By: Anna Majavu
New research has found that a large number of women-led small and growing businesses are reluctant to apply for commercial funding because they are overwhelmed and more comfortable applying for grant financing. The research, conducted by small business training organisations, the Aspen Network of Development Entrepreneurs Southern Africa office (Aspen), and the African Management Institute (AMI), aimed to connect 75 women-led small and growing businesses with lenders through a specialised four-month Accelerated Access to Finance programme.
Aspen and AMI designed the programme based on prior research. It showed that women-owned small businesses were less likely to know about available finance opportunities or know what investors wanted and how to negotiate with them. The women-led businesses were also trained in “soft finance access skills” which included negotiating, telling the story of how their business came to be, and how to advocate for themselves. After this, the intention was to match each business with a funder through a specialised “matchmaking process”.
However, the organisations found that the “final link to eligible funders proved to be one of the most challenging”, mainly because the businesses struggled to compile the amount of information that investors needed. Of the 75 businesses enrolled in the programme, less than half submitted the paperwork to be matched with a funder. Only 18 companies were eventually matched with funders. Once some of the small businesses realised that investors had requirements and expectations, they were also deterred from applying for private finance.
However, the researchers said this should not be seen as a failure of the programme to connect entrepreneurs and investors. “Rather, this should be lauded as a success enabling more careful business planning and collaboration in the future,” they found. About 40% of the SMEs said they preferred grant funding over commercial finance. But in opting to apply for grants only, these SMEs would be disadvantaged during times when no grants were available, the researchers found. Connecting women-owned smaller businesses with finance was seen as vital because research had found that women entrepreneurs create far more jobs for other women than male entrepreneurs did, the AMI said.
Although most of the companies were not matched with funders, 92% of the women businesses said they recommended that female entrepreneurs participate in accelerated access to finance programmes. A total of 48% said the training had helped them increase their revenue, and 29% of the participants said the programme had helped them create jobs.
The researchers also found that women-led enterprises might benefit more from “specialist” programmes that trained them to apply for finance in specific sectors, such as agriculture. Masingita Shabangu of Mulberry Tree Tops Projects said: “What I enjoyed mostly was the networking. It is said that the most lonely person is often an entrepreneur. AMI has closed that gap through the programme. It has been a very encouraging journey.”
Financing remains an issue for women entrepreneurs.