Meet Otala Nakiranda, a woman whose work is at the interception of investment, entrepreneurship, and finance. Finance is a key aspect of business growth and sustainability.
Supporting women businesses to access finance is an important theme in the work that we do. It’s even a module in our Simplicity program.
So we spoke to Otala about this topic that is close to our heart.
what she does
Otala supports investors, financial institutions and small businesses to integrate gender into their work for both financial and social returns.
She carried out research on closing the financing gap for early stage women entrepreneurs in sub-Saharan Africa.
why can’t we access financing?
At the end of 2019, Otala enrolled in a MSc Program in Entrepreneurship Financing at UIC Barcelona.
“At about the same time, I spoke to a friend who was interviewing female entrepreneurs about their fundraising experiences. This included the challenges they faced and how successful their efforts had been,” Otala said. “I was curious about this and started doing my own research.”
She learned that while there were a number of programs supporting women entrepreneurs in Africa, there wasn’t much data to show the actual impact of these programs.
“For example, I read about a program African Development Bank (AfDB) run in Kenya and Cameroon providing collateral to women entrepreneurs. These banks had no incentive to serve this market segment.
Instead of distributing financing to the women entrepreneurs, 90% of the money was returned to the AFdB.
Commercial banks have just recently started creating value propositions for women. They have not been incentivised to serve the women entrepreneur segment in particular. There was clearly a problem.
Otala was also curious to know what other challenges DFIs were facing in getting money to women entrepreneurs.
This became the focus of her thesis.
culture and mindset
As women, we don’t always know about these programs targeting us. If we do hear about them, we often immediately assume we don’t qualify.
Women are constantly being told we can’t build high growth businesses. So we have started to believe it.
When a funding opportunity comes up, we disqualify ourselves.
negative perceptions towards women-led businesses affects our ability to access financing.
Most investment funds don’t invest in women-led businesses because they don’t believe they will make financial returns.
You need to show them a pipeline of good female-led businesses with potential to earn them financial returns in order to convince them to focus more on this group of entrepreneurs.
“This isn’t a problem for just DFIs. The various players in investment finance have to be willing to acknowledge their bias. They need to identify opportunities to support more women business owners. This looks different for different funders.”
other findings on financing women-led businesses
Although she is still carrying out the research, she has made a few interesting discoveries to date:
- Women entrepreneurs are automatically thought to be running small mom-and-pop shops. Most of the reports done on gender and entrepreneurship focus on micro businesses. Yet, the research shows that women are building financially sound businesses. We are doing well regardless of the challenges we face accessing finance. We are doing just as well as the men in male-dominated spaces. Sometimes even better.
- Micro loans provided to women by microfinance institutions don’t do a lot to get women out of poverty. Instead, we are kept in a constant poverty loop. The money we receive is often too little to make a positive impact on their business, and yet we still have to pay it back. So it’s a never ending cycle of poverty. Micro-finance institutions have started working on different initiatives to still provide micro loans while providing more support to the women receiving them.
desired outcomes of the research
Otala wants us understand why there is still a gender financing gap and how to close it. “My research shows that Funders and DFIs need to rethink the way they provide funding.”
The research confirmed that the current interventions are not working well. Most of the financial products available are not customized to women’s unique needs and context. As a result, they leave women out.
All is not lost though. Gender lens investing is gaining steam across the world.
However, investors and financial institutions in sub-Saharan Africa need to do more to understand the needs of women business owners. They also need to customize financial products to meet these needs.
because viable women businesses do exist
Support Otala Nakiranda in this ongoing research by filling out this survey on women entrepreneurs in East Africa!