Inadequate credit to women-owned SMEs creates $285bn credit gap – Elsie Awadzi Addo
Second Deputy Governor of the Bank of Ghana (BoG), Elsie Awadzi-Addo, says a $285 billion credit gap has been created due to inadequate access to credit by women-owned small and medium and enterprises [SMEs].
According to Mrs Awadzi-Addo, closing the credit gap especially in developing countries could lead to a 12 percentage points increase in per capita GDP by 2030.
Making the assertion at the Second Anniversary Celebration of the Association of Ghana Industries’ Women in Business Initiative, Mrs Awadzi-Addo averred that in Africa, there is an estimated $42 billion financing gap for African women entrepreneurs across business value chains with only 16-20 percent of women in Sub Saharan Africa are able to access long-term financing from formal financial institutions.
Adding that in Ghana for instance, female entrepreneurs are eight percent times less likely than men to access the kind of capital and other financial services and products that they need to start or scale up their businesses.
“Goldman Sachs estimates that 70 percent of women-owned formal SMEs are unserved or underserved in terms of access to credit, amounting to a $285 billion credit gap, and closing this credit gap in developing countries could lead to a 12 percent increase in percapita GDP by 2030.
“According to an African Development Bank report on Affirmative Finance 3 Action for Women in Africa, there is an estimated $42 billion financing gap for African women entrepreneurs across business value chains, and only 16-20 percent of women in Sub Saharan Africa are able to access long-term financing from formal financial institutions,” she remarked.
Delivering the Keynote address at the anniversary celebration, the Second Deputy Governor remarked that women entrepreneurs and the businesses they own and lead, face serious challenges as their businesses tend to remain smaller and less profitable than those owned by men, owing in part to limited access to business support services, markets, and finance.
To address the limited access to finance challenge faced particularly by women-owned MSMEs, she noted the BoG has put in place mechanisms to support the delivery of credit on a sustainable basis to businesses.
“These include a credit bureau-based reporting system that ensures that banks and other licensed lenders report on credit behaviour (prompt loan repayments as well as defaults) on all borrowers, and that creditors check on borrowers’ credit behaviour before they make credit decisions on loan applications. Responsible borrowers therefore stand a better chance to access more loans and at reasonable interest rates as their credit risk will be lower.
“Also the Bank of Ghana’s Collateral Registry registers all collateral (over movable and immovable assets) provided by borrowers to licensed creditors and facilitates the delivery of credit to borrowers (especially women) who might not have access to immovable asset collateral,” she emphasized.
Touching on the African Continental Free Trade Agreement Area (AfCFTA), Mrs Awadzi-Addo noted there is great potential for Ghanaian women to harness the benefits of the AfCFTA which creates a single African market, as well as many other opportunities beyond Africa thanks to technology and e-commerce platforms among others.
“These market opportunities offer hope to women-owned and women-led businesses in Ghana to scale up and to compete with their peers abroad,” she said.
According to her, forty-four percent [44%] of all micro, small, and medium enterprises (MSMEs) in the country are owned by women, further noting that the MSMEs sector accounts for about 92 percent of all businesses in the country and contributes about 70 percent of Ghana’s GDP.
