Sanderson Abel BAZ
The contribution of women to economic development is well documented. Yet there exists several barriers to the full optimization of women’s economic potential. Reasons commonly cited range from cultural, religious, traditional, and legal discrimination amongst others. Access to Finance is often cited as one of the major factors impeding the growth of women-owned businesses in developing countries.
The key barriers include lack of ownership of collateral – as tradition would seldom cede property rights to women; coupled with the absence of credit histories – owing to the fact that most women businesses are informally organised.
It is a fact that improving financial support for women would increase the number of new businesses, which in turn, would boost economic activity, enable the expansion of old businesses, leading to increased productivity and growth. Women’s access to financial resources is limited by biased lending practices that emerge when financial institutions consider them inexperienced and therefore less attractive clients, or when institutions lack the knowledge to offer products tailored to women’s preferences and constraints.
Despite some of the militating factors against women, there lies an opportunity for women to circumvent the challenges they face in trying to access funding from financial institutions. Women have been proven to be better than man in forming successful groups to deal with various issue of concern to them. One way women can circumvent the challenges of lack of access to finance is to form savings groups which they can leverage to approach formal financial institutions. Women can easily use their groups to develop systematic savings over some defined period of time.
These systematic savings by women’s groups is essential for making sure that such groups become sustainable and for ensuring good loan repayment rates.
Regular savings is also valuable in developing an informal financial system which can be of great benefit to women. Such group funds can supply emergency consumption needs, without their resorting to high-interest moneylenders, and provide women with a source of funds for making small investments in production activities.
These women’s group savings can serve very important purposes to the group members among them; savings would encourage cohesion among the women group members and also savings would serve as a reserve for repayment of loans from financial institutions.
Lots of the times it is difficult for individuals mostly women to save as individuals or in their own business. Savings clubs are a common phenomenon in Zimbabwe which usually can bridge the gap.
It is however important for such outfits to have a self-regulatory constitution that governs the behaviour and contributions by members.
It is also important that the constitution spells out clear financial and banking policies to safeguard the savings of members. After a while the pool of savings can be used as cash collateral in securing facilities from banks. The business groupings members can also give each other what is known as social collateral, by giving each other cross guarantees for loans accessed.
In forming group savings clubs or organisations, there are several opportunities for innovation that women groups can exploit so that there are able to grow their savings and hence increase their opportunities.
Linkages to formal financial institutions: Over time, some members may need more diverse financial services andor larger loan sizes which cannot be met by their club due to certain limitations. In these circumstance they develop a need to develop linkages with established financial institutions which can provide them with various financial products.
Income Generation: While most group savings have been tremendously successful in poverty reduction and income smoothing, there are opportunities to enhance the opportunity for income generation and asset building. These would allow the group or the group members to build up their asset base and hence increase their income generation capacity.
Sustainability and quality:
A challenge to rapid scale up is the sustainability and quality of services of savings clubs once they become independent. Taking advantage of the various governments and other public bodies, these clubs can form credit unions and other larger registered bodies that can provide support, such as negotiating fees with banks and assuring quality standards. This will also further assist them to be fully integrated into the financial system
Building institutional linkages: With the assistance of NGOs or private banks these women’s group can leverage their social capital and organizational capacity to link into agricultural development efforts, health and education and other sector of the economy where they might have interest.
In sum it should be appreciated that a club or an established organization that has developed a reasonable saving record is a good candidate to approach a bank for funding. If you have a savings track record, either in group capacity, it usually demonstrates a level of discipline and patience that will make your group or group member’s good candidates for a successful bank loan application.
Sanderson Abel is an Economist. He writes in his capacity as Senior Economist for the Bankers Association of Zimbabwe. For your valuable feedback and comments related to this article, he can be contacted on [email protected], [email protected] or on numbers 04-744686 and 0772463008