Natalie Africa

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Natalie Africa Senior Gender Co-ordinator Africa
- Gender Entrepreneurship Markets (GEM) South
Africa
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access to finance for women entrepreneurs in
south africa Global Banking Alliance Summit 8
November 2006 Glasgow
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Rationale for the Study

• First such study in South Africa commissioned by
  the dti and funded by the IFC with support from
  the Finmark Trust
• Concern is Black Economic Empowerment (BEE) a
  gender-biased process?
• Aims of the study
• Review current policies and offerings
• Ascertain improvements to better serve women
• Assess financial service needs of women
  entrepreneurs across SMME spectrum
• Analyse the impact of related issues such as
  business development support and credit
  referencing issues.

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Principle obstacles

• Principle obstacles to access identified
• Poor financial literacy and confidence
• Awareness and attitudes of financial institutions
• Insufficient BEE targets and codes
• Lack of appropriate products

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Customer analysis - employment

• Data sources Finscope Surveys, the Labour Force
  Survey, focus groups.
• Race still primary driver of poverty and lack of
  financial access - gender exacerbates access
• Notable racial and gender differences in access
  to formal employment for over 18s
• 28 of black women self-employed versus 16 of
  black men 13 of white women and 24 of white
  men
• Major policy implications a huge under-served
  market for business development support providers
  and financiers.

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Customer analysis financial usage

• 37 of South African adults have no financial
  products
• 42 black females and males and 5 and 4 white
  females and males
• Black womens usage of financial services is
  inflated by use of informal financial products
  such as funeral and burial cover and informal
  savings clubs.
• Home loans 2 of black men and women and 32 of
  white men and 26 of white women

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Macro Framework

• South Africa post-1994 strong on SMME policy and
  strategies
• The White Paper on National Strategy for
  Development Promotion of Small Business in
  South Africa (1995)
• 1996 Ntsika Enterprise Promotion Development
  Agency/SEDA, Khula Enterprise Finance.
• Existing and new DFIs vis. IDC, NEF, Umsobomvu
  Youth Fund, and Provincial Development
  Corporations.
• South Africa Microfinance Apex Fund (SAMAF).
• Additional banking legislation to expand
  financial services market and protect customers
• The Financial Sector Charter 2003 - major gap
  gender targets only for staffing and very
  modest none for enterprise funding!

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Institutional Offerings Mainstream Banks

• Sixteen interviews - mainstream banks, DFIs and
  MFIs only two commercial banks are making an
  effort to have a strategy for the womens market
• Not enough market segmentation and MIS adaptation
  - ie know and serve your market.
• Business development support and financing
  requirements not coordinated
• Women in business - reported little premium for
  loyalty and track records

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Institutional offerings - DFIs

• Generous resources exist for development finance
• But inadequate effort to enhance skills,
  coherence or measure performance against
  strategies
• No gender-specific approach to understanding
  womens businesses, sectoral and locational
  breakdowns
• Need for uniform measuring and reporting
  standards and joint learning across institutions
  to systematise processes and offerings from
  institutions
• Women entrepreneurs - very little awareness of
  DFIs - need for better marketing

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Institutional offerings Microfinance

• Micro finance sector - generally weak, services
  poorly and unevenly distributed
• The sector shrunk in South Africa over last 10
  years - 32 lenders in 1996 to 11 in 2004.
• The products range - limited and dominated by
  group lending to detriment of growth oriented
  women enterprises
• Insufficient investment in building capacity in
  the sector
• Yet significant and international technical
  resources for MF should be reviewed and
  utilised in the local context.

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Business Development Services

• Huge human resource development gap in South
  Africa.
• The state has supported BDS on a policy and
  operational level eg Ntsika, SEDA and provincial
  initiatives.
• However, delivery is not coherent and even rural
  areas for example are under resourced.
• Programmes are not sufficiently gender focused,
  do not adequately differentiate between different
  levels of enterprises, and need to be better
  integrated with access to finance strategies.
• 70/30 ratio registered during interviews for
  male/female usage of BDS
• Key benchmarks need to be applied in order for
  BDS support to be more effective, and to be
  really seen as an alternative form of collateral
  by funders.

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Credit Referencing Issues

• Principal issues include
• Conflation of business, contractual and personal
  histories
• Mystification of credit information system
• Banks inability to clear records even long after
  debts are settled
• Transunion ITC 2005 - of 8.5 million women on
  their books, 95 manage their obligations
  responsibly
• Use of alternative credit information and
  coordinated credit vetting

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BEE financing and gender

• BEE Codes not sufficiently gender-specific for
  financing, enterprise development or procurement
• Women-led BEE investment companies - initial
  perception of women as a necessary add on , not
  as business players in their own right
• Survey of 10 institutions - majority not able to
  report on the gender disaggregation of their
  procurement spend. Where reported, 2-5 only.
• Banks interviewed indicated need to adjust their
  MIS systems to report on gender in procurement
  this is a long way off
• Implication Preferential procurement for womens
  enterprises may be a token and very small
  fraction of the total, if more specific measures
  not put in place.

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Critical recommendations

• Black women largest group of self employed people
  in the country - more limited access to formal
  employment and skills legacy of the apartheid
  economy.
• This requires a gender-specific policy approach
  for stakeholders - from financial institutions to
  business support providers
• Approach should then be translated into all
  policy documents, industry charters and agency
  mandates which is not currently the case.
• A biennial survey of the state of SMMEs needs to
  be instated such a survey should include a
  qualitative quantitative picture of
  contribution and progress of small businesses
  across racial gender lines.

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Critical recommendations cont.

• Gender education market awareness should be
  conducted in banks, DFIs business development
  agencies
• Appropriate BDS training for women in micro
  enterprise and small business is essential to
  overcome a range of constraints
• Critical need for expansion of microfinance
  across the country in line with the
  recommendations in study and to support the large
  number of self employed women
• Asymmetries in credit information need to be
  resolved

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Thank you!
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