ACCESS TO FINANCE AND WOMEN ENTREPRENEURSHIP

ACCESS TO FINANCE AND WOMEN ENTREPRENEURS
INTRODUCTION
From the last census conducted by the National Population Commission
(NPC) in Nigeria in 2006, it shows that the population of Nigerian women
quite outnumbered the population of men, as women has a population of about
72million which is more than half of the Nigerian population of about
140million as at 2006.
The present government is emphasizing and clamoring for
entrepreneurial development for the sustenance and development of Nigeria
economy. If the population of the women who genetically are well known for
their enterprising natures and zeal are empowered and supported with the
needed financial facilities to set up small and medium scale businesses,
the economy will receive a massive boost and geometrical economic
development will be experienced in Nigeria. Women entrepreneurs around the
world are making a difference. They contribute numerous ideas and a great
deal of energy and capital resources to their communities, and generate
jobs as well as create additional work for suppliers and other spin-off
business linkages (Common wealth secretariat, 2002). Siwadi and Mhangami
(2011) adds that it is undeniable that women entrepreneurs are the major
actors in that sector and contributors to economic development and are
becoming increasingly visible in the local economies of the developing
counties. Promoting women's economic and political empowerment has gained
greater attention over the last three decades (Yeshiareg Defene, 2007).
In most countries, regions and sectors, the majority of business
owner/managers are male (from 65% to 75%). However, there is increasing
evidence that more and more women are becoming interested in small business
ownership and/or actually starting up in business. In addition, rates of
self employment among women are increasing in several EU countries.
Although there are no official statistics relating businesses to the gender
of their owner/manager, there is a good deal of evidence to suggest a
significant increase in female entrepreneurship. One consequence of this is
that women are a relatively new group of entrepreneurs compared with men,
which means that they are more likely to run younger businesses. This in
turn has some implications for the problems they face and their ability to
deal with them.
A number of factors can be sighted as impediments to the growth and
expansion of Nigerian women entrepreneurs. In general terms women
entrepreneurs face dual challenges. Firstly, the structural problems women
face are common to all SME operators, and secondly in addition to the
common problems, women entrepreneurs face problems that can be
characterized as women- specific problems, mostly associated with socio-
cultural factors and gender biased practices. As a result the problems
Nigerian women entrepreneurs' faces are many and diverse in comparison with
their male counterpart business operators.
The purpose of this study is not to address all the challenges facing
Nigerian women entrepreneurs. Its purpose is rather to provide a gleam of
the challenges associated with
meeting the financial needs of women entrepreneurs. Finance is one of the
few, and probably the most, important element for business start-up and
business operation. Even a good business idea can not be started without
finance. Likewise a good business can not be operational with out working
capital. While access to finance is a challenge common to all SMEs, the
challenge for women business owners is compounded by the multifaceted
gender related problems that inhibit their ability to access finance,
which, even within the SME sector, is one of the major factors accountable
for hampering the emergence and growth of their businesses.

Statement of the Problem
The small and micro enterprises (SMEs) play an important role in the
Kenyan Economy. According to the Economic Survey (2006), the sector
contributed over 50 percent of new jobs created in the year 2005. In
Ethiopia women accounted for 73.74% of the total micro enterprise
operators, (CSA, 2003). On the other hand the share of women enterprise
owners within the small scale manufacturing establishments and the medium
and large scale industrial activities is no more than 13.7% and 30%
respectively, (CSA, 2006). In Ghana, SMEs have been noted to contribute
about 85% of manufacturing employment (Steel and Webster, 1991). They
represent
about 80% of the private sector and also account for about 92% of
businesses in Ghana. For the
current Ghana government's slogan of "Golden Age of Business" to succeed
and for the country to reach the per capita income of US $1,000 by 2012,
there is the need to steadily increase the rate of economic growth from the
present level of 4-5% to 7-10%. In Nigeria, due to the weak framework in
ascertain the number and contribution of SMEs to the economy, due to the
over reliance on oil which has led to the neglect of other sectors, an
accurate data couldn't not be gotten of the level of contribution of SMEs
to the economy. However, from the records available, the SMEs are
contributing more than 40% to the economy.
According to Amyx (2005), one of the most significant challenges is
the negative perception towards SMEs and most especially women SME
operators. Potential clients perceive small businesses as lacking the
ability to provide quality services and are unable to satisfy more than one
critical project simultaneously. Often larger companies are selected and
given business for their clout in the industry and name recognition alone.
A woman entrepreneur is considered and seen as weak in contending with
men entrepreneur as they compete for space in the business world and with
customers. Most financial institutions whose main prerogatives are to get
profit as fast as possible, sees a woman entrepreneur as someone who will
not be able to deliver on time, hence there may be a delay in the returns
of the borrowed fund. The business climate is seen as harsh and for a woman
who they belief she wont be able to cope with the environment.
Also, it is perceived that women excel better in unskilled and semi-
skilled businesses like hairstyling, fashion designing, bead and soap
making, and home based businesses which are not seen as a business that can
yield the required profit needed and desired by finance houses. Now, for a
woman entrepreneur to present a business proposal of a high tech firm or
household upholstery importation business, a business and risk officer of
any bank will not take such as a viable business for a woman and hence will
be reluctant in considering not to talk of approving her for loan.
Women owned businesses are known for their low start up and working capital
(Siwadi etal 2011, Glen 2003) note that under normal circumstances women's
enterprises have low growth rate and limited potential partially due to the
type of business activities they run. The question then is, what can women
entrepreneurs do to help them in accessing fund with ease or at most to
have the same level playing ground as a man entrepreneur.
Women entrepreneurs face many problems. Kimathi (2009) emphasize that
small businesses are held back by tough local conditions some of them are
unable to raise huge collaterals demanded by banks as a condition to access
loans. This has created an impression that they are too big for
microfinance institutions but too small for conventional banks. But, could
this challenge faced by the women entrepreneurs in Nigeria be surmounted
and what can be done in overcoming it? This study seeks to explore more.

