How Sh580 billion fund will benefit women’s SMEs

Dar es Salaam. There is fresh hope for small businesses owned by women in Tanzania with local financial institutions set to benefit from a continental guarantee fund of $250 million (about Sh583 billion) that specifically seeks to cater for their capital needs.

The fund is the brainchild of the Africa Development Bank (AfDB) and the African Guarantee Fund (AGF).

The Affirmative Finance Action for Women in Africa (Afawa) will provide leverage to credit extended to women by commercial banks, thus reducing the risk factor and improving the bankability of women entrepreneurs.

The manager of the AfDB’s East Africa Regional Development and Business Delivery Office, Ms Nnenna Nwabufo, said yesterday that while women-owned businesses constitute the bulk of micro, small and medium enterprises (MSMEs), the group is still at the bottom of the financing ladder due to perceived risks.

“This fund was established to close the gender financing gap in Africa. We believe that through increasing financing to women, we will be directly fostering economic and social development,” she said.

Afawa also involves financial institutions in responding appropriately to women entrepreneurs’ needs as well as advocating favourable legal and regulatory frameworks for the business sector.

In Tanzania, there is a significant financing gap for MSMEs, and the situation is especially dire among women entrepreneurs as less than 20 percent have access to bank loans.

Investment, Industry and Trade deputy minister Exaud Kigae said it is important for economic growth to trickle down through gender-balanced financing in all sectors of the economy, and Tanzania is ready make use of capital from the fund.

“This fund plans to unlock up to $2 billion in financing for women’s MSMEs in Africa, and I am sure we in Tanzania can exploit some of the available investment opportunities by tapping into this new solution,” he said.

Mr Kigae said some of the potential areas for investment include agro-processing; manufacturing and production; construction and real estate, and the services industry.

“We expect that through this fund, we will be able to strengthen our investment centre (TIC), increase finance facilities to a wider range of MSMEs, and even add new financial institutions,” he added.

For her part, the executive director of the Tanzania Bankers Association (TBA), Ms Tuse Joune, said the banking industry recognises the role of women-owned businesses in the market, and promised that TBA would collaborate and partner with stakeholders to address gender issues in financing.

“In promoting sustainability, we understand that we need to be part and parcel of women’s empowerment and creating innovative products that will improve access to financing for women entrepreneurs,” she said.

In its quest to scale up MSMEs financing, the AfDB said recently that it was considering establishing a development bank that would specifically cater for their financing needs.

The AfDB, which has been supporting the growth of MSMEs in Tanzania in a number of ways, including through its approval in 2016 of a $120 million line of credit to a local commercial bank, said it would establish an entrepreneurial development bank in Tanzania.

Available data shows that there are over three million MSMEs in Tanzania.

According to the Financial Sector Deepening Trust (FSDT), MSMEs contribute 27 percent of Tanzania’s GDP, and employ over 5.2 million people.

However, the growth of MSMEs in Tanzania is hindered by limited access to finance and ineffective use of financial products, largely because most MSMEs lack formal registration, collateral, credit history and tailored financial products.