Increasing the access of African women to credit : an integrated approach

INCREASING THE ACCESS OF AFRICAN WOMEN TO CREDIT

AN INTEGRATED APPROACH

Economic Commission for Africa

AfricanTrainingand Research Centre for Women P.O. Box 3001

Addis Ababa

Ethiopia

Funding for the publication of this

handbook

was provided

by Swedish

International Development Authorityunder the Project: "Increasing Women's Access to Credit Through TraininginManagement and Credit Techniques"

Published

by Economic

Commission for

Africa!

African Training and Re- search Centre for Women

TABLE OF CONTENTS

Foreword v

Preface ix

CHAPTER

I: Introduction 1

CHAPTER II: The Problem 5

CHAPTER III: Elements for Access to Credit 13

CHAPTER

IV:

An

Integrated Approach for Providing Packages

of Assistance . . . 23

CHAPTER

V: Operationalisingthe Approach 31

CONCLUSIONS . . . . .... . . .' . . . 37 APPENDICES . . . 39

I: Sources ofFun~ 39

II:

List

of Resource Persons . . . . ' . . . 49

III: References t 51

Foreword

Current observations indicate that one of the major setbacks and threats to the efforts made by women to advance their effective participationindevelop- ment is the lack of sustained effort by all concerned. Positive actions which have greater multiplier effects as well as impact on the lives of more women, especially at the grassroots level must be strengthened.

Greater effort has tobemadeinorder to develop logical approaches capable of transforming discriminatory attitudes based on sex into equal opportunity for women.

It is in this regard that the United Nations Economic Commission for Africa!African TrainingandResearch Centre for Women (UNECA/ATRCW) ispromoting ideas aimed at constructing logically arranged programmes to help improve women's access to credit. Its efforts in this field have involved identify- ing obstacles and ways of empowering women to actively participate in economic development. UNECA/ATRCW's involvementinwomen's access to credit has provided it with valuable experience.

This experience, indicated that female investment opportunities and entrepreneurial careers are frustrated by difficulties related to access to formal institutional credit. Hence, UNECA/ATRCW recommends actions for the establishment of effective credit assistance programmes which will assist in the successful access of women (especially rural and urban poor women) to credit.

This handbook, "Increasing the Access of African Women To Credit -An Integrated Approach" is part of its efforts to document and communicate its observations in the search for ways to successfully secure women's access to credit in the African Region.

The concept of "Integrated Approach" is not completely new. It is the culmination of observationand experiences from activities, projects and programmes that have attempted to address the problem of women's limited access to credit. The concept attempts to take piecemeal actions puttheminto holistic perspectives and in a continuum, rather than stop-gap measures, develop comphrehensive programmes that meet the (",at-ying needs and requirements for women's access to credit.

The handbook is meant to be thought provoking, presents a conceptual approach and lays the

basis

for implementing programmes. It is hoped that the handbookwillgenerate interest, encourage further discussions and reactions that will eventually lead to the development of guidelines for women's access to credit.

Lastly,the Cross-drum used as logo on the cover page and also used to convey the messageinChapter Four, represents an integrative wholesome approach;

an approach involving calling people's attention, by sounding the

drum

to the need for action to help women to qualify for credit,andthe reaction of others to the sound by providing various supports and assistance towards enhancing women's

access

to credit.

Working togetherinharmony, to the sound of the African drum calling us to react positively to the needs of women, especially the rural- andurban-poor,we can make strides towardsthe advancement of women.

Adebayo AdedeJl UN Under-Secretary-General

and

Executive Secretary of Economic Commission for Africa

Increasing Women's Access to Credit

Making

all

this happenin

lr-

self is a challenge

There are many women in Africa who could succeed

in

economic activitiesifonly they had little resources - financial - to get started.This is an attempt to suggest ways of helping many

such women to realise their dreams

They do not need much to pullout of their predica- ment; effectively increasing their access to credit that can provide them with a little capital canbe a way out

Let us reflect together through the pages of this booklet and go into action

Preface

The Handbook on Increasing Women's Access to Credit An Integrated Approach is a product of the project on the development of measures for increasing women's access to credit in the African Region. Among other things the projectaimsat:

a) Improving women's technical, management and entrepreneurial skills;

and

b) Setting up pilot projects to demonstrate various possibilities of using credit facilities for developmentofsmallscale industries.

The ideas presented in this handbook are the culmination of activities and interactions in the field, at regional, subregional and national levels wherein views, observations and experiences on women's access to credit are shared.

Several perspectives on actions required to increase women's access to credit have been tested. The general concensus has been that isolated actions have not provided the

kinds

of impacts needed to greatly increase the access of women (especially rural and

urban

poor women) to credit.

The attainment of a meaningful result in this area requires an all-round effort to remove the various factors inhibiting women's access to credit. Itwas thus considered necessary to galvanise the isolated actions of governments, interna- tional organisations and Non-Governmental Organisations into more sus- tainable and continuous actions that would eventually guide women to credit acquisition.

Of all these, the project came up with the interactive approach to ensure that women receive assistance in increasing their access to credit.

The ideas expressed in the document are the outcome of a review by a team of experts drawn from such various institutions as banks, management training institutions, Government Ministries, international organisations, universities and local non-governmental organisations.

The handbookisintended to provide women development planners, advo- cates, administrators of women's programmes, bankers, development institu- tions hoth international and local, consultants, intermediary agencies and women themselves with a wider. perspective on and better understanding of the vital issues related to women's access to credit for productive activities.

Itis envisaged that the handbook will assist in.-

a) The ongoing search for better ways of increasing women's access to credit;

b) The designing and planning of programmes and projects for women's access to credit;

c) The development of a more coordinated and cohesive approach to women's access to credit;

d) Disseminating information about the process of increasing wQD1en's access to credit.

ECNATRCW expresses its appreciation to the Government of Sweden for its generous funding of the project "Increasing Women's Access to Credit through Training in Management and Credit Techniques" from whose activities has resulted this publication.

x

Chapter I Introduction

The Economic Commission for Africa (ECA), as one of the Key Regional organisations of Africa, has

a

leading role to playinthe, advancement of women in the development process of the region. In response to this role, ECA has continuously endeavoured to reflect and includeinits work programme, issues and actions for enhancing women's participation in development.

The Commission's efforts in

this

regard, supports the fact that women have

a

special

and

substantial role to playinthe economic development of the African Region.

