Investing in women-led SMEs for economic growth in Africa

Despite the tremendous progress that has been made to advance women’s financial inclusion and economic empowerment, women in Kenya and across Africa still face several challenges in accessing economic opportunities. The main barriers include limited access to financial services, inadequate education and skills, restrictive cultural norms, and insufficient support for women entrepreneurs. CNBC Africa’s Flora Limukii recently sat down with Karnika Yadav, Director for Intellecap Africa, to delve deeper into the challenges faced by women-led businesses in accessing finance and the steps needed to address these gaps. Yadav highlighted the critical issue of access to finance for women entrepreneurs, noting that the existing financial systems and structures are often not aligned with the needs of these businesses. While women-led businesses account for a significant portion of enterprises in Kenya and across Africa, they typically operate as micro or nano businesses, making it challenging for them to access the necessary funds. Research conducted by Intellecap Africa revealed that these businesses often require capital in the range of $500 to $1,000, a ticket size that is not adequately met by the available financial instruments in the market. One key obstacle faced by women entrepreneurs is their preference for debt financing over equity. While private equity and venture capitalists predominantly offer equity capital, women-led businesses are more inclined towards debt instruments. This mismatch in capital preferences further limits the financial options available to women entrepreneurs and hinders their ability to scale and grow their businesses. In order to make women-led businesses more 'bankable,' Yadav emphasized the importance of providing pre-financial support to these enterprises. This support includes offering technical assistance to help women entrepreneurs manage their finances effectively, understand their business models, explore different revenue streams, and obtain essential certifications such as CEP and NEMA certifications. By enhancing the financial literacy and business acumen of women entrepreneurs, they can position themselves as attractive prospects for potential investors and corporate buyers, thus expanding their market reach and growth opportunities. Addressing the systemic barriers faced by women entrepreneurs will require a multi-faceted approach that involves collaboration between financial institutions, government entities, NGOs, and private sector stakeholders. By fostering an enabling environment that provides tailored financial products, targeted technical assistance, and supportive regulatory frameworks, women-led businesses can overcome existing challenges and thrive in the competitive business landscape of Africa. As women continue to play a vital role in driving economic growth and innovation in Africa, empowering them with the necessary resources and support is essential for harnessing their full potential and advancing towards a more inclusive and sustainable future for all.