Strengthening Access to Finance for Women-Owned SMEs in Developing Countries

Published: October 2011

This report highlights key trends, challenges, and opportunities for advancing women's entrepreneurship and increasing their access to finance. Due to their high growth potential, women-owned SMEs in developing countries are of particular interest. The report therefore focuses on the presence of women-owned SMEs in developing countries across different types of enterprises, and the ability of these business owners to access finance to grow their businesses; identifies financial and non-financial institutions
with scalable approaches to increase access to finance for women entrepreneurs in developing countries; pinpoints specific knowledge gaps for which further research is recommended; and, provides policy recommendations on expanding access to finance for women entrepreneurs.

Key Findings

  • When the environment is conducive to business, female and male entrepreneurs perform very similarly and have similar rates of borrowing.
  • Some survey results indicate that limitations in access to finance for women entrepreneurs may be primarily associated with their propensity to operate smaller and informal businesses.
  • Access to human capital and collateral are often cited to help explain why women are less likely to receive loans.
  • If women's businesses are perceived to be riskier, higher cost, and/or lower return, creditors will be reluctant to lend to them, irrespective of whether the perception of higher risk is based on facts and experience or on conjecture.
  • Microfinance has partly compensated for women's low access to formal finance. However, as women entrepreneurs grow, they need financial products.
  • Women's access to finance beyond microfinance is increasingly supported by a number of actors, including International Finance Institutions (IFIs).
  • However, these initiatives are small and siloed, and often lack targets or monitoring and evaluation frameworks.
  • Financial institutions can pro-actively and profitably engage with women entrepreneurs as clients and services that go beyond microcredit.
  • Three-point action plan to expand women's access to finance: 1.Endorse a set of recommendations for policymakers in the developing world to establish a supportive, enabling environment that will facilitate women entrepreneurs' access to financial services in their respective countries. 2. Lead efforts to identify, evaluate, and support the replication of successful models for expanding financial services to women entrepreneurs.3.Lead efforts to gather gender disaggregated data on SME finance in a coordinated fashion.
  • Women entrepreneurs make significant contributions to their economies.
  • Women-owned businesses appear restricted in their growth paths.
  • Because financing is an important means by which to pursue growth opportunities, addressing women entrepreneurs' specific needs in accessing finance must be part of the development agenda.
  • Access to finance for women is limited by nonfinancial barriers.
  • In many developing countries, a weak investment climate limits enterprises' productivity -- and thus access to finance for Small and Medium Enterprises (SMEs) more generally.
  • Investment climate constraints hit smaller firms harder, and women entrepreneurs are particularly affected since they are more likely to run smaller businesses.
  • Weak creditors' rights and a lack of credit information can disproportionately disadvantage women, particularly if they have little collateral or control over assets.
  • Some non-financial constraints have a direct gender dimension.

Populations Women

Industries Business, Finance

Publishers International Finance Corporation (IFC)

Funded by International Finance Corporation