Aware of the important roles women are playing and can playinall sectors of the economy, the challenge before us allishow to change, modify and improve the conditions under which women participate so as to improve and enhance their effectiveness and performance. For this reason, ECA attaches greatim- portance to the identification and development of such crucial strategies as increasing women's access to credit which can increase their productivity and contribution to development.

The Commissioin's African Training and Research Centre for Women (ATRCW) has undertaken activities aimed at providing insight and possible solutions to women's access to credit resources. ATRCW is currently im- plementing in three countries the project: "Increasing Women's Access to Credit Through Training inManagement and Credit Techniques". Thisproject is geared towards providing a more realistic approach to the access' of women to credit, taking into consideration the political, economic and cultural structure of the continent.

This handbook is the outcome of ATRCW's concern and efforts to assist women entrepreneurs to overcome the obstacles they usually encounter in obtaining credit. It is hoped that the ideas and proposals contained thereinwill be found useful and serve such purposes as translating concepts into action- oriented credit programmes, increasing awareness of the importance ofand need for initiating programmes for women's access to credit and attracting meaningful proposals for solving the problems women face in obtaining credit.

1.1 The Experience of ATRCW

The efforts of ATRCWinthe area of women entreprneurship development and their access to credit has provided the Centre with a lot of experiences, justifying the need for mobilising and channelling resources to women, especially the rural and urban poor, for economic participation. Furthermore, ATRCW has identified the central issues of women's access to credit as follows:

a) Provision of the needed support to enable women td qualify for credit;

b) Modification of existing financial brokerage practices so as to allow for effective utilisation by various target groups;

c) Identification of credit sources.

On the basis of the~bove experiences, ATRCW is proposing an approach and practical measures that must be adopted if a favourable environment for women's increased access to credit must be created.

The approach calls for measures at macro and micro levels to help women to become creditworthy, direct policies towards creating flexible banking practices favourable-tothe rural and urbanpoor, and bridge the gap between formal and informal banking sectors.

The macro actions cover broad areas of policy initiation and legal enactments, banking and credit policy modifications, development of co-ordination bodies at national levels, provision of instutional support and services and mobilisation of financial resources. The key intermedian agencies that may be involved in bringing about these macro actions are governments, development agencies (local and international), donors and financial institutions.

Generally, micro actions should basically be on a case-by-case and one-to- one bases. Such individualised activities should aim at making women more capable in their business operations, help them to qualify for credit and to effectively utilise the credit obtained. Therefore, micro activities should centre around providing women with credit, necessary support and assistance and supervision of their business operations. Intervention of these nature can be by or through women machineries, training institutions, legal associations, inter- mediate financial institutions, and other specialised agencies.

Itis also important to design sub-programmes to meet the varying needs of target beneficiaries who may be categorised as pre-entrepreneurs, small, medium- and large-scale entrepreneurs, depending on their entrepreneurial size, credit needs and stage of development.

The designing of such sub-programme packages should also take into con- sideration the rural or urban background.

It isin this context that ATRCW is opening

this

dialogue to encourage concerted effort from all concerned at the macro and micro levels to help create an environment and carry out actions aimed at increasing the access of African women to credit.

In presenting the approach and measures, issues are developed around the following topic areas:

a) The problems of women's access to credit which have led to the conceptual approach;

b) The elements of access to credit which brought out some food for thought and cases in points. Here also, an outline of vita! elements (needs and issues) to be considered in designing an integrated approach to increasing women's access to creditis provided;

c) An integrated approach as a model for increasing women's access to credit, is expounded from both the macro and micro levels;

d) Operationalising the approach by elaborating titbits on actions and sources of support that can be usedinoperationalising programmes and projects aimed at increasing women's access to credit.

Chapter II The Problem

"The lack of property rights ... militates against the womenISefforts to undertake development projects in their villages and towns. If they decide to investin a maizemill orto develop a vegetable garden ora hotel, theyhave very great difficulty in getting a loanfrom the bank. Theyhave no collateral to offer, and often cannot evengive the assurance that the income from the investmentwillbe completely at theirdisposal.,,1

J

ullus Nyerere Former President United Republic of Tanzania

2.1 The Problem Setting

Finance is one of the major factors for accellerating development. Credit provides funds for implementing various socio-economic development activities.

While credit can be used for a variety of purposes, including education of children and provision of many household needs, this handbook deals mainly with the need for credit purposely for income-producing or entrepreneurial activities.

There is a growing recognition that institutional

cr~dit

plays an important role inthe socio-economic development of any society. Itis clear that with socio- economic development, income rises, employment is created and entrepreneurial activities are intensified. TheInternational Centre for Research on Women stresses that credit forms part of the larger picture of access to resources.

There are many women in Africa who could succeed in economic activities if only they had little financial resources^[0get started. In fact, credit enhances women's economic activities.

Women are extensively involved in informal credit systems such as obtaining money from relatives, and money lenders, but are not necessarily highly knowledgeable about or have adequate access to formal borrowing systems.Be- sides, the amount from informal sources is usually insufficient and the terms and conditions attached unfair to the recipient.

ECNOAU . The Arusha Strategies for the Advancement of Women in Africa: Beyond the end of the United Nations Decade for Women (1984)

Constraints on female borrowing are similar to constraints on other female activities, such as access to agricultural extension services or technology. The constraints on female borrowing include:

a) Social customs that restrict women's ability to deal with credit officials;

b) the nature and type of credit programmes whose size, and repayment schedules are not suitable to women's activities and outlook;

c) The westernised nature of formal credit institutions which, as a function of their origin, conceptualisation and method of operation, renders almost all rural and urban-poor women inelligible for credit;

d) The non-availability to many women of the time and skills necessary for loan negotiations;

e) The lack of collateral, as the majority of women do not have title to land or other property;

f) Legal restrictions which, in some cases require that the husband must co-signforthe loan;

g) Bureaucracy on the partoflending officers who are usually prejudiced.

2.2 Problem-solving

The question then arises as to how institutional credit can be obtained and made available to vulnerable groups, especially poor women, to facilitate their taking direct advantage of productive activities. Provision of credit to women, especially the rural- and urban-poor, will help to improve their economic condi- tions. Women therefore need credit to help them contribute adequately to development and for self-actualisation.

