A framework for enhancing accessibility of finance from microfinance institutions to women-owned small and medium enterprises

Abstract

Women-owned small and medium enterprises have contributed to the world’s economic growth and employment creation. However, a financing gap has persisted as most of such enterprises struggle to access finance from microfinance institutions, especially in patriarchal African societies. Of the 57% micro, small, and medium enterprises owned by women surveyed in Zimbabwe, only 14% accessed finance, according to the FinScope survey of 2014. The inadequacies or lack thereof of MFI and women SME financing initiatives and frameworks in both developed and developing countries have motivated this study, with the aim of developing a framework for enhanced financial access from MFIs to women-owned SMEs in Zimbabwe. These theories have informed the study: Perking Order Theory, Credit Rationing Theory, Women Empowerment Theory, Vulnerable Group Theory, Liberal Feminism and Marxist Feminism theories, Theory of Planned Behaviour and Institutional theory. The study used a pragmatic research philosophy, mixed research design, and a cross-sectional approach. The quantitative target population was 12 122 women-owned SMEs in Harare. Using a random sample size calculator, a targeted sample size of 400 was determined, where 320 were successful. The qualitative target population was 20 MFIs, from which 15 were successful. Data were collected using questionnaires and interviews, and were quantitatively analysed using factor analysis and qualitatively using thematic analysis, respectively. The study results revealed that the facilitating factors behind MFIs’ financing of women-owned SMEs are women’s SME support systems, strengthened infrastructure, collaboration, and regulated interest rates. The financial access constraints faced by women-owned SMEs are women SMEs’ informality, inadequate infrastructure, MFI’s prohibitive charges, poor financial position, illiteracy, non-sensitised MFI products and services, stereotyping and lack of collateral. The appropriate MFI products are capacity building, business capital, government support, financial literacy and business start-up coaching, while affordable MFI products are MFIs’ innovative products and services, MFI capitalisation, group loans and online applications; and micro-insurance qualified in both groups. The framework contributed to the body of knowledge in theory, practice and policy. Different stakeholders, such as MFIs, women entrepreneurs and the government, got guidance through the framework in promoting enhanced financial access for women’s empowerment, financial inclusion and sustainable economic growth.