The role of formal education in boosting women’s access to finance

A recent study conducted by Viffa Consult in Nairobi has shed light on the vital role of formal education in enhancing women's access to finance in Africa. According to Victor Otieno, Managing Director of Viffa Consult, the study highlighted the significant impact of education levels on the type of financing women entrepreneurs are able to access. Women with higher education levels, such as undergraduates, were more likely to secure formal financing from banks, savings, and retained earnings, while those with lower education levels, such as high school graduates, turned to alternative sources like mobile credit, family and friends, and savings groups known as 'chamas'. This disparity underscores the importance of financial inclusion and the need for more inclusive banking practices to support women in business. One key finding of the study was the correlation between the size of the business and the ease of accessing financing. Small businesses with annual turnovers of less than $50,000 faced significant challenges in securing funding, largely due to their informal nature and lack of financial records. This informal sector represents a majority of SMEs in Africa, highlighting the need for tailored financial solutions to support their growth and development. Another noteworthy discovery was the top three challenges faced by women entrepreneurs in Kenya, with harassment by government officials ranking as the primary obstacle, followed by financial constraints and market challenges. This finding underscores the need for greater support and resources to empower women in business and create a more conducive environment for their success. Victor Otieno emphasized the importance of addressing the financial challenges faced by SMEs, not just limited to women entrepreneurs but inclusive of all small businesses. He highlighted the need for financial institutions to adapt their risk management strategies to accommodate the unique needs of small businesses and ensure greater access to funding. Otieno also mentioned the potential of alternative financing mechanisms, such as savings groups and community-based investment platforms, as viable options to complement traditional banking services. In response to potential solutions, Otieno proposed leveraging existing cultural and historical practices, such as 'chamas' and table-banking groups, to provide alternative sources of financing for small businesses. By tapping into these grassroots initiatives, African economies can support the growth of SMEs and boost economic development at the grassroots level. The recent commitments made at the G7 summit, including a pledge of $251 million to the African Development Bank's program for women entrepreneurs, have been widely welcomed as a step towards promoting gender equality and economic empowerment. Otieno emphasized the importance of allocating these funds strategically to prioritize sectors with high growth potential, such as manufacturing, agriculture, and ICT. Additionally, he stressed the need for capacity-building initiatives to enhance the business acumen and skills of women entrepreneurs, enabling them to effectively utilize the funds and drive sustainable growth. Looking ahead, the focus must be on ensuring that these financial resources are channeled effectively to support women in key sectors and facilitate access to markets through initiatives like the African Continental Free Trade Agreement. By fostering a conducive environment for women entrepreneurs to thrive, Africa can harness the full potential of its female workforce and drive economic progress across the continent.