Research Objective
This study seeks to find out:
i) What challenges are facing small- scale women entrepreneurs in Nigeria
in accessing fund?
ii) In what industries are these small-scale women entrepreneurs engaged
in?
iii) What measures have been put in place by the Nigeria government and
other institutions to assist such small-scale women entrepreneurs in
securing funds?
iv) What can be recommended in future for small-scale entrepreneurs in
Nigeria and other developing countries

METHODOLOGY
To meet the research objectives the study employed desktop research by
reviewing relevant texts, websites, journals, magazines bulletins, reports
and newspapers. Also oral interview, without the use of questionnaire was
employed.


LITERATURE REVIEW
Defining Small and Micro Enterprises
A micro-enterprise (or microenterprise) is a type of small business,
often registered, having five or fewer employees and requiring seed capital
of not more than $35,000. The term is often used in Australia to refer to a
business with a single owner-operator, and having up to 20 employees. The
European Union EU defines micro-enterprises as those that meet 2 of the
following 3 criteria and have not failed to do so for at least 10 years:
fewer than 20 employees
balance sheet total below $800,000 US
turnover below 800000 US
(http://en.wikipedia.org/wiki/Micro-enterprise)
Mugwara (2000) defines small and micro enterprises as businesses owned
by individual entrepreneur who employs one person to twenty people as the
business grows.
To (Bowen, Morara & Mureithi, 2009) it can be inferred that small and
micro businesses are dominated by people with relatively low levels of
education.
Entrepreneurs are widely recognized as the prime movers of economic
development; the people who translate ideas into action. An interesting
though not widely accepted definition of an entrepreneur is a person who
has the ability to scan and identify opportunities in his or her
environment, gather the resources necessary to take advantage of the
opportunities and implement successful action to utilize the opportunities.
In Nigeria, context, small enterprises are those businesses that have
1-50emplyees, whereas medium enterprises are those businesses that employ
51-99 people. Ahmad, Xarier, Perumal and Nor (2011) defines women
entrepreneur as a woman who have initiated a business, is actively involved
in managing it, and owns at least 50% of the firm and have been in
operation one year or longer.
This definition identifies an entrepreneur by their behavior rather
than the specific occupation they are involved in. Those who have studied
entrepreneurial behavior have noted certain characteristics such as
innovativeness, ability and willingness to take calculated risks,
determination, insight, total involvement, independence, need for
achievement, leadership ability and among others Githeko Jason (2005).

