Women-led businesses more likely to repay loans – AGF

Supporting women-owned businesses is not merely a sentimental decision but makes financial sense, with data from the Africa Guarantee Fund (AGF) suggesting women-owned businesses which had received support from the Fund are less likely to default.

Their non-performing loan (NPL) ratio currently stand between 1 and 1.5 percent. This is a stark contrast to the global average – including men – of 4 to 6 percent.

Managing Director for West Africa at the AGF, Bendjin Kpeglo, disclosed this during a formalisation of a strategic partnership with Zenith Bank to provide increased access to funding for micro, small and medium enterprises (MSMEs) in Ghana, with a particular focus on women-owned and green businesses.

“When we examine our portfolio, we see that women-led businesses provide better returns. For instance, the non-performing loan ratio for this segment is less than two percent. It is between 1 and 1.5 percent,” he said on the side-lines of the signing ceremony.

Under this partnership, the Fund will de-risk facilities for women-led businesses by up to 70 percent. Kpeglo’s assertions align with existing data, including one study which revealed that women-led companies tend to yield superior returns on investment (ROI), generating 78 cents for every dollar of funding, compared to just 31 cents for male-founded start-ups.

There is currently a US$42billion funding gap for female entrepreneurs in sub-Saharan Africa and McKinsey estimates that bridging the gender gap could unlock US$316billion in gross domestic product by 2025; and the AGF, through the African Development Bank’s ‘Affirmative Finance Action for Women in Africa’ (AFAWA) initiative, will direct up to US$2billion toward underwriting financial institutions’ SME lending.

Deputy Director of Banking Supervision at the Bank of Ghana, Ismail Adam, lauded this development, emphasising the the partnership with the Fitch AA- rated Fund will bolster Zenith Bank’s asset base, mitigate risk exposure and enhance its reputation.

Additionally, the move would allow the bank to extend credit at a significantly lower cost, in line with the central bank’s desire to see more lending to the real sector.

He further expressed confidence that a sharp decline in inflation would see lending rates drop across board.

This comes as the interest on commercial loans averaged 32 percent in 2023. However, the Ghana Reference Rate has witnessed a marginal decrease this year, dropping from 32.17 percent in January to 31.31 percent this month.

Managing Director/ Chief Executive Officer of Zenith Bank Henry C. Onwuzurigbo said his outfit’s expertise in serving MSMEs, coupled with its presence in 11 of the 16 regions in the country, makes it well-positioned to lead the charge.

“Zenith Bank has consistently championed the cause of MSMEs. These initiatives are not stop gap measures; they form part of our roadmap toward building a stronger future for MSMEs and, by extension, for Ghana. However, we understand that the road to success is paved with collaboration, beyond individual efforts. That is why we are excited to partner the AGF. With their extensive experience and vast financial resources, AGF becomes a huge shoulder for us to stand on in our quest to empower MSMEs,” he elaborated.

The bank’s chief also described the partnership as a “powerful force multiplier,” adding that through it, both parties and other stakeholders will unlock a multitude of benefits for MSMEs risk sharing , allowing them to offer loans to businesses that previously struggled to meet collateral requirements.

“This opens doors for countless entrepreneurs, fostering economic growth and job creation,” he added.

He also emphasised the bank’s commitment to conducting periodic assessments through its dedicated SME desk, with plans to engage 100 SMEs initially, expanding to 300 within the first 12 months.

On his part, the Director of the Financial Sector Division of the Ministry of Finance, Sampson Akligoh, expressed his outfit’s support for the initiative, underscoring the government’s commitment to fostering inclusive economic growth through targeted support for MSMEs, particularly those led by women.

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