These constraints and situations do not mean that there have not been efforts to meet the credit needs of women. Recently, attention has been focused on credit granting, and availability as well as on necessary mechanisms aimed at 'helping women to increase both their productivity and income base. A random survey of the situation reveals that a lot of activities and initiatives with regard to credit, especially on women's access to it have been going on. Among these are the following-

a) A survey on women and credit undertaken by ATRCW;

b) Women's World Banking initiatives in helping to create an enabling environment in which women will have access to economic resources;

c) Preparation of Guidelines for setting up a Revolving Loan Fundbythe United Nations Development Fund for Women (UNIFEM);

d) Increasing women's access to credit through Credit Unions in West Africa (Seminar organised by Africa Co-operative Savings and Credit Associa- tion);

e) Guide to Community Revolving Loan Funds by The United Nations Development Fund for Women (UNIFEM) and;

f) Studies on the situation of women and credit.

The point of all these, is that credit programmes have been approached from the dimension of resource identification and utilisation - through creation of revolving funds and loan guarantee schemes. Also, there has been mobilisation of savings throughsavingsand credit unions. Although these are vital aspects of the envisaged solutions, they have their limitationsin that they lack the other support mechanisms

for boosting

the

business skills

and

capability necessary for

an effective utilisation of the loans approved. Credit institutions are required to continuously monitor and evaluate the implementation of the business. and provide business information and advice. In a sense. credit institutions may be required to act as business consultants, or a mechanism should be established to accomplish such tasks.

2.3 A New Approach

A programme for increasing women's access to credit requires a comprehen- sive integration of the various resources and support measures that will make them not only credit-worthy but also intelligent entrepreneurs. It is within this framework that we are presenting and thinking out a concept that we at the ATRCW believe willhelp women to successfully gain access to credit from major financial institutions.

The approach establishes that to successfully increase women's access to credit, actions mustbetaken to ensure not only their acquisition of loan but also the meaningful utilisation of such loan. Italso calls for formal credit facilities and mechanisms, on the one hand and women (rural and urban) uniting their efforts on the other. This requires that credit institutions should be more flexible (take more risks) and that women should be more aware of their obligations.

Whatever the circumstances, both parties, especially the women, need strong support.

The ideas that follow and later on partly elaborated are presented as a concept rather than a rigid formula for success. They are flexible and should be tailored to country specific needs in the context of the social, political, economic and legal framework of each country. The concept arose from the need to increase women's access to credit in the African Region. The ideas presented are not in themselves exhaustive or conclusive. Many other actions will be required for the successful access of women to credit.

The concept is based on the following observations on rural and urban poor women:

a) That rural and urban poor women, in spite of their difficulties and apparent poverty, know their situation and environment better;

b) That a rural or urban pOOT woman who seeks credit is ambitious and an achiever, as such a woman would like to break from the vicious circle of poverty.

From the above, it is apparent that a number of other elements are required for a successful business. The common denominator to all these is finance through credit, with which women will have access to other necesary resources - human, material, and technological as well as the skills to use them effectively.

In a nutshell, the concept is a plan of action for the successful access of women to credit.

The "Integrated Approach» - is it just a slogan, an approach or a theoretical fad? Does the approach packaged provide a strategy for the access of women to credit? Ifso, what are the key elements and how does it offer opportunities for effectively increasing women's access to credit. Itis beyond the scope of this handbook to probe all these questions in depth. The concept presented here-in has a more limited purpose. In the first place, it seeks to explain the appeal of the integrated approach. Secondly, an attempt is made to convey some of the flavour of the ideas associated with the integrated approach, through an examina- tion of the access network (between institutions and agencies at the macro and micro levels) and (he credit access requirements. Thirdly, some critical obser- vations are made on the appropriateness of this concept, followed by operational suggestions.

2.4 Why an integrated approach?

The concept being presented and which calls for collective reflexion is the Integrated Approach to the Access of African Women to Credit. It is being presented on the basis of the belief that the question of credit is very complex and time- consuming and that for women to gain maximum ground on this, an access programme must therefore be service-oriented with follow up exercises by the bank and other institutions to ensure both productive utilisation of the loans and recovery in due time. This helps to establish the credit- worthiness and improves the living standards of women. Furthermore, an integrated ap- proach ensures the provision of an assistance package for women's entrepreneurship development and access to credit.

The concept presented here is advocated on the basis that access to credit must not be conceived merely to fulfil financial requirements. Itmust in addition be seen as encompassing a whole range of needs relating to the effective utilisation of the loan. It must seek to relate the individual/group savings to her/their credit needs so that she/they may be able to draw on surpluses after

meeting credit obligations, and still be able to meet other intermediate needs. A credit effort must seek to improve the rate of recovery of credit and also provide systems for supervisingcredit,thus ensuring that loans are properly used.

2.5 Statements on the Integrated Approach

The concept is conceived with the following considerations in mind:

a) There are new prospects for providing women with credit if they are to realise the above-mentioned credit benefits;

b) Access must be within the mainstream of the financial activities either by direct contact or

by

linking informal financial activities to formal financial systems;

c) Confidence and ability must be built on women, and women must also acquire capacities for effectively competing in the business world;

d) Tactical approach for working out women'saccess to credit must be tried out;

e) Effective participation of women in credit programmes/projects must come through awareness, assessment and actions, transforming women into creditworthy individuals/groups.

2.6 Credit - Not a Simple Matter

Development specialists point out that ifcredit is difficult to obtain by most entrepreneurs, it is even more difficult for women entrepreneurs. Various social and cultural constraints preclude women's full access to many modern/formal sources of credit, such as banks, cooperatives and credit unions. Furthermore, erroneous assumptions that women do not save, or repay loans and therefore are poor credit risks have continued to pose huge impediments to women's access.² Although studies by FJ.A. Bouman, M.K. Delancy and E.P. Schumacher, Sebstad and M. Buvinic have all helped to dismiss these myths, the problem of providing women with credit still lingers on.

2.7 Cases-in point

The MRARU women's group in Kenya is a case in point of women needing appropriate access to credit: The group is a community self-help organisation located

iJ.l

the Taita Hills of Kenya. Itcollects members' contributions and uses

2 Robert von der Ohe . Chief Economist, Credit Union National Association. (From Credit and Women's Economic Development, World Council of Credit Unions. Inc. September

1984)

it for community advancement projects. In addition to maintaining and operat- ing a public transport system, it runs a local dry foodstore and holds regular meetings to discuss business and exchange information. Since 1970,membership of the group has grown from47to over 200.

