Bridging the Finance Gap for Women Entrepreneurs

35. Uganda: Policy insights on how culture influences access to finance

Dr. Tabitha Sindani
University of Greenwich

Background

The micro-, small- and medium-sized enterprise (MSMEs) sector accounts for 80% of GDP (UNCTAD, 2022[1]), and 40% of all micro- and small-enterprises are women-owned (Mastercard, 2020[2]), which demonstrates women’s entrepreneurial contribution to the country’s economic growth. However, women earn 30% lower profits than men on average, and they tend operate smaller businesses that are concentrated in lower value-addition sectors where profit margins are slim. Women entrepreneurs also continue to face a myriad of structural and gender-specific barriers when accessing enterprise finance (Puerto, 2022[3]). Although there is no specific legislation or stand-alone national entrepreneurship policy (UNCTAD, 2023[4]), the Government of Uganda has rolled out several programmes and initiatives since 2015 to unlock the women’s entrepreneurial potential through skills development and improved access to affordable finance.

Recent policy actions include the MSMEs Policy (2015-25) and National MSME Strategic Plan 2016-17 to 2020-21 developed by the Ministry of Trade, Industry and Co-operative (MTIC) to promote MSMEs development, private sector growth and accelerate the development of an entrepreneurial culture. This policy aimed to address major challenges faced by MSMEs and entrepreneurs, including limited access to affordable finance, appropriate technology, adequate business and technical skills, markets and business information, infrastructural facilities, quality assurance and affordable product certification services. In addition, Uganda Women Entrepreneurship Programme (UWEP) was launched in 2015 by the Ministry of Gender, Labour and Social Development to improve women’s access to affordable finance by providing interest-free enterprise funds and provided needs-based training. This sought to address the low levels of lending to women entrepreneurs by mainstream financial institutions due to limited amounts of collateral.

Policy issue: Socio-cultural issues affecting access to finance

The underlying social structures and restrictive gender norms are the major socio-cultural factors influencing women’s access to finance (Kusimba, 2018[5]; Myamba, 2023[6]). Society, like many others in Africa, is characterised by socio-cultural attitudes and practices that privilege boy’s education over girl’s (Bantebya, Muhanguzi and Watson, 2014[7]). As such, women’s low levels of formal education and financial literacy hinders their access to affordable financial services from mainstream financial services. Therefore, they are often considered to be lacking credibility and creditworthiness compared to men (Eton and Nkamusiima, 2023[8]). In addition, there are restrictive patrilineal customary laws and cultural practices related to land ownership whereby men have individualised land ownership rights (Ngunjiri, 2018[9]). Over 80% of land administered under customary law is owned by men, passed on to men through inheritance and managed by men (Adoko, Akin and Knight, 2011[10]). As such women have limited access to and ownership of capital assets such as land (which is owned by men). Consequently, women fail to meet the collateral security requirements for accessing loans from mainstream financial institutions (Myamba, 2023[6]). Furthermore, gender-based digital financial exclusion and women’s digital illiteracy contribute to the difficulties of obtaining digital financial services (Holloway, Niazi and Rouse, 2017[11]).

To address the major challenges facing women’s lack of access to affordable finance, the government offers enterprise funds for women entrepreneurs issued under Uganda’s MSMEs strategic policy and UWEP programmes towards achieving Uganda’s Government Vision 2040. However, few women entrepreneurs are able to benefit from these policy interventions and programmes and concerns have been raised about the size of their impact. Moreover, these programmes have not resulted into substantial economic gains in uplifting the socio-economic status of women especially those in rural communities trapped in poverty. Similarly, women in rural areas of largely excluded due their peripheral positioning and rural spatial dynamics that lead to a low level of awareness about the opportunity to access these funds (Guloba, Ssewanyana and Birabwa, 2017[12]).

Conclusions

Actions along several axes are needed to address the multiple levels of socio-cultural barriers faced to achieve the overarching MSMEs strategic objectives of enhance the MSMEs growth. These include promoting women’s economic empowerment, increasing financial education and addressing legal obstacles to land ownership which hinders the ability of women to access credit due to a lack of collateral.

References

[10] Adoko, J., J. Akin and R. Knight (2011), Understanding and Strengthening Women’s Land Rights Under Customary Tenure in Uganda, OXFAM, https://resourceequity.org/record/428-understanding-and-strengthening-womens-land-rights-under-customary-tenure-in-uganda/ (accessed on 30 September 2024).

[7] Bantebya, G., F. Muhanguzi and C. Watson (2014), Adolescent girls in the balance: Changes and continuity in social norms and practices around marriage and education in Uganda, Overseas Development Institute., London, https://resourcecentre.savethechildren.net/document/adolescent-girls-balance-changes-and-continuity-social-norms-and-practices-around-marriage/ (accessed on 30 September 2024).

[8] Eton, M. and D. Nkamusiima (2023), “Access to finance and women entrepreneurship development in the Kigezi subregion, Uganda”, Journal of the International Council for Small Business, Vol. 4/4, pp. 317-329, https://doi.org/10.1080/26437015.2022.2104184.

[12] Guloba, M., S. Ssewanyana and E. Birabwa (2017), A pathway to social protection development in Uganda: a synthesis report, https://ideas.repec.org/p/ags/eprcrs/257814.html (accessed on 30 September 2024).

[11] Holloway, K., Z. Niazi and R. Rouse (2017), Women’s economic empowerment through financial inclusion: A review of existing evidence and remaining knowledge gaps, Innovations for poverty action.

[5] Kusimba, S. (2018), ““It is easy for women to ask!”: Gender and digital finance in Kenya”, Economic Anthropology, Vol. 5/2, pp. 247-260, https://doi.org/10.1002/sea2.12121.

[2] Mastercard (2020), The Mastercard Index of Women Entrepreneurs 2020 Report, https://www.mastercard.com/news/media/1ulpy5at/ma_miwe-report-2020.pdf (accessed on 24 January 2024).

[6] Myamba, F. (2023), Expanding Digital Financial Services in the East African Community with a Gender Lens, African Economic Research Consortium, https://publication.aercafricalibrary.org/server/api/core/bitstreams/002a050e-2db2-4647-a580-7c06f18f55df/content (accessed on 30 September 2024).

[9] Ngunjiri, N. (2018), Barriers to access to financial inclusion to women in Kenya, https://www.researchgate.net/publication/324152021_Barriers_to_access_to_financial_inclusion_to_women_in_Kenya (accessed on 30 September 2024).

[3] Puerto, M. (2022), Strengthening Uganda’s Economic Growth with Support to Women Entrepreneurs, World Bank, https://blogs.worldbank.org/en/africacan/strengthening-ugandas-economic-growth-support-women-entrepreneurs (accessed on 24 January 2024).

[4] UNCTAD (2023), Uganda: Entrepreneurship Policy Review, https://unctad.org/system/files/official-document/tcsdiaeinf2023d1_en.pdf (accessed on 24 January 2024).

[1] UNCTAD (2022), UNCTAD supports Uganda to develop a national strategy to boost entrepreneurship, https://unctad.org/news/unctad-supports-uganda-develop-national-strategy-boost-entrepreneurship (accessed on 24 January 2024).