MICROCAPITAL BRIEF: African Development Bank (AfDB) Loan Guarantee Scheme Provides Loans to Women Whose Businesses are Too Big for Microfinance

The lack of access to finance for women entrepreneurs in Africa was a theme of the recent annual meeting of the African Development Bank (AfDB) held in Lisbon, Portugal. A report presented at the AfDB meeting showed that women entrepreneurs face a number of hurdles that make it difficult for them to obtain financing, while a study by AfDB estimated that the USD 19 billion-demand for finance from women entrepreneurs reflects an opportunity for finance institutions as well as for job creation. 

In some countries reporting an increase of 10 percent to 30 percent over the last decade in the number of women-run enterprises (such as South Africa, Zambia, Egypt, Ghana, Ivory Coast, Nigeria and Ethiopia), these firms received on average less than 10 percent of all capital invested. In Uganda, women own about 40 percent of businesses with registered premises but only receive about 9 percent of commercial credit.

In efforts to tap into the need for finance of potential of women entrepreneurs, AfDB is scaling up a loan guarantee scheme aimed at increasing women’s access to finance under the growth-oriented women entrepreneurs (GOWE) program. This program partners with local banks to guarantee half of a woman entrepreneur’s loan, with a minimum loan amount of USD 10,000.

Ms Line Picard, principal investment officer of AfDB’s private sector and microfinance department said, “Choosing the right bank is key… and we have to monitor them on a monthly or weekly basis, as they have no incentive to make these loans.”

By Carol Kim, Research Associate

About African Development Bank (AfDB): Established in 1964, AfDB provides approximately USD 3 billion in loans and grants to governments and private companies in Africa each year. Owned and funded by member governments, the bank has a mandate to reduce poverty and promote sustainable development. Currently, AfDB shareholders consist of 77 member countries, which include 53 African countries. As of April 2011, the president is Donald Kaberuka.

Sources and Additional Resources:

guardian.co.uk: “Africa’s Women Mean Business – But They Need Finance”, June 2011, http://www.guardian.co.uk/global-development/poverty-matters/2011/jun/14/africa-women-entrepreneurs-overlooked

MicroCapital.org: “MICROCAPITAL BRIEF: Rwanda’s Bank of Kigali Announces Three Microfinance Products Targeting Rural Financial Inclusion”, May 31, 2011, https://www.microcapital.org/microcapital-brief-rwanda’s-bank-of-kigali-announces-three-microfinance-products-targeting-rural-financial-inclusion/

MicroCapital.org: “MICROCAPITAL BRIEF: African Development Bank (AfDB), World Bank Group Publish “Leveraging Migration for Africa: Remittances, Skills, and Investments” Report”, April 25, 2011, https://www.microcapital.org/microcapital-brief-african-development-bank-afdb-world-bank-group-publish-“leveraging-migration-for-africa-remittances-skills-and-investments”-report/

MicroCapital’s Universe Profile: African Development Bank (AfDB), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=African+Development+Bank++%28AfDB%29

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

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