The World Bank has called for the need to tailor financial products and services to the women led Small and Medium Enterprises (SMEs) (W-SME) appropriately to ensure that credit is available for them.
According to the survey report dubbed ‘Access to Finance and Capacity Building of Women-led Small and Medium Enterprises in Zambia’ done by the World Bank in March 2021, there is significant potential for W-SME lending, with an estimated market size of K2.2 billion for W-SME loans.
This is a combination of unmet demand from current female borrowers and women led firms that need to borrow in the future and the number is quite significant.
Speaking during the Launch of the survey report policy Workshop attended by the Zambian Business Times-ZBT, World Bank country manager Dr Sahr Kpundeh said to unlock this demand and make sure that credit is available to viable women-led SMEs; one key factor was to be able to tailor financial products and services to W-led SMEs appropriately.
He said there is room to pursue innovations that can take into account how women-led SMEs operate, the types of collateral they have access to and the additional services that would be needed to ensure they understand the products on offer.
Dr Kpundeh said, “Women Entrepreneurs Finance Initiative Zambia is pursuing partnerships with financial institutions to provide technical assistance to do just this.”
He said the survey shows that women in business do not find financial institutions to be particularly welcoming, with many female borrowers who are successful in their applications reporting lower loan amounts with shorter repayment periods compared to male peers.
Dr Kpundeh said moreover, almost half of the women surveyed report that financial institutions require them to provide male signatories although the law does not require it.
“Development of new products and services leveraging the significant advancements in the regulatory environment offers another critical opportunity.
“Zambia is the global leader in the Doing Business Getting Credit indicator, and yet we do not see financial institutions taking full advantage of this best practice legal and institutional framework,” he said.
Dr Kpundeh noted that SMEs in Zambia have been heavily impacted by COVID. He said according to the latest round of COVID surveys conducted by the World Bank, nearly 6 percent firms have permanently closed and for those that have remained open, monthly sales have fallen by 34 percent on average.
Dr. Kpundeh observed that the liquidity crisis for SMEs is particularly severe as 95 percent firms face cash flow constraints, 84 percent firms have delayed payments to suppliers, landlords or tax authorities and 23 percent have been overdue on financial obligations.
“SMEs in Zambia represent 70 percent of GDP, employ 88 percent of the workforce, and constitute 97 percent of businesses. Women-led SMEs constitute 17 to 30 percent of SMEs in Zambia, according to varying estimates in the formal and informal sectors.
“In this context, the survey of women led SMEs and the market research report on moveable asset based lending are even more relevant as they offer granular details on what can be done to boost access to finance and non-financial services for SMEs and enhance the credit environment in Zambia,” he said.
Dr. Kpundeh said the market study on the movable asset-based lending points out how Zambia can further improve the eco-system for such lending that is a mainstay and a critical tool for SME access to finance in developed economies.
“The World Bank Group is a dedicated partner to the Government and the financial and private sectors in advancing this agenda,” he said.