This group of women started their bus service in an effort to meet the real need for transporting goats, maize and cassava roots from their community to the trading centre which is very difficult to reach. Their first attempt to obtain credit saw the initiation of the business which was delayed for almost three years as they had to save to meet the banking requirements. In another attempt, they lost an opportunity to purchase a bus because they could not readily withdraw their money from the post office as they had to give two weeks notice by the end of which the bus had already been sold to someone else.

Disappointed, the women began afresh but by the time they found another bus, its cost had risen higher. Acquiring the bus was easier as they had already opened an account in a commercial bank and could write a check immediately.

They also received assistance from the District Commissioner and from a woman Community Development Officer in obtaining loan for the purchase of the bus.

The operation of the bus service went well at first. This enabled them to repay the loan and even earn profits which were distributed to members. The bus worked so hard that, it eventually needed to be replaced. By then the cost of a new bus had tripled and, no savings had been made. So again they were faced with the problem of raising money and getting credit.

They had to depend once again on their collective savings, used the old bus as a deposit on a new one and one of its members loaned the difference to the group to enable them to obtain credit for the purchase of the new bus.³

Their situation is typical for no professional advice or support is sought in the handling of their transactions. The business has not grown, though the old bus was replaced by the new one. Their greatest problem is managing their business so as to effectively liquidate their loans and still have enough profit to improve their business and lives at horne.

To really be creditworthy, one must be able to generate income and profit, be able to manage one's money, earn enough to use at home and be able to sustain or expand business activities.

To this effect, there is the need for an assistance package that would create the well-qualified entrepreneur that it takes to successfully have access to credit.

3 JillKneerirn-"Village Women Organise: The Mraru Bus Service", Seeds Pamphlet Series No.2, New York, Seeds 1980.

DUTERIMBERE • Helping to secure women's access to credit is another important type of credit support institution formed in Rwanda, in 1987by a group of Rwandese women who fully comprehended the needs of women and the part they play in national development. DUTERIMBERE is a non-profit-making organisation and since its inception has promoted the development of women's small-scale enterprises, provided training, market feasibility studies, technical assistance and initiated some bank guarantee to give women access to credit as a means of improving their socio-economic status. The sources of funds for the mentioned activities are the association members, contributions and fund- rais- ingactivities. With these, DUTERIMBERE has been able to provide informa- tion and assistance to over 600 womenjpRwanda, hold training seminars,ineach of Rwanda's 10prefectures, study market opportunities and work with individual entrepreneurs.

In the schemes efforts to fortify women's progress it is doing everything possible to establish accord with Rwanda's BaOQ,ues POIJulaire (Peoples' Bank) which

will

provide loans to women entrepreneurs. This is very important because the Association has, after its two years activities, realized that it can not meet the fast expanding needs and demands of women's solely by funds raised from the members, but requires a reasonable amount of loan from the bank in order to fund the women's activities. However, even though banks have expressed a positive interest in providing loan to women through DUTERIMBERE, the Association is still unable to meet the credit guarantee requirements of the banks.

Itstill requires to put a substantial amount of money in the bank for guaranteeing loans for a good number of women.

Looking at the Association andall its efforts and good intentions, its lacking in an aspect of the package concept renders it incapable of providing full assistance that is vital for the successful access of women to credit.

REVOLVING LOAN FUNDING - A group of 50 women in Africa decided to start a small-scale enterprise, but discovered that they had not enough money for

it

and could not borrow money from the

bank

because they had no collateral.

The fiftywomen had one thing incommon; each of them had 10 goats. The women decided to direct their small saving towards raising a herd. One member of the group, trainedinanimal husbandry, kept the herd. A local veterinarian assisted with advice. And the local market proved to be good. The women worked out

all

the details and sold the goats. They agreed that the time for expanding had come and sought money for expansion which included lending money to the group members tobepaid back in time for others to borrow. This practice, however, experienced some problems as borrowers lagged behind in payments.

By

analysing their delinquent loans regularly, they discovered that their terms were unrealistic generally for their borrowers who were not properly advised and simply could not save enough inbetween payments to meet the schedules. Therefore, the fund could not revolve as planned. In order to save the project, the women agreed to adapt a flexible changeinthe terms of payment

and also employed someone experiencedinoperating revolving funds to assist them.

2.8 Lessons Learnt

The above are three diverse cases of requirements to be met in fulfilling the conditions for securing women's access to credit. They provide enough evidence that a loop-sided approach to credit often does not meet the varying needs of women. They also establish that there are varying interlocking elements and needs that require attention and assistance as a holistic approach must be designed to address the various dimensions of the credit access issue.

Project supervision Awareness building

Confidence building

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Essential Elements

The integrated approach therefore addresses the various needs, require- ments andriskfactors which limit women's access to credit. It aims at meeting the requirements and ultimately reducing the risks so as to be able to present women as lowriskclients capable of meeting credit requrements and obligations for their personal gains and business development, and also enabling them to repay loan on time.

In putting together the concept of integrated approach to women's access to credit, itisnecessary to take into consideration factors that influence women's access to credit as

this

willhelp to explain how women can be helped. Itwillalso put into perspective the dimensions of credit access programmes and how projects can and should be tailored to meet the varying dimensions of credit access requirements. The factors fall under the following broad categories:

needs to be addressed, people involved and what it takes to secure women's access to credit.

3.1. Needs To Be Addressed

3.1.1. Needs

3.1.1.1 Educational Training

Various forms of education is needed by womenin order to provide them with knowledge on how to gain access to credit and carry out entrepreneurial activities. Education on credit arrangements and logistics for entering and participating in business can go a long way in developing the proftle for meeting the challenges of the business world. The question of collateral which neces- sitates legal protection on property rights and ownership calls for education on legal issues. Therefore a multi-dimensional education thatwillhelp women see more clearly and handle things properly must be provided. Education can be provided on an individual or collective basis through the mass media. It is important that such education should also be directed towards men so as to enable them to appreciate the rationale behind the observations and sentiments beingraised. It should also create change in societal attitude and in societal values.

Equally important is the need for skills development in critical areas of business and credit acquisition.

