78152 v2
Ready
for Growth:
Solutions to Increase Access to Finance for
Women-Owned Business in the Middle East and North Africa
Executive
The Middle East and North Africa (MENA) region is at one of the
most critical turning points in its modern history. The Arab Spring
was driven by the desire for economic opportunity and justice in
Summary the face of poverty and unemployment. The development of strong
economies that enable both women and men to enhance their
livelihoods is crucial for the future of the region.
While there is limited data on the correlation between SME growth and
job creation in the region, studies have shown that SMEs in middle-
income economies generally contribute nearly half of employment and
as much as a third of gross domestic product. SMEs often contribute
more to employment growth than large firms. One global study
found that as small firms (with 1 to 100 employees) grow, their rates of
employment grow more than larger firms.
Accessing finance is a key hurdle to SME growth, regardless of gender.
However, a 2011 study showed that women-owned SMEs grow more
slowly than their male-owned counterparts. One of the key factors the
study associated with slower growth rates was access to finance, which
includes gender-specific challenges such as lack of collateral and less
control over assets. The partners in this report identified an opportunity
to further explore the nature of this barrier for women.
Over 75 percent of survey respondents in this report have fewer than
100 employees and want to grow their businesses. However, as shown
in the findings, many women are not accessing commercial credit,
an essential tool for business success. Based on World Bank Group
Enterprise Surveys across developing countries, women-owned SMEs
have unmet financial needs of close to $300 billion per year. Moreover,
IFC’s work with the private sector has shown that many banks are
unaware of the opportunity presented by women-owned SMEs. These
women-owned SMEs are the “missing middle” in finance.
By understanding their needs and the critical obstacles they face in accessing finance, this report identifies
real solutions to increase the economic contributions of women-owned SMEs. It also shows the aspiration
of MENA women business owners to grow their enterprises. The report partners believe their growth will
generate employment, addressing the region’s greatest development challenge.
This report surveyed 431 women business owners across 8 economies. All women surveyed are members of
the MENA Businesswomen’s Network (MENA BWN) and the survey findings are representative of the larger
MENA BWN membership.
Key MENA BWN members are ambitious owners of established,
growth-oriented businesses. Members make strategic decisions about
Findings
their business and growth trajectory, and 73 percent of respondents own
at least half of their business. When asked to describe their goals over
the next three years, the majority chose growth-oriented responses such
as “growth through expansion into new markets” (49 percent), “growth
through greater profitability” (42 percent) or “growth through merger or
acquisition” (12 percent). These women business owners have a strong
appetite for expansion and are poised to contribute to national and
regional economies.
85% Growth and economic viability were chief concerns. The leading
areas of concern to women business owners in the MENA region
are: managing and maintaining business growth (83 percent); finding
and keeping skilled employees (82 percent); and gaining access to
new markets (81 percent). Access to capital, while a key business
concern, comes behind growth management. Two-thirds (67 percent)
of members surveyed say that access to capital is a very or extremely
important issue. However, improved access to finance could also
facilitate expansion and directly address the growth management
concerns. With this in mind, women business owners’ access to finance
of respondents owned at is the key focus of this report.
least half of their businesses
A majority of women business owners meet their capital needs
through private sources, such as personal savings, family and
friends (52 percent). Most women business owners surveyed are
Two-thirds “banked” – with 80 percent using personal checking accounts and 69
percent using business checking accounts. Just 18 percent report having
a commercial bank loan and even fewer respondents (10 percent) have
a line of credit for their business. Business earnings are also commonly
used (36 percent). These conditions reflect that few women business
owners rely on financial institutions or outside investors for business
needs, but instead they act predominantly as private citizens. MENA
women business owners have access to financial institutions, yet
they are not accessing formal finance itself. This is a significant and
of members surveyed say that profitable opportunity for lending institutions.
access to capital is a very or
extremely important issue
Access to When asked specifically about difficulties seeking
finance for their business over the past year, 64
Finance
percent of respondents had sought capital, and
most — 41 percent overall — had encountered
difficulties in accessing this needed finance.
Women business owners ranked their difficulties in
accessing finance
as follows:
• 67 percent cite high interest rates as the major
hurdle
Women’s access to •
36 percent had difficulties due to lack of
collateral guarantees
finance challenges: • 31 percent found the process too complicated
•
17 percent lacked a business track record to
secure financing
•
16 percent felt mistreated by banks due to being
a woman business owner.
67%
In addition to these individual difficulties, 70
cited high interest rates as a percent of MENA BWN members agree that
hurdle they have encountered lending conditions in their economy are too
when seeking external financing. restrictive and do not allow them to secure
the financing needed for growth. These women
business owners said they wanted a stronger
relationship with their banks. Women surveyed
felt that bank staff members often lack adequate
70% knowledge and experience to handle SME
customers. Over two-thirds (67 percent) say that
they would like to meet more regularly with their
found bank lending conditions were banker so that bankers better understand
restrictive to the point of being
prohibitive
their needs.
Despite challenges, women business owners
are very interested in accessing finance for their
business growth needs. In regards to specific
financial products, women business owners
are more interested in long-term capital than
short-term capital, with interest in supply
71% chain and equity financing as well. A majority
of respondents said that long-term financing
would be of greatest value to their business over
the next year (70 percent would find it useful).
Slightly fewer respondents (68 percent) said that
short-term financing would be useful. One in
of women entrepreneurs asserted that bank
staff members lacked adequate knowledge and five respondents overall would find supply chain
experience to handle SME customers effectively. financing and equity capital very useful (22 percent
and 19 percent respectively).
Access to In addition to improved access to finance, women business
owners expressed high demand for greater access to
Information
information and training in order to grow their businesses.
Respondents said that learning about the following topics would
be most useful in leading their business:
• General business management skills (76 percent)
and •
Using financial products such as SME lending products or
Training
equity capital (69 percent)
• Exporting (66 percent)
• Accounting and financial management (63 percent)
• Selling to large, multi-national corporations (60 percent).
As a majority of women business owners plan to expand
operations and ramp up employment in the coming months
and years, greater access to capital will be necessary to fuel
this expansion. Targeted reforms and technical assistance for
women-owned SMEs in the MENA region can have a
powerful impact.
This report provides recommendations for key stakeholders
representing the SME ecosystem, including lending
institutions, international financial institutions, governments,
women’s business associations, donors, non-governmental
organizations, corporations and educational institutions. The
recommendations address the need to improve access to
existing sources of financing; develop tailored financial tools
for women business owners; and overcome the barriers that
prevent women from accessing finance. They include supply-
side actions, such as partial credit guarantee programs, as
well as demand-side actions, such as training to improve
business skills or better manage finances. Taking action
on the recommendations in this report is key to economic
development in MENA.