The covid-19 pandemic is ravaging the world indiscriminately, but a combination of health and economic factors means the pandemic presents a particular set of challenges in Sub-Saharan Africa. Although the continent is reporting far fewer cases of covid-19 than the rest of the world, the pandemic poses far-reaching economic ramifications, particularly for vulnerable populations such as women.

A slowdown in economic growth has already been felt among small and medium-size enterprises (SMEs)in hard-hit sectors such as tourism, retail, and services and thus likely to create wide-spread job losses.

SMEs are critical to Africa’s economic growth across the region and represent about 90 percent of Africa’s businesses and provide about 60 percent of jobs on the continent. Access to finance is one of the main challenges facing SMEs in normal times—with the majority of these firms lacking the finance needed to grow.

Prior to covid-19, SMEs in Sub-Saharan Africa count among the world’s most financially constrained, with the International Finance Corporation estimating that 52 percent of SMEs in the region have an unmet financing need with a credit gap of US $331 billion.
It is difficult to grasp the immediate effects of covid-19. SMEs already face challenges in accessing finance and will undoubtedly face unprecedented challenges due to covid-19. Women-led SMEs are the worst affected because they tend to be in the most exposed sectors and receive the fewest amount of support in terms of financing. According to a recent study by the International Trade Centre, 64 percent of women-led firms declared their business operations as strongly affected, compared with 52 percent
of men-led companies.

Policymakers and investors working to address the health and economic challenges posed by covid-19 must go beyond moratoriums and renegotiation of existing loan terms. To better serve women-led SMEs, this will require a concerted effort from multiple stakeholders to include banks, development finance institutions (DFIs), regulators, and government to apply a gender-lens when designing covid-19 related economic recovery efforts.

First, there is a need for gender-disaggregated data to inform and shape policies and investments. The pandemic presents an unprecedented opportunity to expand gender data collection on women entrepreneurs. Second, there is a need to apply a gender-lens approach when designing Covid-19 responses to support SMEs. This includes designing specific digital solutions and financial instruments that better meets women’s needs. The financial exclusion of women is a global problem, with approximately 1 billion women that do not have formal financial services, due to persistent barriers in access to identification documents, mobile phones, digital skills, financial capability, as well as inappropriate products and more. 

The situation is reflective in Sub-Saharan Africa where according to the World Bank, only 37 percent of women have a bank account, compared with 48 percent of men, a gap that has only widened over the past several years. Therefore, it is critical for DFIs, investors and other financial intermediaries to apply a gender-lens in investment analysis and decision-making, not just as a “nice-to-have,” but core to any strategic action. Furthermore, the pandemic has underscored the need for robust digital infrastructure as a platform to support financial inclusion and women’s economic empowerment. Third, there is a need for technical assistance facilities to provide women-led SMEs with advisory services to help them make more informed decisions and adjust their business
models, enabling them to survive the pandemic while setting themselves up for post-pandemic growth.

The covid-19 pandemic is not only a health crisis but also an economic crisis that could cause Sub-Saharan Africa’s GDP growth rate to drop down to -5.1 percent in 2020. Implementing a targeted gender-lens approach to increase support to women-led SMEs will be critical to bridging the financing gap for women estimated at US $42 billion and for Africa’s covid-19 economic recovery efforts.

Iftin Fatah is a Senior Investment Officer at the U.S. International Development Finance Corporation. The views expressed herein are her own.