Training is.an indispensable factor for the success ofanyprogramme aimed at securing women's access to credit. Thereisan intimate relationship between training and effective and efficient application of loan obtained. This relat- ionship depends on the nature of activities associated with the acquisition and utilisation of loans and, naturally, training can greatly influence their effec- tiveness and efficiency.

14

Such training must involve a package of programmes or actions that should ensure learning, stimulate motivation, reinforce creativity, improveabilityto take risks~and allow for success. Certain essential qualities, skills, attitudes and entrepreneurial culture are requiredinorder to provide or enhance competence and effectiveness in either entrepreneurial or financial management. A person engaged in economic activities must have the ability to observe and evaluate opportunities, identify and put together resources requiredintaking advantage of opportunities and initiating appropriate actions to ensure success.

Training designed tofulfill the above mustbemulti-dimensional and should provide:

a) Skills on organisational development. Any woman seeking credit needs organisational development skills as

it

helps in her conceptual understanding and rationalisation of the opportunities around her and how to organise herself in the midst of these opportunities. This training is even more important for rural and urban poor women who have to meet more stringent organisational requirements, such as group formation.

b) Resource management skills. Since entrepreneurial success depends on the ability to raise funds and manage such funds so as to be able to carry out and accomplish business functions. The fulfillment of this training need is a positive step towards securing women's access to credit, as successful credit obtention programmes must provide understanding and guidance on financial needs, ability to implement a business plan, identification of sources of funding and their funding requirements, loan negotiating skills, elements of financial control, stability, sustainability and growth.

c) Operational skills as credit institutions often refuse to grant loans when sceptical about the operational ability of clients. Such training must aim at providing assistance and supervision to clients by ensuring that they adopt appropriate measures that willguarantee the success of the business and eventual timely repayment of loan obtained.

d) Marketing skills because no matter how successful a woman is in the administrative and financial management of business she can not do without selling her products or services and this requires such effective marketing skills as advertising and sales promotion.

e) Awareness of the socio-cultural dynamics in which the woman finds herself and operates in. Such an awareness helps women to cope with the dual roles of work and familyin addition to other socio-economic activities which form an enterface within which women operate. Creating this awareness through training will make her capable of coping with the stresses she will encounter in fulfilling the roles.

Besides basic traininginmanagerial/entrepreneurial awareness. trainingin technical and sometimes product-centred and production skills can also

be

provided.

How trainingiseffected may also be multi-dimensional including business training, extension service training and staff development training of personnel of intermediary agencies,allaimed at enhancing the capabilities of those respon- sible for implementing such programmes as well as their beneficiaries. This form of assistance provides assurances of a successful implementation of the project, which banks require as a proof that their loans are repayable.

3.1.1.2 Identification and appraisal of prQiects

There is an obvious need to conduct exercises to identify project ideas.

Currently, women are found clusteredin

limited

or the same areas of business.

This situation has a limiting effect on the success of women's access to credit.

Access to credit requires justifying and satisfying of the various components of the access triangle, described below.

For a successful access to credit, itisimportant to develop and present an access package consisting of project idea, a creditworthy individual/group, security and repayment assurance.

This access package provides information on:

a) The character and ability of individuals/groups which helpsinestablishing the credit worthiness of individuals.

b) The project idea to be funded, which proves beyond reasonable doubt the profit potential; and

c) The stakesinthe game; the security and assuranceswhich, inthe caseof default, provides the bank with an alternative means of recovering its money.

Of equal importance

if

not more importantisthe identification of proven credit worthy sellable and viable projects that meet the

liquidity

requirements of banks. It is therefore necessary that an access-to-credit programme/project should devote some of its resources to the identification of viable projects that can be presented by individuals to banks for funding.

16

3.1.1.3 Project development and write-up

Another critical need to be met

in

securingwomen's access to credit

is

the provision, through various mechanisms, of assistance

in

the development of the viable project identified.

This

entails the conception, planning and implemen- ration of a businessventure.

A

project can sometimes

^be

identifiedas viable

by

merelylookingat the raw informationwhich can then

he

collected, developedand presented

in

a manner that provides the bank with the information it requires in making its decision whether or not to grant a loan. Bank officials rely,

to

a great extent, on documentation of information that

can

provide evidences of the potential of

a

business, especially a newone.

Many

projects are rejected on the basis of poorly formulated plans viability

and

writcups.

A

poorly formulated project

is

a signal to problems ahead and

does

not provide the information needed by banks.

Women,particularlyat the grassrootslevel

still

lackexperiencein developing and

writing

project proposals.

This

doesnot, however, meanthat theyare unable to identifybusinessopportunities.

It

is in

this

regard that there

isa

definite need for assistance in project development and write-ups, which forms

part

of the loan application require- ments.

3.1.1.4 BlInk arrangements

Access to

credit requires agreed bank arrangements which women should complywith in order to

avail

themselves of favourable bank credit facilities.

3.1.1.5 Project aupervlalonlguldance

Most banks

intimatethat

in as

much

as

they are willing

to

offer credit there

is

the need for assurancethat the loansgranted can be repaid.

A

major assurance that banks require is that project

will

be

run

successfully and this requires effective supervision of and guidance on the operation of the project. Most of

the

time banks are not sufficiently equipped to provide such supervision and guidance as

it

requires time and manpower. In those cases where banks find it feasibleto providesuchassistancethe service ispaid for,therebyincurringextra cost.

BaQks suggest that intermediaryagencies should provideproject supervision and guidanceeither on a gratia or low-cost basisas

thiswill

increase the potential of womenin meetingmost of the credit requirementsof banks.

3.1.1.1 Group

Building/Development

The formation of women'sgroups at grassroots levels for borrowingmoney from the

bank

bas become a necessary and

vital

requirement for bank lending.

Interviews

with

banks that have granted credit to women have revealed their

desire to offer more of group lending than lending to individuals; their reasons being that they have found group lending to be more effective and easier to manage, the rate of repayment isusually higher as thereis collective responsi- bility and it also reduces unnecessary interference from husbands and increases the level of accountability.t

It might be necessary todraw on the experiences of the Philippines, Bangladesh, and India,inwhich the basic principles of group approach to credit have proven to have some success.

s

Grouping for activitiesis not a new phey.omenominAfrica. We have seen women come togetherin groups for various purposes, one notable example is for pooling of savings which has different names such as OSuSu and Tontines.

Women also come together to form cooperatives.

The need therefore is not how to form groups but how to make them self-sustaining and permanent leading to an identity which is the rust stage to obtaining legal status and societal protection.

