Women-led businesses in Kenya have a bigger investment impact, supporting huge portions of household budgets, a survey by the World Bank shows and firming the need for deeper special financing for such enterprises.
In Kenya, firm-level profits earned by female entrepreneurs represent on average 65 per cent of their household income while these businesses mainly employ women — boosting their multiplier financial effects both on the national economy and on households.
“Women-led businesses mostly employ women, which shows they can be a catalyst for bringing more women into the workforce. About 75 per cent of the workers in female-owned enterprises are women (when excluding the business owner), while in male-owned businesses, only 20 per cent of employees are women,” the study shows.
The women businesses in Kenya also have an edge in innovation due to more engagements with customers to establish their special needs.
“A survey of female-owned firms in Kenya, 82 per cent of female entrepreneurs indicated that they ask customers if there are other products or services the clients would buy from them. Almost 20 per cent of women business owners said also that they were planning to introduce new products or improve existing products in the coming two years,” says the World Bank.
However, 31 per cent of the female entrepreneurs in Kenya suggested that they were unwilling to try something new unless they were 100 per cent certain it would succeed.
With such huge potential, the World Bank says providing women with access to secure mechanisms for savings, including bank accounts and mobile savings technology, can increase their business investment and support the overall economy.
“For example, providing female market vendors in Kenya with access to savings accounts enabled large increases in business investment (over 45 per cent) and consumption (37 per cent), while no impact was found in providing such accounts to male motorbike drivers,” it says.
Adding access to business bank accounts to support formalisation led to significant increases in women’s use of business bank accounts and insurance, and also enabled more women to separate household and business money.
“This led to large impacts on sales and profits for female entrepreneurs. On the other hand, increased access to financial services does not always translate into greater use by women. In Kenya, researchers found that providing free ATM cards, which reduced withdrawal fees and increased account accessibility, increased overall account use” says the World Bank further.
However, men significantly increased their usage of the accounts, whereas women reduced account usage.
increase in savings
Surveys further revealed that in areas where mobile payment provider M-Pesa expanded relatively strongly, female-headed households experienced greater increases in consumption than male-headed households in Kenya.
The rise in consumption came hand-in-hand with an increase in savings by female-headed households and coincided with a shift in women’s occupations from subsistence farming to business and retail occupations.
Married couples operating joint bank accounts were more likely to invest in livestock and household assets than where each held their separate accounts where each invested in their separate income-generating activities.
The World Bank study supported business-to-business linkages between women-led enterprises and larger businesses, saying women-led businesses benefiting from such linkages experienced a 20 percent increase in profits.
Interestingly, only 31 percent of women ventured into male-dominated businesses with 53 per cent playing ‘safe’ by venturing into female-dominated businesses while another 28 percent preferred to operate in the high stakes sectors that attract both genders.
In its efforts to improve women participation in business, in 2017, the government allocated Sh481 million in funding, which up to 70 per cent went to women businesses and four per cent to businesses owned by disabled people.
Interestingly, most businesses run by women were a full-time activity with an average of two employees and 27 percent reported that their mothers also ran a business in the retail sector compared to male-led businesses mostly in the manufacturing sector with at least four workers.
While women are members of social groupings (chamas), they lacked the financial muscle to lend high amounts of money to one another for business growth.
“Men’s networks are larger and evidence suggests that they are more likely to provide opportunities for sharing equipment while women often rely on their spouse, in particular for financial support,” it adds.
The World Bank said deeper investment in women enterprises would help improve the fortunes of households.
While one in five women traders owned their business premises, most of the businesses were lowly capitalised compared to the male-owned businesses that typically had capital up to six times larger than that of female-owned firms.
Cultural norms that barred women from owning land and their low capitalised enterprises hurt their prospects of accessing credit to grow their businesses compared to men who were able to borrow large amounts of money to grow their businesses.
Most women, it found, relied on microcredit facilities run on mobile apps where money borrowed was paid within days allowing the women traders to borrow afresh the next day.
The women traders, known to have a higher score in repaying loans than men mostly operate in makeshift sheds that do not require connection to electricity as opposed to male traders.
The study found that only innovations such as the use of psychometric tests as an alternative to the provision of collateral could benefit women entrepreneurs allowing them to access higher loans.
Psychometric tests match one’s personality and cognitive abilities to the expected task of running their business.
“Alternative credit scoring technologies using psychometric tests offer the promise of easing women’s access to larger business loans,” it adds.
The World Bank study observes that advent of mobile phone-based money accounts 13 years ago ignited women’s interest in business where money realised was ‘stored’ within reach, thanks to privacy of the pin-protected mobile accounts.