Four ways to boost investment in women-led small businesses

Windy Massabni Private sector, Refugees and IDPs, Women's Economic Empowerment

Oxfam’s conversations and projects with entrepreneurs across the globe reveal a big gender gap in access to finance, says Windy Massabni. Women in business tell us that better support for them will include loan guarantees, alternative credit scoring systems and building the gender awareness of lenders.

Women selling mangos on the streets of Oyam, Uganda (picture: Windy Massabni)

“In Uganda where I come from, women still do not have the right of inheritance. All the assets and properties go to the male heir,” explains Marion Etiang, the founder of the Shea Care company in Uganda. “It’s up to men to give what they deem fit to the female in the family. Typically, when a woman goes to the bank to seek a loan for her business, the bank would require collateral which is often asset-based, even if she has the cash flow.”

Marion highlights a major root cause that holds women-owned businesses back: discriminatory gender norms over inheritance capital, capital that is therefore only available to men, not women, to grow their businesses. Such regressive gender norms lie behind the glaring gender gap in access to business finance.

Bringing investors closer to women-led SMEs

In the realm of entrepreneurship, there’s often a disconnect between investors and small and medium-sized enterprises (SMEs). While much effort is dedicated to making women-led SMEs “investment-ready”, little attention is paid to fostering “SME-readiness” or openness among investors or financial institutions. This oversight perpetuates inequalities in access to finance, particularly for women entrepreneurs.

But what if we could bring investors closer to women-led SMEs? In a survey conducted as part of Oxfam Novib’s project to support SMEs, the Impact SME Development programme, lack of collateral or assets was cited by women-owned businesses as a major obstacle. We also found that while 57% of businesses owned by men and 68% with mixed gender ownership sought external finance, only 46% of female-owned businesses did so.

Interestingly, women-owned SMEs had a 95% success rate in securing external funding, compared to 77% for male-owned and 93% for mixed-gender-owned businesses. This suggests that women entrepreneurs may be more reserved in seeking external funding. This is backed up by research by the Financial Alliance for Women, which found that women who are customers of financial service providers were more “risk conscious” then men, and more likely to sacrifice a potential upside in exchange for lower risk or less debt.  

So how can we support women entrepreneurs to get the finance they deserve and that can help their firms thrive? Tackling root causes such as sexist inheritance customs and laws will of course be crucial for long-term change – but alongside this the women we talked to pointed out how NGOs and other support organisations can take action now to help them in four broad areas.

1. Loan guarantee schemes

Many women emphasised the potential effectiveness of long-term guarantee schemes and partnerships. These local guarantees effectively protect financial institutions from losses if borrowers default, incentivising them to lend to women-owned businesses, even without collateral.

Abrar Shahriyar Mridha, Enterprise Development Project Manager at Oxfam GB, oversees a multi-country programme providing access to sustainable capital to help SMEs grow, and says such loan guarantees can transform the prospects for women-owned enterprises. “Partnering with banks and financial institutions gives us leverage to access women-led MSMEs, making them more bankable. These enterprises have created almost 18,500 jobs for women and reached 55,000 farmers, with 49% women in leadership positions.” Abrar’s example vividly illustrates the transformative effect that guarantee schemes can have on women-owned enterprises, fostering economic empowerment and gender equality.

2. Alternative credit scoring – and including “social performance”

Women are more reliable borrowers then men. Financial Alliance Women found that men are far more likely to be failing to keep up with repayments than women. Yet women continue to be underserved when it comes to accessing loans.

Different ways of assessing credit-worthiness  can help. That means analysing cash flow and business performance, rather than relying solely on traditional collateral-based assessments.

What could make a big difference is looking not just at conventional metrics but at the social capital created. Hassan Hajam, the Executive Director of Platform Impact, the Impact SME programme’s main partner in Cambodia, says: “Investors should design innovative, alternative financial instruments for impact-driven SMEs We have to move away from the typical balance sheet, profit-and loss statement, cash flow etc.. by integrating social and environmental dimensions at the end of the profit-and-loss statement if we want to see real impact thrive.”

By prioritising investments in businesses that can show such “social performance” – supporting gender equality and empowering women economically – investors can address disparities in access to finance.

3. Flexible products with smaller loans

An often-overlooked aspect of addressing gender inequality in access to finance is reassessing the size of investments. Many investors typically focus on offering large loans, often exceeding $1 million, which may not align with the needs of small and medium-sized enterprises (SMEs), especially those owned by women. These businesses frequently require smaller investments ranging from $100,000 to $500,000 to scale effectively.

Recognizing this disparity, initiatives such as our newly launched Pepea Fund aim to bridge the gap by providing smaller loans with a gender-lens tailored to SMEs, in this case with a focus on climate change mitigation. While we acknowledge that smaller investments may pose higher costs for investors, it’s imperative to take account of the social impact of such investments alongside the financial returns. We offer “mezzanine” loans, flexible loans with flexible terms that do not necessarily require tangible assets as security. This flexibility makes them more accessible to women entrepreneurs who may lack traditional collateral, such as property or equipment.

4. Gender diversity and gender awareness in financial institutions.

Ensuring lenders have a gender-diverse team is also crucial in addressing the biases and barriers faced by women entrepreneurs. This requires gender balance at all levels of a financial institution – from the executive level to front line staff.

At the ANDE x Sasin Business School Women Impact Entrepreneurship Day 2024, one business leader shared her experience of intimidation while applying for a loan at a bank.

As the head of a sustainable packaging company in Thailand, she had all the necessary documentation for the loan and met all the requirements, yet faced extensive questioning from the predominantly male staff. She felt compelled to prove her legitimacy, showcase her qualifications, and justify her ability to manage her business alongside motherhood.

This unsettling encounter underscores the need both for gender balance and for gender-sensitivity training for bank staff so they can better serve women. Alongside this lenders  will need a gender-lens investment strategy, fostering an environment where women entrepreneurs feel respected and supported, without encountering undue scrutiny or bias.

But we also need to keep campaigning on root causes

Initiatives such as guarantee schemes, alternative credit scoring methods, and promoting gender diversity in fund management teams are essential steps in bridging the gender gap in SME financing. However, while these efforts do help alleviate immediate barriers, they do not address the root causes of gender disparities.

NGOs such as Oxfam and enterprise support organisations have a crucial role to play, not just in providing support through initiatives like those above, but also in advocating for policies and practices that tackle root causes, that change norms and systems and lay the foundations for true gender equity in access to finance.


Windy Massabni

Windy Massabni is an Impact SME development specialist based at Oxfam Novib in the Hague. She coordinates the influencing, learning and training component of the programme in all countries.

Find out more about the Impact SME Development Programme here.

This is the latest blog in our series that started on International Women’s DayFollow Oxfam’s #HerMoneyMatters campaign on Twitter/X and LinkedIn. And watch the recording of this Instagram Live session to mark IWD24, on ‘How to make the economy work for women’