There is also the need for sustainability and viability of groupsinorder to meet the credit requirements of banks. Survivaland growth effectively increase group bargaining power and influence.

A third need concerns how to develop,

within

the group, a leadership thatis capable of leading, of seeking its members'interests and of acting as spokesman when necessary.

3.1.1.7 Awareness/confidence building

The need for awareness and confidence building have come very much into focus as a necessary step towards the

fmancial

emancipation and integration of women, especially from the grassroots levelinto the economic mainstream.

Availability of credit to women provide them an outlet for their

fmancial

eman- cipation and ultimate integration into the mainstream of economy activities.

Such awareness/confidence building programmes must provide information on: sources of resources, methods of obtaining credit, sources of business assistance

in

obtaining credit and approach. Knowledge "and informationwill give women more confidence to venture into more challenging and competitive businesses. They will also give them the confidence tobemOJ;'L agressive in searching for and getting help.

4 ILO • Group Based Savings and Credit for the Poor. Papers and Proceedings of a Workshop. Bogra(Bangaladesh, 1983)

5 Mahabub Hossain - "Credit for Alleviation of RuralPove~.The GramenBankin Bangladesh. International FoodPolicyResearch Institute in collaboration with Bangladesh Institute of Development Studies. Research Report 65. February 1988.

18

3.1.2 Issues

In addressing African women's entreprneurship development and access to credit

it

is important to examine carefully the following issues, taking into consideration various programmes of action such as:-

a) Individual versus group lending, weighing the positive and negative aspects of both, examining their practicality and applying them on a case-by-case basis. Group formation, outlook and effectiveness need to be looked into. The question whether existing groups shouldbe used9ygiving them an economic dimension or whether new ones should be developed? Whichever way out, the legal entity of groups needs to be ensuredifthey are tobeused for collateral-free borrowing. In general, group formation must be encouraged as a means of improving access to credit. This approach is considered to reduce default as it

involves collective

risk

taking which has proven more secure than individual

credit.

b) The effect of inflation on the cost of borrowing must alsobeconsidered when negotiating for credit.

c) Marketing problems - since it is usual for women to produce without being able to market their products. Marketing services might have tobeincluded in the assistance package planned for women.

d) Cost of credit which is often considered toohighfor some categories of women and businesses. Therewillbe a need to negotiate for preferential interest rate and this willrequire a reduction of the burden and administrative costs of loans Credit programmes designed to minimise the burden of loan should consider obtaining favourable terms of repayment and. interest as well as provi- sion of inputs as opposed to cash.

e) Resource mobilisation and their channelling to poor groups of womenin the rural and urban areas. The mobilisation should include gathering the savings of these women and linking such savings to credit. Thiswillgive them a stake in.

the business and help to enhance their possibility of meeting an essential qualify- ing requirement. Sources of soft loans should also be identified.

f) The need to ease out the rigidity of existing banking practicesby:

i) circumventing collateral requirement;

ii}reducing bureaucratic measures;

iii)developing effective follow-up monitoring and evaluation services; and iv) developing financial intermediary institutions.

All these can bring about a more effective utilisation of credit possibly

by

target groups.

3.2 Who Are Involved?

Addressing the needs, requitements and conditions for women's access to credit should involve actors of both womenbeneficiariesof credit programmes

and

other interested parties

such as

intermediary agents and support

units,

workingin unison to better equip womenfor

a

successful access to credit.

3.2.1 Beneficiaries

Womenbeneficiariesof credit programme

fall

under twocategories - women already engaged in socio-economic activities and those with potential for entrepreneuria1engagements.

Either category - whether investigating business/income generating pos- sibilities or

already

involved in a business-and looking forward to expansion

~will

somehowneed resourcesand probablyseek credit from sources of financing.

In

whatever status or situationsuch women

find

themselves, they must realise that it is their individual or collective involvement and responsibility in creating the appropriate conditions(or successfully gaining access

to

credit that

will

encourage the efforts of others.

The greatest possibility

of

successlies

in

the beneficiaries taking bold steps to ensure

that

their personal effortsand that of others can

be

used for realising their individual or collective gains.

3.2.2

Intenned~ary

agents

The involvement of intermediaryagents -

be

they

NODs,

private individuals

OJ;

governments -

isan

invaluable

link

between women

inneed and

financial houses or support units. Intermediary agents

can

be a motivating force in directing women to

financial

resources and making available managerial and entrepreneurial services to women already in business or potential business women. It can be in the formof a continuously growing and changingentity that

is

responsiveto

the

credit needs of women.

It

can

alsobe

by initiating a variety of programmes

for the

integration of women, especially the

urban-

and

rural-

poor rural women who desperately need such

vital

linkages for entry into the economicmainstream. Furthermore,·intermediary agents provide support base as wen as linkage to other support units.

An

intermediary agent

can

also respond to the individual or group needs of women entrepreneurs by providing services that ensure better utilisation of opportunities, equipping them with the talents and requirements for approach-

ingfinancialinstitutions for

resources, assisting them in the effective utilisation of resources obtained, guiding them

in

their business operations and ensuring timely repayment of loans.

Such agents can harness available financial resources and provide, tech-

nological, managerial and developmental assistance. Therefo.. e, for intermediary

agents to

be

effective in linking womentheymustpossess knowledge of

all

forms

20

of available assistance; know how the various support institutions operate and how to use them effectively. It is equally important that agents should be familiar with -the environment of the credit applicant as such knowledge is useful in negotiating arrangements on

women's

behalf.

3.2.3 Support institutions

In securing women's access to credit, many types of financial, technical, managerial, developmental and other services must be made available. How- ever,allof these services cannotbereadily supplied

by

one insititution alone. It is therefore necessary that the intermediary agents should tap the services of other institutions in meeting the needs/requirements for

securing

women's ac- cess to credit.

Support institutions can provide assistance in financial arrangements, tech-

nical development,

research,

accounting and financial

planning and control, managerial and entrepreneurial

skills

development as well as

in

training and counselling

in all

other relevant areas.

3.3 What It Takes

Given the economic and social importance of women's participation in economic development and the expressed concern for assisting women access to credit, it is important that such enabling factors as resources, co-operation, policy and mechanisms should be put into effect for ensuring the success of women's access to credit and their ultimate integration into the mainstream of economic development.

