Women and SMEs still have the least access to loans

Absa Business Banking Director Elizabeth Wasunna

Absa Business Banking Director Elizabeth Wasunna  (left) with Melanin Kapital CEO Melanie Keita during the signing of a partnership between Absa, Melanin Kapital and the African Guarantee Fund to improve access to finance for women-owned and led SMEs on December 14, 2022.

Photo credit: Diana ngila | Nation Media Group

Use of digital finance is expanding, but small and medium enterprises (SMEs) and women have less access to it, according to an International Monetary Fund (IMF) report, Financial Access Survey (FAS).

The Financial Access Survey: 2022 Trends and Developments, paints a picture of the financial access and inclusion trends post-Covid-19 pandemic, and how SMEs have been affected. Several research projects have confirmed that poor or low access to finance is usually among the reasons why start-ups fail. The IMF survey found that women entrepreneurs continue to be disadvantaged.

“Data for SMEs and women reveal that challenges remain in terms of financial access of these vulnerable groups,” the report states. The study also discusses the continued expansion in the use of digital financial services during 2021, which is considerably higher than the pre-pandemic levels.

It further observes that SMEs account for a large share of employment and output, yet they tend to face greater constraints in accessing finance. The report continues, “Women continue to be underserved, with gender gaps persisting in 2021. Women represent another vulnerable group in many economies as they are often underbanked or financially excluded.”

The FAS data indicates that the gender gap in financial access persisted in many economies in 2021. Women’s account ownership, savings and outstanding loans were all lower than men’s. Also, the survey confirmed that the pandemic disrupted the traditional way people accessed financial services, prompting greater use of digital finance.

 This behaviour seems to have continued during the height of the global pandemic. The number of traditional financial access points such as bank branches have decreased, while non-traditional digital modes of financial access, particularly mobile money in developing economies, have grown significantly since the onset of the Covid-19 pandemic.

The number of mobile money agents per 100,000 adults almost doubled (from around 450 to 880), worldwide between 2019 and 2021, mostly driven by increases in Africa and Asia. While digitalised financial services increased in importance during the pandemic, traditional banking services such as bank loans and deposits remained an important element of financial inclusion.

The report notes that microfinance institutions promote the inclusion of unserved and underserved populations, with a special focus on female customers, SMEs, and the rural and urban poor.