Johannesburg - Micro, Small, and Medium Enterprises (MSME) are the engines of economic growth in Africa. They are an effective pathway for empowering women who grow 70% of the food and invest 90% of their earnings in communities. Moreover, MSMEs provide over 80% of jobs, especially the youth (60% of the unemployed).
Global director of programmes at Shared Interest, Dorcas Onyango said with that being said, the Covid-19 pandemic has been a strain on the overall economy. Experts believe the Covid-19 pandemic could set back gender equality efforts by decades, unless the global community takes steps to stem the slide. A meaningful recovery from the crisis must consider the needs of women, half of the world’s population.
“The reality is that small businesses, and particularly those owned and run by black women, continue to struggle to attain funding. This raises many questions, particularly in a country such as South Africa, which has consistently been lauded for, among others, the soundness of its banking industry, business dynamism, entrepreneurial culture and a sturdy development financing mechanism,” she said.
Onyango also questioned why it is still difficult to witness a financial development agenda committed to making women a vital cog of the market economy.
“The lack of access to credit is a barrier to many Africans starting and owning businesses. Do social norms and laws possibly play a role in disenfranchising women entrepreneurs? Traditional banks always or often require collateral. What happens to those that lack assets?” Onyango asks.
She said it could be argued that accessing information that would create a channel to financial mechanisms is almost non-existent. She further questioned whether some of the citizens are basically information poor.
“Similarly, financial institutions could also be lacking knowledge in terms of dealing with the previously unbankable. How is the risk managed by those financial institutions that have an appetite to help in this particular instance? What are the practical solutions that we should start looking at in order to deal with the current problem? Shouldn’t the definition of financial inclusion be revisited to ensure that it is more than just access to a transactional account and funds?” Onyango asks.
Shared Interest guarantees loans by Southern Africa’s financial institutions and commercial lenders to low-income borrowers who would otherwise be considered unbankable. It serves as a catalytic vehicle to unlock capital and other resources for black women entrepreneurs and other small and medium-sized businesses to scale and grow. Its initiatives are aimed at creating inclusive and sustainable solutions to address Southern Africa’s economic inequality, and to achieve long-term growth and impact in the key development sectors of agriculture, climate change, women’s entrepreneurship, fintech and social enterprises.
Shared Interest is doing this by providing Partial Credit Guarantees of up to 75% of the loan sum where it shares risks with local financial lenders to get them to lend to low-income borrowers, mainly women. The organisation also provides technical support to beneficiaries, which includes how to work with local banks and technical support to lenders who are learning to work with new borrowers who they would otherwise consider unbankable.
Over the past 29 years the Shared Interest non-profit guarantee fund provided $34 million in loan guarantees, which unlocked more than $131 million in local capital for black businesses, and ultimately benefited more than two million economically disenfranchised Southern Africans.
Building on its strong track record of social impact and economic development in South Africa, Shared Interest recently implemented a new business model and expanded to other Southern African countries, including eSwatini, Malawi, Mozambique, and Zambia.