In Africa, gender equality can be improved by dedicated lending to female-led businesses

Women are under-represented when it comes to financial services in Uganda: women own about 39% of Uganda’s businesses, but they receive only 9% of commercial credit. They are 40% less likely than men to have a bank account. And only 25% of women use mobile money.

Uganda’s National Financial Inclusion Strategy aims to change this, with the Uganda Development Bank (UDBL) at the vanguard of these efforts. The European Investment Bank is supporting them with a €15 million credit line under the East Africa SME-focused Regional Facility and as part of our SheInvest for Africa initiative.

The 2X Challenge

Whether you are a man or a woman, it can be difficult in Uganda to get financing for small businesses to grow and evolve. Interest rates are generally high in the country, and loan tenors are not long enough. This is where UDBL comes in, providing financing at affordable interest rates. UDBL’s mission is to help develop the private sector in Uganda.

Under a new initiative called the 2X Challenge they are now specifically paying attention to female-led private entrepreneurship. The 2X Challenge is a commitment by development finance institutions to mobilise $3 billion in investment for women’s economic empowerment by the end of 2020. The goal of the 2X Challenge is to advance women as entrepreneurs, business leaders and employees, improve their lives and increase their opportunities.

This credit line to UDBL does exactly this: allocating at least 30% of a credit line or investment fund to women-owned or women-led businesses, as part of an overall effort to improve gender equality.

Changing policies to lend to women

It turns out that providing financing to women-led businesses needs a tailored approach.

“In the case of smaller businesses and start-ups led by female entrepreneurs, we need to look at designing alternative collateral requirements,” says UDBL’s Managing Director Patricia Ojangole.

This is because often in Uganda assets are owned by or registered to men, yet business owners without land or property can have a hard time getting credit. To support women, therefore, there must be alternatives to this collateral, or else collateral requirements will have to be downgraded.

“We also need dedicated mentoring programmes to develop their management skills, and give access to information and knowledge sharing platforms that relate to their sector and their business.”

Most women in agribusiness

UDBL counts 115 companies in its portfolio. They mainly come from four different sectors: agriculture and agribusiness, manufacturing, tourism, and human capital development, which consists of vocational training institutions and learning centres for adults and schools for children. Within these sectors, there is plenty of diversity. They are supporting tourist lodges, hospitals, nursing and medical schools, and many more. “We have female-led clients in all sectors,” says Ojangole, “and we are putting initiatives into place to help them evolve.”

The largest number of women-led companies in UDBL’s portfolio is in agriculture and agribusiness, but there are exceptions to this. For example, Delight Supplies is Uganda’s foremost cosmetics and beauty products distributor, serving customers across the country out of their Kampala premises. Another company run by a woman, Crest Foam, manufactures mattresses and pillows and sells them in Uganda and beyond.

An alternative offer

“We look at human capital development and the holistic evolution of businesses,” says Ojangole. “On one side, our project preparation unit works with the government and private sector in project feasibility. On the other, our advisory unit helps our clients to develop better internal governance. That is for larger companies. We are also putting together a programme to provide mentorship and training to start-ups.”

So UDBL’s philosophy in contributing to improving gender equality in Uganda goes beyond providing financing for businesses owned or managed by women. “To build the capacity of women, we need to design special programmes and financing products that suit women’s needs and circumstances,” says Ojangole.