Unlocking funding for women-led SMEs in South Africa

In a bid to address the funding challenges faced by women-led small and medium enterprises (SMEs) in South Africa, the creation of the Afawa Finance Series has been announced. This collaborative effort involves the African Development Bank, the African Guarantee Fund, and BASAM, with the goal of unlocking financing for women-owned businesses in the region. The initiative aims to foster sustainable growth for women-led SMEs by influencing financial institutions and addressing the gender disparity in access to capital. Franck Adjagba, the Group Director of Business Development at the African Guarantee Fund, shed light on the program and its impact during a recent interview on CNBC Africa. Adjagba emphasized the three pillars of the Afawa Guarantee for Growth program, which include access to finance, technical assistance, and creating enabling environments. Through these pillars, the program seeks to raise awareness about gender equity, enhance the knowledge of women SMEs to make them more attractive to banks, and ultimately facilitate access to finance. Noting that 90 percent of funding in Africa comes from banks, Adjagba highlighted the importance of working with financial institutions to support women entrepreneurs. One of the key challenges faced by women-led SMEs is the lack of collateral and the need to change the risk perception of women in business. Adjagba explained that by offering guarantees to banks of up to 75 percent, the program aims to mitigate these challenges and encourage more financial institutions to invest in women-owned businesses. Despite the existing bias and cultural barriers, the Afawa Finance Series is working towards bridging the gap and creating a more inclusive financial system that recognizes the potential of women entrepreneurs. During the interview, Adjagba addressed the issue of data supporting the bankability of women-led businesses. He emphasized the importance of bridging the data gap and leveraging impact data to showcase the repayment reliability of women borrowers. With a track record of women repaying loans faithfully, the program aims to demonstrate the long-term success and viability of investing in women-led businesses. The discussion also touched on the challenges faced by women entrepreneurs in accessing funding, including late entry into the lending cycle and limited opportunities for scaling their businesses. Adjagba highlighted the role of business service providers and incubators in preparing women entrepreneurs for growth and expansion. By integrating women-led SMEs into value chains and providing the necessary skills and support, the program aims to accelerate the growth of women-owned businesses and facilitate their integration into the broader financial ecosystem. Looking ahead, Adjagba outlined the ambitious goal of bridging the $39 billion funding gap for women in Africa by $5 billion over the next five years. While acknowledging that change takes time, he expressed confidence in the momentum and progress that has already been made through the program. With 189 banks in 39 countries already on board, the Afawa Finance Series is poised to make a meaningful impact in empowering women entrepreneurs and driving economic growth in the region. In conclusion, the collaborative efforts of the Afawa Finance Series represent a significant step towards unlocking funding for women-led SMEs in South Africa. By addressing the systemic barriers and biases that hinder women's access to finance, the program is paving the way for greater gender equity and inclusive economic development in the region.