Micro-enterprise finance as an empowerment tool for women-owned businesses: lessons from Kenya and South Africa

Wamaitha, Mary

Micro-enterprise finance as an empowerment tool for women-owned businesses: lessons from Kenya and South Africa

Master Thesis

2012

Publisher

University of Cape Town

Department

Research of GSB

Faculty

Faculty of Commerce

Abstract

The dualism of South Africa's economy is reflected, most notably, in the country's high Gini coefficient which in 2010 was recorded at 63.14. The recent labour and social unrest in the country may be attributed in part to the socio-economic disparity between the first and second economy. Twenty-one per cent of the population lives on R1 000 or less. The majority of the population, 52 per cent, lives on R1 800 a month. Furthermore, only 29 per cent of the adult population in South Africa is employed full time. The unemployment rate in 2011 was 24.9 per cent and the unemployment rate for women remained higher than the national average between 2008 and 2012. Although the unemployment rate for both men and women increased in 2012, women were 1, 2 times more likely to be unemployed than men. The South African government has made some strides in alleviating poverty through various interventions, including formulating a job creation strategy aiming to create 5 million new jobs by 2020, providing social grants to the poor and adopting policies such as the Broad-Based Black Economic Empowerment policy support to promote black-owned businesses. However, the financial services sector has not been sufficiently addressed in these interventions despite the pressing need for reforms. There are currently six leading or mainstream banks which provide the full spectrum of financial services to the South African population. Many of these banks provide little or no access to the marginalised groups in society including women and alternative sources of finance for the poor are also limited. This study proffers that microfinance can be an effective mechanism which can be used to deliver financial services to the unbanked or those who only have access to informal banking services. More specifically, it focuses on how microfinance can be used to empower women and promote the growth and sustainability amongst women. The main objectives of the study are to identify and assess the critical success factors and shortcomings of the Kenyan microfinance model, which is well-developed and regulated and make recommendations for the South African microfinance sector. The study places specific emphasis on microfinance models tailored for women and women-owned businesses. The research approach adopted in this study was intended to be flexible, explorative and comparative. It draws from the lending models applied by Equity Bank in Kenya and Women's Development Business in South Africa. Both primary and secondary data was used in order to achieve the objectives of the study. The key findings of the study reveal that, the critical success factors of microfinance institutions which lend to women include the adoption of a multi-faceted lending methodology, group-based and individual lending, encouragement and facilitation of savings. Other critical success factors are educational and business skills training interventions and product innovation and diversification to meet the needs of these women.

Keywords

Development Finance

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