The enabling factors are:

a) Resources which must bemade available. The resources required are financial, human, material and technological. They are required for providing assistance in seeing women through the credit access network.

b) The development of co-operation between institutions. The various institutions need to combine their efforts through the intermediary agent who should develop an effective working relationship with the other support units.

c) Policy which provides the framework for initiating and developing assis- tance programmes It is on the basis of declared policies that assistance and programmes for women's access to credit can bedeveloped. Such policy framework must eliminate discrimination, protect women fromunfairdeals and also intervene positively in favour of women.

d) Mechanisms: While there are no simple solutions and much remains to be learned about how to secure women's access to credit, mechanisms, ap- proaches and systems must be adopted to enhance the availability of resources through credit and the efficient use of such resources. This areaisthe main focus of

this

handbook and is tagged the "Integrated Approach".

Chapter IV An Integrated Approach for Providing Packages of Assistance

Obviously, the issue of facilitating women's access to credit is a very complex one and needs to be appproached from different dimensions and pointsofview.

Itrequires the provision ofanenabling environment for women entrepreneurial development.

Such an environment must provide them with greater access to business education and training, modern marketing techniques, better means of produc- tion, assistance in organising them into viable associations/co-operatives

and

in identifying and developing viable business projects adaptable to credit facilities.

Therefore the question of availability and access of credit to women should be considered within the context of the major components of the integrated approach.

23

4.1.1 Macro Components

i) Policy and Legislative actions to create the necessary enabling environ- ment;

ii)Development of an appropriate banking and credit system that lendsitself to the credit realities of the African environment and developmental needs;

iii)Provision of extension services

by

key co-operating organisations and ministries;

iv) Identification and development of a co-ordinating body through which

actions

towards women's entrepreneurship development and their access to credit can be initiated and delivere¢'

v) Arrangement for institutional support and services

In general, as earlier mentioned, macro actions must centre around the development ofan enabling environment

within whiCh

women's increased access to credit canbeensured.

4~1.2

Micro Components

i) Providing women with information, knowledge, confidence and awareness for

gaining

access to credit

ii)Helping women to acquirefinancial,material, technological and human resources for embarking on economic activities.

iii)Building up women's capabilities, and competence to enable them to meet and copewiththerequirement of growthon acquired resources, a factor that reducesrisksand increases ability to repay loans.

This

integrated approach therefore identifies the interrelationships between

the

abovetwocomponents and other areas of action for meaningfully facilitating women's access to credit: The interrelationship is like a soccer team playing a football game whose objective is to scoregoa1s and

win.

Inorder towin,the team must make the right combination of passess andbe able to put adequate pressure on its opponent in order to score goals and be in the lead. Therefore, to successfully gain access to credit. women should be ready to take the right combination of actions and put pressure on the financial institutions so as to qualify for credit.

24

The Integrated Approach Through A Credit· Access Network

I Enabling

I I

^{Leading I}

I

^{Acquiring I I} Building up

j

I CREDIT WORTHINESS

I

l

Increased Resource Base

I

_I

I

I Enhancement of Living

I

4.2 Macro Actions

4.2.1 Developing an Enabling Environment

The afore-mentioned list of macro actionsis required for developing an enabling environment within which women's access to creditcanbe.enhanced.

The following are key areas for macro actions:

a) Policy and Legislation; Policy enactments; legal changes effected through mediatory activities. Advocacy workcanbecarried out on changing/modifying policies and legislationinfavour of creating a conducive environment/condition for increasing access of credit to women, throughinter aliataxation policies, legal rights of women and banking policies.

b) Influencing banking practices and systems by modifying or improving internal banking mechanisms and systemsinfavour of credit to women.

c) Provision of extension services by making key co-operating organisations and ministries to look into and modify their extension programmes in order to accommodate the entrepreneurial and access-to-credit dimensions, for ex- ample, through agricultural, cooperative development and aduh education programmes.

d) Identification and development of an already existing or a new co-ordinal- ing

body

is required at the macro level. Such a body maybegovernmental or non-governmental and should be the linkthrough which services and support couldbeinitiated and provided for women's entrepreneurship development and their increased access to credit. Services to be provided are better organisedby co-ordinating bodies.

e) Arranging institutionalsupport and servicesthrough co-ordinating bodies inco-operation with other institutions services. Such support and services may encompass,inter aliadevelopment of rural credit institutions, and provision of education, health and marketing services.

4.3 Micro Actions 4.3.1 Leading On

One

of

the major tasks of increasing women's

access

to creditisto establish sources of credit and technical assistance thatwill funnel benefits directly to women (Buvinic.caall979). Because womenlack bargainingpower, their access to resources

will

have to be, at least initiallythrough the mediation of a strong advocate an individual or sponsoring institution which shouldlinkthem with

service agencies and

represent

their interest. A study of rural

co-operatives

by

the United Nations concluded that the more groups maintain effectiveand strong ties with such outside agencies as central associations that provide training, information, counselling and other services, the better and easier it is for them to

gain

access to resources (UNIRSD 1975).6

The guidancecomponent of the assistancepackageconcerns the information, knowledge, confidence, awareness and linkage needs of women wanting togain access to credit. Ithas often been established that most women, especially the urban- and rural-poor are not aware of opportunities around them;ifaware, are either not knowledgeable about or do not have enough confidence to exploit available opportunities. Most women therefore

need

helpinidentifying

resour- ces,

opportunities. viable projects. and in

defining

their credit access needs, which will lead them to presenting themselves and their projects to sources of finance. This component assists helpless women to develop the strength and wisdom to effectively present themselves'and their ideas to financial institutions.

Gaps

between financial

institutions

and

women clients have been identifed by financial insititutionswhichhave expressed the desire to have such gaps

fi1led

by leaders as a wayof establishingthe assurance that loans made available can be paid back to the banks. Theassurances will be in the form of training, counselling, collateral build-up, identification of viable projects. managing of projects, marketabilityof product

and

overall accountability.

For these assurances tobemet. the leading hands must guide women to such appropriate support agenciesas research agencies that

can

provide womenwith

the required services

whichbanks

tie

to their credit.

6 The United Nations International Researcb Studies Division:Study of Rural Co-operatives,1975

26

The need for such assurances and linkages to be provided by leading hands is ever greater for the

urban-

and rural-poor women who, because of their educational background and poverty, are unable to meet the requirements of financial institutions and, as such, unable to chart their own paths.