Accessibility of Fund by Women Entrepreneurs
The extant literature is clear on the fact that small businesses
mostly have problems accessing funds from finance providers to finance
fixed assets and working capital for their operations (Tucker and Lean,
2003). The presence and nature of a 'finance gap' for small firms has been
debated for decades, ever since the Macmillan Report (Macmillan, 1931).
According to Blanton and Dorman (1994), small firms are frequently under-
capitalized. That is, the term structure of loans granted to SMEs does not
suit their needs. Blanton and Dorman (1994) argue that even when SMEs are
given credit, they are often granted short-term loans and therefore they
have no option but to depend on short-term and informal credits in
financing their long-term needs such as acquiring new equipments (Riding
and Short, 1987).
In general terms the need for capital is either to start new
businesses, or to effectively operate existing enterprises. Availability of
finance determines the capacity of an enterprise in a number of ways,
especially in choice of technology, access to markets, access to essential
resources, etc, which in turn greatly influence the viability and success
of a business.
Securing capital for business start-up or business operation is one of
the major obstacles every entrepreneur, particularly those in the SME
sector, face. But even by the standard of SME operators women entrepreneurs
face additional constraints to secure financial resources.
A number of studies made in this are show that business women face
more challenges in accessing finance from financial institutions. A study
carried out by the International Labour Organization (ILO), for example,
put access to finance as the major obstacle facing business women. "Women
often start a business with their own money or money borrowed from family
and friends with limited access to other forms of credit", (ILO, 2005).
Important issues identified within the context of informational
asymmetry are adverse selection and moral hazard. Under adverse selection,
theoretical models often assume that an entrepreneur has private knowledge
about the success probability of a project or expected profits that are not
shared with the financier. Consequently, suppliers of capital cannot
differentiate between a high quality business and a low-quality business
and even most especially if its coming from a woman entrepreneur, an
adverse selection can result.
While the need for detailed and objective research can not be over
emphasized, the information gathered from various research sources allow
one to make bold generalization that the few Nigerian women entrepreneurs
who manage to access the services of financial institutions borrow smaller
amount of money relative to their male counterparts. The study identified
two explanatory factors for such state of affairs. First when compared to
men, women are generally considered rational borrowers as most tend to
borrow what their businesses require while men tend to exaggerate their
requirements, which is sighted as one of the probable reasons for the
relative weak repayment performances of men borrowers.
The second explanatory factor for the small magnitude of borrowing
made to women entrepreneurs would be the areas of activities women
businesses tend to concentrate. In general terms women businesses are
concentrated in activities that are relatively less capital intensive like
food processing, textile, etc. For example, the 2006 CSA survey report on
small scale manufacturing activities indicates that the share of women
ownership in food processing and textiles was 47.1% and 42,82%
respectively, while their share in the relatively capital intensive
business activities like metal works and furniture making was no more than
7.06% and 4.905 in that order.
What ever the reasons could be, the information outlined in this
section demonstrates that women entrepreneur's access to finance is highly
constrained even when compared to the constraints facing the small and
medium enterprise sector of the country. To this effect the most important
challenges identified by the study are discussed in the next section.


Major Challenges in Accessing Finance
Women entrepreneurs face dual challenges in accessing financial
resources. As part of the overall entrepreneurial class they face common
constraints the private sector faces, particularly small scale operators,
to access financial resources. In addition, as women they face specific
challenges associated with their gender.
The major challenges identified during this assessment are categorized
under three headings.

Common challenges
One set of problem is associated with structural problems that are
common to all entrepreneurs, especially SME operators. To start with
constraints arising from the low level of economic development restrict
availability of infrastructural facilities that are essential ingredients
for business growth and expansion. Constraints to access vital facilities,
such as communication facilities, work premises, raw materials and inputs,
choice of appropriate technology, etc... impede the efforts of Nigerian
entrepreneurs, especially SME operators that account for the bulk of the
country's private sector, to create viable business activities that can
grow and move into the ranks of medium and large scale enterprises. In
short, macro economic conditions impede the ability of a large number of
entrepreneurs to develop their capital bases which intern imply that they
can rarely meet the conditions set by the financial institutions.
In this regards low capability to meet conditions of the banks,
particularly loan guarantee or collateral were sighted as the main barrier
to borrow from banks by both women and men entrepreneurs. According to
statistics, out of every 10 businesswoman, only three women were able to
supply the required collateral to borrow from the banks, while for the
rest, low ability to provide loan guarantee or collateral was the major
factor that inhibited them from seeking bank finance to expand their
business or to start new businesses. One can also add low capacity to
develop sound business plan documents as the other barrier to loan finance.

The second set of challenges is associated with the developing
condition of the Nigeria financial industry. The reach of most banks are
restricted to the major urban centers, and even then the coverage is
restricted to a few segment of the urban society where their funds can
easily be recovered. There are some banks in existence who cannot boast of
having branches in all the 36 states of the federation. The unstable
financial policies and the interruption of policy implantation of banks by
the Central Banks of Nigeria and the Federal Government also add up to this
challenges. The low developing stage of financial institutions, have two
implications. One implication is that due to their limited reach to the
society, the ability of the sector to mobilize financial resources is not
that robust.
The other implication is associated with the risk aversion attitudes
of financial institutions. The situation reduces the responsiveness of
banks to loan requests from smaller enterprises. CBs, including the MFBs
are believed to target mainly big and medium urban borrowers with
relatively bigger investment activities and hence are not considerate when
it comes to small borrowers, due to risk aversion attitude.
In addition, banks do not lend to certain sectors, like for example
non irrigated farming activities. A case study is the non-release of the
Agric fund, for farmers by commercial banks, even though the CBN has
released this fund since 2005, it is sad to note that seven years has
passed and the fund has not yet been released in some states, and where it
has been released, the women groups are either shortchanged or outwitted
from the fund. One prominent business woman, interviewed for this study,
said that she could not access short term loan for working capital,
although she had long standing business relationship with many of the
institutions.
From experience it could also be observed that the third set of the
structural problems is associated with negative internal factors of SMEs
themselves, such as low management capacity, weak marketing skill and low
technological absorptive capacities, limit the capability for business
growth and expansion. Even if financial resources are readily available,
many SMEs may need interventions through training and advisory services to
benefit from the favorable situation.


