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Looking Up? Bank Loans For Female African Entrepreneurs

Looking Up? Bank Loans For Female African Entrepreneurs

Fewer women own companies in Africa than elsewhere in the world but African women establishing small companies have better chances of securing bank loans than similar businesses run by men, according to a report in Phys.org.

On the other hand, male African corporate leaders tend to be favored over women when it comes to loans for medium-sized companies, according to research from the University of Copenhagen. Researchers analysed prospects for growth in the lending practices of African banks. The findings were recently published in the scientific journal, “Development Studies.”

A survey showed that women-owned small businesses were likely to get loans 6 percent more than if the businesses had male owners. The opposite was true for larger companies with 50-plus employees, where there was a six percent better chance of women owners being denied loans than men.

Researchers looked at data collected by World Bank from 4,838 businesses in 16 sub-Saharan Africa countries. They found that small, women-owned companies have the same productivity as companies owned by men, but their profit rate is lower. The researchers concluded that there is no immediate reason to favor loans to women owners.

Humanitarian aid organisations support banks to enable them to give loans for investing in and running businesses, however, when the organisations give banks the green light to make it easier for women than for men to borrow instead of focusing on the business idea, they run the risk of, at worst, inhibiting growth, said John Rand, a university professor who helped head up the research, according to Phys.org.

The analysis prompted researchers to question whether it would “be better to focus on viable business concepts rather than gender to boost growth in the African private sector – in particular if the funding is to fuel growth,” said Prof. Henrik Hansen, who also headed up the research.

“African women generally have less favorable terms than African men in many aspects of life – also when it comes to the possibility of starting up businesses,” Hansen said. “However, in relation to obtaining bank loans for running small businesses, men seem to be the ones discriminated against…African banks tend to provide loans to women rather than men, even though men may have better investment projects and business ideas.”