Although women play a major role in the economic development of emerging economies, they have the least access to capital and credit compared to their male counterparts. Giving more credit to women has been mooted as one of the fastest ways to reduce poverty in emerging economies. The virtues of female entrepreneurship have been extolled over the last few years although a lot still needs to be done to make this a reality: without capital or credit entrepreneurship is hardly possible so this means that solutions need to be found that enhance this capacity rather than talk about it and do nothing about it.
Crowd funding is definitely one of the solutions that could be put forward that could increase the likelihood of increasing available capital to women. Crowd funding in this sense refers to the process of providing small loans to female owned businesses which enables them to expand and grow their businesses. This also means that they reinvest the proceeds of their business into the nutrition and education of their families which results in an increase in the quality of life of their society and community. This correlation has been supported by evidence from the World Bank and IFC stating that women reinvest 90% of their profits in the home whilst mean reinvest only 60-70%.
Increasing access to capital for women could also be presented as a clear business preposition to actors in the crowd funding sector as their repayment rates far out way those of men, which means that its actually makes good business sense to lend to women. The current repayment statistics are at 98% for women and 70% for men (source: World Bank report). Grameen Bank was one of the first banks to see this and this explains why 94% of their loans go to women only. In addition to this, from the social responsibility perspective, increased lending to women has been seen to have a direct impact on the level of development in development such as more children in school, better nutrition for family and an overall improvement in the quality of life of their families.
Key considerations for participants lending to women is that funders would need to tailor their products to fit women’s needs rather than the other way around. For example, they should develop loan products that are accessible to women with home based businesses as well as ensure that spouses are not required to sign loan agreements for loans disbursed.
There are also cultural and sociological constraints that currently exist in most societies that often hamper women from learning about, and taking advantage of crowd funding; the information may be unavailable to them. For example the high rate of illiteracy among women in Asia and Africa as well as discrimination practices in property ownership and employment.
Strategies can be employed by funders to counter these constraints such as group or solidarity lending where loans are provided to women in a group which means that a group can be selected with some women who can read and write who can guarantee loans on behalf of those who can’t. Group lending is also a Grameen Bank initiative and contributes even further to high repayment rates as the women encourage each other to succeed in business and they can mentor each other when needed.
Ultimately, lending to women needs to be looked as at a great business proposition and an excellent tool to helping developing economies to slowly rise out of poverty. Funders need to look at the provision of capital and credit to women as a low risk strategy and as an excellent social responsibility strategy whose impact will be felt in the longer term and lead to the world really and truly becoming a better place!
Guest post contributed by Kanini Mutooni, founder of Inuka.org