Gender-specific Challenges
A number of factors impeding women entrepreneurs access to finance
were identified during the interviews and discussions made with selected
business women and other stakeholders.
The first problem is associated with high informal entry barrier to
the services of financial institutions. Socialization is one of the
mechanisms employed to facilitate business transactions in Nigeria, which
appear to be more so in the financial sector. In a male dominated society
like ours women find it difficult to easily socialize. As a way out they
would tend to depend on male kin to facilitate issuance of loan through
socialization. This was raised as one of the major entry barriers women
face by most respondents, including the male business owners.
Also, entry barriers were said to be high for new business starters to
access loan finance. According to the respondents two reasons can be
sighted as the causes for this state of affairs. The first was said to be
the fact that new business starters, especially women, lack information and
the experiences as to how to approach banks, while the second was that
banks trust entrepreneurs with whom they have long business relationships
much more than the soundness of the business ideas. One respondent, for
example, said that the first time she approached a bank for loan the
response was rather cool. But when her husband intervened on her be-half
the responses were warm and fast. Once she started business dealings and
established good track records, she had no problem to get additional loans.

Relationship lending was said to be common by the experts of banks
interviewed for this study. In fact such loan products are called "clean
loans", - loans given without any collateral, and "partially clean loans",
- loans given with partial collateral. In both cases the loans are term
loans and the important criteria are long business relationships and
outstanding track records in repayment of loans.
The second challenge identified is associated with the nature of the
businesses most women are engaged in. In most cases women businesses are
not only found in the informal micro enterprise sector, but the types of
business activities they are engaged in are also relatively less capital
intensive. For example, according to a CSA survey of 2003 more than 65% of
all females in cottage/Handicraft manufacturing industries were engaged in
the processing of food products and beverages, As a result women
entrepreneurs often shy from seeking bank finance. This should not however
imply that women are weak to accumulate capital. Women are proved to be
more entrepreneurial when they are exposed to opportunities and have access
to resources. In fact their capacity for capital accumulation is affected
by their tendency, as mothers and wives, to spend what ever income they
earn on the welfare of their families and to avert risks so as to make
provisions for the future.
The third problem identified is associated with socio cultural
problems. To start with, business women are encumbered with high household
demand, which, together with the business demand, impacts their ability to
solely focus on their businesses and by implication their ability to seek
loan finance. Also, culturally women shy from pushing their causes too far,
which again impacts their negotiation capability. The other socio cultural
issue is the fact that women are careful to take, as well as to timely pay,
loans. They take what they require and pay promptly when compared to their
male counterparts. All the experts in the banks and microfinance
institutions indicated that women are more responsible in the utilization
of borrowed money and in paying back loans than men.
The fourth problem, which is also partly associated with socio
cultural factors, is the fact that women have little access to education.
Under education of women perpetuates their limited capacity for growing
their business beyond the informal micro enterprise sector. As a result the
businesses of most women entrepreneurs are constrained by week managerial
and marketing skills, finance and technology absorptive capabilities.

Conclusion and Recommendation
Small and medium scale businesses play an important role in the
economy of any nation. And with the recent call by the Federal Government
for an aggressive drive for small scale and medium scale businesses, there
is need to give utmost support to the people that are naturally and
genetically endowed to be enterprising in nature- the woman. Apart from
this, there is need to give them the necessary support because they
constitute a larger percentage of the population of Nigeria.
The challenges facing women in business is as a result of their
marginalization by the men folk and if this economy and government of the
day are really serious about their economic drive and desire to boost the
economic growth of Nigeria within the short possible time, the need to
empower and support the women with the necessary facilities especially fund
is important. This is because, the Nigeria woman is "a ready soldier" for
entrepreneurship.
It will be recommended that in considering loan and funding for the
woman entrepreneur, the finance houses should rather lower the standard and
condition for her rather than stiffening it the more.





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