In general, leading women can do much to increase their abilities and confidence to go out and locate, create and seize opportunities for themselves.

It canalsoprovide motivation to initiate actions and programmes for the benefit of more women.

4.4 Acquiring Credit

With regard to credit acquisition, the following citationisrelevant: "Although women produce more than half the poor countries' food - the non extension of agricultural credit often worsens their economic positions. The loans go to male farmers whose signatures are much more likely to be accepted than those of females.,,7

Inthe rural areas, land usually belongs to the community whichisheaded by men, many urban and rural poor women are illiterate and in general, have little experience with bank officials and as such do not have the power and means of

loan acquisition. .

This power and means of acquisition

must

bedeveloped ifwomen are to qualify for loans. Since banks areinthe "money business", they sell and buy money, just

as

other businesses and trade their products and services. There- fore,

in

order to acquire money from banks the bargaining power and

means

of loan acquisition mustbedeveloped.

Thepowerandmeans of acquisition

fall

under:

4.4.1 Tangible power and means, which may be described

8S:

a) Ownersequity, which isone's own contribution to the business.

b) Collateral Oft in other words, something of value that is pledged to guaranteealoan. Its provision means that if the loanisnot repaid the collateral

canbe

taken instead. Different forms of collateral are acceptable to different

banks

and these need tobearranged and negotiated with the bank concerned.

c) A co-signer, whoisa person, group or institution other than the borrower, who

signs

an agreementinorder to give more credibility to a borrower who may beconsidered high-risk. The co-signer provides additional power or means to acquire credit.

7 The African Education News, 1980.

d) Assets or something of value owned by the borrower provide two means of power to acquire -

a

collateral and a means of

debt

payment.

~

4.4.2 Intangible power and means

These are projections of possiblepower and means

of

acquiring loans.

They

are forecasted and presented to banks as an established abilityto

pay.

back loans to be acquired. These projections help to establish two positionsof the business:

a) What the business can afford to pay for the financing; and b) Proof that the businesscan really afford to pay.

Realistic projections of future results are important and can be derived from either earning projectionswhich

is

obtained fromthe incomestatement,

showing

the gross income of the business and the net income after all expenses; or from cash flow projections .showing when money is expected to come in and when expenses are to

be

met. When applying for loan, financial institutions usually want to 'seeeither/or both of these statements

as

proof of means to pay back the loan.

When assessing the cost of

financing

a project, interest

is

charged as cost of borrowing.

This

interest together

with

the premiumbecome the total credit. The

borrower's ability

to pay cost of borrowingplus premium

is

established from the projections provided to the

bank.

Sometimes the rate and

type

of interest

can

bet negotiated.

Access to credit enables women to acquire needed funds, technology, materials and human energy and talents to be used to engage in productive activities.

The development of this power- or means to acquire credit is crucial for success in securingwomen'saccess to credit. The banks are in bushiess to make profit and so are out to reduce or eleminate risks that

might

affect their profit potential.

For most women,especiallythe urban and rural poor women who lack these powers or means required by banks, there should be arrangements and negotiations that can produce a spirit of goodwill and harmony between banks and handicapped women clients.

Assistance to groups maybe

in

the form of acquisitionof legal identity which maybe used in the absence of collateral. Furthermore, assistance maybe for the acquisition of other needed support.

4.5 Building Up

Financial institutions look beyond leading, means and power of acquisition

in

deciding whether or not to grant loan. There is the need for continuous

assurance that the viability and potential of the business project and its entrepreneur, respectively,willlast throughout the life of the loan.

As such. the success factors of both the project and theindividual/group behind it are crucial for the successful access of women to credit.

The assumption

exists

that thereisa positive co-relation between availability of funds and profitability of business. Itisnow more evident

that

manywomen who obtain credit are

stiU lacking in

the

basic

operational

skills

necessary to establish and build up

business

potential. For

instance,

the Kenya Women's Finance TrustLtd{KWFr)states in one of its publicationsthatits experience hasbeen that most women engagedineconomic enterprises. consider that their only problemiscapital whereas, more often

t.h8n

not, the problems identified have to do with management,whichcouldberecord-keeping,pricing or inven·

tory management. Forthisreason,KWFT has had to adopt a

policy

to provide management training to loan applicants who lack suchskillsbefore

their

loans are processed and granted.

The development of operationalskillshelps in building up businessviability and potential. The operational skills tobedeveloped concern:

a) Proper and effective business management which is vital tothe success of the business, and this isone extraneous condition for bank credit. The assurance that the individual/group can efficiently and effectively manage the project, or that there is a qualified intermediary agent to supervise the business . operation or provide support units to give them the management advice and

guidance.

b) Productive capacity which mustbemanaged in such a way

as

to achieve optimum results. Production operations mustbe planned taking into account appropriate technology that can meet the financial capacity and expected production output of the business. Of equal importanceis system designing of production operations soas toachieve cost effectiveness. In thisregard, most women need production skills development to help theminplanning and

analys-

ing the productivity of their business.

c) Marketing: The survival of

a

business

is

hinged on the availability of marketing outlets for its services or products. The problem is either thereisDO

market for products or services or the marketing skills necessary to create or open up markets are lacking.

d) Profitability, which can be enhanced by sound and effective

financial

planning and control. Investing too muchina low-profit stock or too much

in

a low turn-over stock can affect the profitability of the business. A proper financial assessment and decision-making can positively influe''''p the profit margin of a business.

e) Growth: Building up a business can lead to growth, an indication of success which will require new investment that must be properly managed in order to save the business from undergoingfinancial strain.

Helping women to identify the strengths and weaknesses of their businesses and to develop or enhance their operational skillswillgo some way in providing the building-up capabilities that banks look for when making loan decisions.

Credit acquisition demands multifaceted actions thatcallfor identifying and dealing positively with the basics of credit operations, and ways to cope with and to take advantage of them. The extension of credit to women on their own terms

is

characterised by obvious problems, constraints and limitations which must be addressed realisticallyinlight of me dual reality and needs of women seeking credit and financial institutions offering credit. Credit is a commodity that carries a cost and a price and, as with any other commodity^Ithe game is buying and selling. A customer who wants a commodity must know about it, where to obtain

it,

have the means to obtain itand know how to use it effectively or appropriately. The approach packaged embraces both aspects of credit.