Dr. Sola Adesola
Oxford Brookes University
Ihinosen Ebinum
Procter & Gamble
Bridging the Finance Gap for Women Entrepreneurs
Insights from Academic and Policy Research
With a population of over 200 million, Nigeria is the most populated country in Africa and the 7th most populous nation in the world (World Bank, 2020[1]). Nigeria has an exceptionally high number of women entrepreneurs that account for about 40% with early-stage entrepreneurial activity; however, only about 20% of these entrepreneurs are operating in the formal sector (PwC, 2020[2]). According to the joint Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and Nigerian National Bureau of Statistics last survey, women entrepreneurs accounted for 43% in the ownership structure of micro-enterprises, compared to 22% in small- and medium-enterprises and 20% for larger enterprises (National Bureau of Statistics, 2017[3]). According to Women in Management, Business and Public service (Wimbiz), 56% of Nigerian men report having access to financial services compared to only 45% of women (Wimbiz, 2023[4]).
Nigeria benefits from the presence of many Multi-national Corporations (MNCs) where diversity initiatives can help open procurement and supply chains to businesses owned by people from under-represented groups. Attention is generally placed on the growth barriers of women entrepreneurs; however, two clear areas of discrimination are evident. First, the missing link for women-owned businesses is the under-representation of women of business spending within the MNC expenditure, representing less than 25% of MNC procurement (Adesua-Lincoln, 2011[5]). This low representation in MNC spending reflects the limited availability of women-owned businesses who can successfully operate within MNC supply chains as indicated in the low representation in medium- and large-scale enterprises with goods and services suited towards MNCs. Evidence, however, shows that 22% of women distributors have access to finance, which illustrates this constraint to resources has implications on inventory and storage facilities (Investment Climate Reform Facility, 2021[6]). Secondly, gender bias in procurement processes and MNCs teams are the key limitations within women’s access to finance, leading to women entrepreneurs having limited access to finance, lack of information on sources, limited credit history, higher loan requirements and inadequate collateral (Adesua-Lincoln, 2011[5]).
Women entrepreneurs have long faced barriers in accessing finance for business start-up and growth and are less likely to be successful in financing compared to their male counterparts. Women’s access to finance is impeded by the banking institutions having higher requirements for loans and credit facilities for women entrepreneurs compared men (Abdullah and Quayes, 2016[7]). Requirements for a bank loan are cashflow statement, customer’s request letter, audited financials, copy of Corporate Affairs Commission (CAC) and other documents or collateral depending on what is being financed (Union Bank, 2024[8]). Despite the provisions of the Nigerian law providing equal rights, customary practices that are discriminatory against women in property ownership and inheritance rights still persists (International Labour Organisation, 2022[9]), impacting the availability of collateral where required for a loan. The Nigerian Bank of Industry has tailored-funds for women, which aim to promote diversity and gender empowerment by providing low-cost financing, over long tenors with more favourable terms for sectors like agro-processing, healthcare, ICT, engineering, creative industry, gas and petrochemicals, and fashion industry (Bank of Industry, 2024[10]). Compared to men, women are more likely to rely on personal funds, microfinancing and loans from informal networks to finance their business (Adesua-Lincoln, 2011[5]). The smaller-sized businesses operated by women limits their ability to participate in large tenders with high expenditure which would have more impact on profitability and sustained growth.
Recent evidence shows that access to credit is a major obstacle for businesses to thrive and grow in Nigeria (PwC, 2020[2]; National Bureau of Statistics, 2017[3]). Women business owners expressed the biggest challenge related to accessing external finance is collateral requirements. As part of supply diversity programmes of MNCs, they are collaborating together (e.g. P&G, British American Tobacco, Access Bank, Accenture) to work with women entrepreneurs to develop entrepreneurial capabilities, teach financial literacy, access finance (Brand Communications, 2018[11]) and in the case of P&G, provide grants to support their businesses (Onwuegbuchi, 2018[12]). Access Bank, a financial services conglomerate with headquarters in Nigeria with subsidiaries across Africa, China, Middle East, the United Kingdom and Europe, supports the finance challenges of women-owned businesses by leveraging their base competence and large expenditure as a multi-national institution to support women businesses in finance and contract allocation (Access Bank, 2024[13]). They launched the “W initiative” to meet the needs of the women entrepreneurs specifically and to provide good references to their procurement unit for inclusion in the bank’s tenders and business allocations. As illustrated in Figure 25.1, the inter-relationships within Access Bank creates a thriving ecosystem with a mutually beneficial relationship between three parties – Access Bank’s Procurement, Access Bank’s “W initiative” team and the women-owned businesses, where value is created and parties meet individual objectives, as represented in their high women-owned business expenditure share. In this case, Access Bank is meeting the funding challenge and also leveraging their large expenditure to grow the women entrepreneurs spending by making referrals to their procurement unit. Other examples include MNC (P&G) and one bank (Bank of Industry).
The second area of MNC’s support to increase the representation of women-owned businesses is the provision of supply chain financing with suppliers, customers and service providers to increase value for all participating companies. In Nigeria, Procter & Gamble connects with Citibank to provide supply chain financing to its suppliers to meet their short- to mid-term financing needs (i.e. purchase order or contract financing) based on a valid purchase order or contract to the supplier (P&G, 2024[14]). Subject to a valid purchase order or contract, this programme provides suppliers the option of receiving payment in as little as 15 days from invoice receipt compared to the standard 90, 120 or 180 days with the goal of improving cash position and reducing their debt (P&G, 2024[14]). With this programme, entrepreneurs receive discounted loans to help close the gap, which in turn provides an opportunity to build a credit history and learn about bank financing. This credit history helps improve the chances of successfully obtaining finance in the future.
Thirdly, MNCs help women-owned businesses by providing flexibility in payment terms in the form of advance or early payment managed on a case-by-case basis, most times applied at a discount. This is practiced by Cummins and P&G, thus benefiting women-owned businesses to meet their financing requirements, helping their cash flow and contractual obligations further deepening the relationships and dependence on MNC buyers for their business growth. An enabler on invoice management is the electronic invoicing which is set up between the MNC and its suppliers, speeds up the payment process by eliminating paper invoice submission, delays and errors prevalent with manual invoice processing.
While supply chain financing is being adopted, it comes at a cost as a price discount is usually applied and with other burdens remain (e.g. taxation, levies, operating costs to service MNCs), hence reducing the women-owned businesses and supplier profitability. The supply chain financing and flexible payment term support by MNCs are relevant for specific purchase orders or contracts that meets women-owned business’ and supplier finance needs on a transaction basis. While this meets women-owned businesses’ immediate operational need, the long-term business growth needs (e.g. business expansion, facility upgrades, capital expenditure) require long-term financing, which still remains largely unmet hence the low representation. Due to the global financial crisis aggravated by the COVID-19 pandemic, smaller companies have found themselves pressured by incidental cost of financing and rising interest rates (Wasiu Alli, 2024[15]). To mitigate women-owned businesses’ growth challenges and increase representation in supply chain within MNCs, access to finance goes beyond access but ensuring short- and long-term needs to provide for entire business and reduce the cost of finance burden.
The lack of a clear government mandate related to increasing diversity, gender bias and discrimination are unlikely to be reduced without widespread reforms. In addition, MNCs should be encouraged to reflect on their supplier selection and supply chain processes and how to ensure that MNC expenditure allocation decisions are unbiased with respect to women-owned businesses.
References
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