Women in manufacturing facing difficulty in accessing capital

Oct 13, 2020

Women in manufacturing continue to face difficulty in accessing capital that is needed for the expansion of their businesses.

A new study by the International Center for Research on Women (ICRW) found most women-owned manufacturing businesses are Micro, Small and Medium Enterprises (MSME) and operate in the informal sector. 

Women in manufacturing continue to face difficulty in accessing capital that is needed for the expansion of their businesses as most banks require collateral that most women do not have. 

The situation in Uganda 

"The research is definitely correct. One of the biggest hindrances to growth for women-owned manufacturing businesses is not just the lack of capital, but the lack of access to cheap capital," says Maxima Nsimenta who quit her engineering job to start a cosmetics manufacturing business. 

"Women have just started out in business to create wealth for themselves. The bottleneck of capital is a challenge. Personally, I had a challenge. It's difficult to find a secure and affordable source of cheap capital." 

"The 25% to 30% we pay in interest for loans is too high, yet the profit margin we are making is low. It takes a lot of work to pull off the debt before moving to the next level," says Nsimenta who is the founder and CEO Livara Cosmetics Company, in an interview with New Vision. 

The report points out that as a result of difficulty in accessing capital, many of the women-owned manufacturing businesses remain unable to grow into medium-sized enterprises, and experience a high cost of production, high cost of transport and high cost of capital expenditure.   

Banks more male leaning 

The Head of SME and Agribusiness at KCB Bank Kenya, Naomi Ndele says even if the banking sector is neutral, banks lean more towards supporting men. 

"The banking model was developed by men to support men. Men have the most access to lending modalities, very few have been re-modelled to incorporate the needs of women," she says in reaction to the report. Ndele disclosed that a few products in the market are developed for women. 

The Gender and inclusivity Specialist at USAID Kenya, Betty Mugo says the biggest obstacle to formalization is the very micro and small size of enterprise, plus the restrictive policy and environment, whereas expansion is failed by the difficulty in accessing capital. 

The new study Women in Manufacturing: Mainstreaming Gender Inclusion conducted in Kenya by the International Center for Research on Women (ICRW) points at similar challenges women-owned manufacturing businesses face in Uganda. 

In 2004 a study in Uganda: Poverty and Gender Assessment: Strengthening Linkages between Poverty and Gender Analysis in Uganda found Women entrepreneurs face a clear gender bias in access to credit, receiving just 9% of available credit.  

Where it all goes wrong  

According to government statistics as of 2002, about 90% of businesses in Uganda were sole proprietorships. Women-owned 39% of the businesses in the Uganda Business Register. 

In the 2010/11 Census of Business Establishments (COBE), it was found that there were 458,106 businesses with fixed premises in the country: 44% owned by females and 56% by males (256,539) 

Compared with the 2001/2002 COBE data, it was a 19% increase in the proportion of women-owned enterprises, going up from 37% in 2001/2002.  

Over the ten-year period between the two censuses, growth in the number of women-owned businesses outpaced that of male-owned businesses by 1.5 times (236% compared to 153%). 

Many other women entrepreneurs were said to be operating from their homes or non-permanent premises, which are not covered by the Census. 

According to the Uganda Investment Authority, the Micro, small and medium enterprises contribute approximately 30% of Uganda's Gross Domestic Product (GDP) and employ more than 2.5 million people. 

In Africa today, Uganda leads in countries that have a high number of women-owned enterprises, despite inadequate entrepreneurial support. 

"Business people in our society seem to pursue wealth without necessarily consulting on how to successfully achieve their dream. Understand the business you are going to do and seek professional advice," says Prof. Charles Kwesiga the Executive Director of Uganda Industrial Research Institute (UIRI) in an interview with New Vision. 

Prof. Kwesiga says the situation is worsened by the lack of affordable finance, skills, and appropriate technology which pose a major challenge to business growth but not just for the women, even the men. 

Other major obstacles  

Most women are not aware of other sources of capital including private equity financing because they don't package their firm to make it attractive to foreign sources of financing, says Nsimenta 

Private equity is an alternative form of private financing, away from public markets, in which funds and investors directly invest in companies or engage in buyouts of such companies. 

Nsimenta, however, says some women in the know are also scared of private equity financing because of the history of theft of property, they are not comfortable with a foreign firm.  

"Women do not like collaborating with men because some end up stealing their properties including land. Awareness of opportunities is also small or not available," she says. 

In addition, the women organisations that should be supporting women are not succeeding in their goal. "Instead of women working for women they are forming cocoons," she says. 

But like it's in the African saying "If you want to go fast, go alone. If you want to go far, go together," says Nsimenta 

She says there are numerous stumbling blocks for women-owned manufacturing businesses to get cheap capital. 

The solution 

Ndele says the lending modalities by banks need to be reviewed to enable women gain access to the sizable capital needed for the expansion of their business and also formalize. 

Prof. Kwesiga on his part says in the absence of SME banks, women in manufacturing business can focus on forming financial outreaches including cooperatives. 

"Women have set up savings and credit cooperatives (SACCO). Some are really managed well and could be a source of capital," he says. 

Nsimenta says when it comes to access to cheap capital; "The information and finance is available. Personally, I do a lot of research, I go asking because I need to get the business to move." 

"The challenge that some women in the manufacturing sector face is that we go to the same people we believe will give us the much-needed capital. Spread-out, that way it's easier to get many affordable financial options to expand your business," says Nsimenta. 

She says to get to the top and access affordable capital, approach professionally those who have succeeded in the manufacturing sector and seek guidance.  

Importantly women need to be more aggressive to get the cheap capital they need to expand their business and formalise. 

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