Women to Lean On: Financing For Women, By Women
Biljana Stanisavljva started her small business in Serbia in 2011, growing wheat and corn as a smallholder farmer. She wants to grow her business, but like many agricultural entrepreneurs, she finds it very challenging to obtain funds for her expansion plans. And as a woman, she faces additional challenges. Even after a decade as a registered business owner, she still has to rely on her husband for most business decisions.
Like many across the globe, women in the rural Balkans rarely have an opportunity to make their own decisions without the influence of their husbands. While many countries provide tax and other incentives to help women start their businesses, women do not always benefit. Men sometimes take advantage of these financial incentives and often re-register a company under a wife’s or sister’s name while running the business with little participation by the women.
Biljana was pleased to meet Arjana Dugajlic, a business advisory services provider (BASP). They met through one of Arjana's clients, who happened to be a buyer of Biljana’s produce. Dugajlic participated in the USAID CATALYZE Engines of Growth program and was incentivized to serve women-owned Small and Medium Enterprises (SMEs). USAID CATALYZE is a USAID-funded global blended finance program implemented by Palladium. “Arjana, the BASP I am working with, helps me to find the most appropriate way to access finance,” said Stanisavljva.
“If successful, this financial support would have an enormous positive impact on my work and living. Without the BASPs, I wouldn't have much chance of getting funds, considering the complex application procedures.”
-- Biljana Stanisavljva
Dugajlic has been working with women-owned small businesses like Biljana’s to help them access financing by identifying appropriate financial products, connecting with financing sources, teaching them management and communication skills, and helping them prepare the loan application documents.
Beyond business and financial training, business advisory services help raise awareness, especially in rural families, about the potential for women as active business leaders and decision-makers. As a BASP, Dugajlic uses every opportunity to empower Biljana and other businesswomen to act more independently. Yet, changing the mindset of men to turn over control of resources and decision-making to women is challenging – and takes time. But women-BASPs have an advantage—they can relate to the cultural norm challenges women in business face. This ability to relate to them and connect with them makes them a better BASP for women-owned SMEs to trust and lean on.
Biljana’s story demonstrates how BASPs are important not only for the business skills they teach, but also for their myth-busting and cultural norm-breaking empowerment to help women entrepreneurs gain their own space and voice in societies willing to adopt new patterns of control over assets and decision making.
Improving Women’s Access to Finance
Women-owned SMEs seeking loans or equity investments typically do not know what financial products are appropriate for them, where to find the sources of financing, and the requirements of investors or lenders. They often are not finance experts and lack networks to financial institutions or even advisors who could help them make connections and prepare their records. Many also lack collateral to secure a loan since the land title is held only by men in many developing countries.
BASPs or financial consultants, as they are referred to in some countries, assist SMEs, including women-owned SMEs, in identifying the appropriate financial products (debt, equity or grant), financing sources (bank or non-bank financial institutions, equity funds, or subsidized grant facilities), and help prepare the application documents. But often, in many developing countries, the value of BASPs is not fully appreciated and monetized despite the significant time and efforts it takes to get women-owned SMEs ready to access financing. While there are dozens, if not hundreds, of qualified BASPs in most countries where CATALYZE works, women-owned SMEs do not yet pay for the services provided by the BASPs at value.
CATALYZE is changing that.
Incentives Drive Behavior Change
In nearly 25 countries, CATALYZE is helping to develop financial markets by mobilizing and channeling private capital to populations overlooked by traditional banking, including women entrepreneurs, rural businesses, farmers, and sectors, like education and healthcare.
CATALYZE programs typically address five elements of the market (aligned to the Five Points Framework): demand for capital (by enterprises or farmers), supply of capital (by financial institutions), intermediaries that facilitate connections between demand and supply (BASPs), the enabling policy environment that encourages or discourages private capital flows, and financial infrastructure. BASPs are especially crucial in improving women’s access to and uptake of external financing to enable business growth.
CATALYZE is creating a pool of high quality and competitive BASPs that can assist women-owned SMEs, actively sourcing and quickly closing investment transactions, and building a more competitive financial services environment. The programs incentivize BASPs to take on new sectors, cohorts, or population groups and work on the demand side to improve creditworthiness, financial controls, market linkages, strategic planning, and business planning to prepare firms and farms for external financing.
On the supply side, BASPs work with banks and non-bank financing institutions (like credit unions or pension funds) to help them see opportunities in new sectors, identify and hedge repayment/investment risks, and develop new products that meet the needs of new sectors or cohorts. These incentives come in the form of pay-for results contracts that reward BASPs for transactions brought to closure. BASPs also earn fees from their clients – whether finance seekers or finance providers.
By helping to subsidize the cost of BASP fees, CATALYZE encourages women-owned SMEs to test the benefits of consulting services. To encourage BASPs to seek out women-owned SMEs as clients and spend as much time as needed to get them investment-s ready, CATALYZE provides bonus incentives to BASPs that support women. Often, women-led BASPs are the most successful in supporting women-owned SMEs access finance because they know firsthand their challenges, needs, and networking preferences.
Creating high quality and competitive Business Advisory Services (BAS)
Driving behavior change also hinges upon the quality of services. BASPs need to deliver financing successfully to address the challenges of women-owned SMEs and create a track record of success to have repeat clients and build a sustainable business. Yet, in many markets where CATALYZE works, the quality of BASPs is inconsistent. The BASPs themselves may not be attuned to understanding and meeting the unique needs of women-owned SMEs. BASPs may not be familiar with cash-flow-based lending products, such as the practice of financial institutions providing clients’ financial needs without collateral, as is usually the case for women in developing countries. Local BASPs often do not have access or contacts with regional and international financiers and investors.
CATALYZE is helping to build BASP’s ability to package bankable projects and provide wrap-around services and is creating opportunities for relationship-building between BASPs and investors so that they can access diverse funding for clients.
Engines of Growth program
Engines of Growth (EoG), a program funded by USAID, seeks to increase access to finance for SMEs, including women-owned SMEs, to drive enterprise growth. EoG helps mobilize capital to sustain distressed-but-viable SMEs and facilitates alternative financing for high-potential SMEs. The program offers other incentives to reach women-owned SMEs through women BASPs, who help develop new alternative financial instruments and facilitate access to intermediaries and networks.
According to Lee Williams, Private Enterprise Officer in USAID's E&E Bureau who designed the activity, “While SMEs in the Western Balkans generally face major challenges to accessing the financing they need to grow, those barriers have an even greater impact on women entrepreneurs and business owners."
The women BASPs also help identify and resolve production and sales constraints that prevent women enterprises from growing and obtaining new finance.
EoG uses a Pay-For-Results (P4R) methodology, where BASPs receive a success fee for identifying and delivering financing to their clients and another bonus fee for supporting women-owned SMEs. The financing catalyzed is just one outcome of EoG, with the broader outcome being a network of self-sustaining BASPs and more women-focused financial products and services.
The guest blog was written by Gaamaa Hishigsuren, Gender Lens Investing Specialist with USAID CATALYZE. For more information on CATALYZE, please visit https://www.usaid.gov/catalyze
This article is part of a blog series on themes to be discussed at an upcoming webinar, Promoting Gender Equity through Finance. To engage more with this content, please join USAID at the webinar on February 24 at 9 am EST. This webinar is part of an ongoing series exploring the role of development finance in private sector engagement and will highlight themes from the Mobilizing Finance For Development online course, which is available on the USAID Learning Lab and USAID University (for USAID staff).