Kampala, Uganda – Stringent collateral requirements imposed by commercial banks are significantly hindering women-owned businesses from accessing crucial financial support through Uganda’s Small Business Recovery Fund (SBRF), according to a recent policy brief by the Economic Policy Research Center (EPRC).
Established in November 2021 with a combined allocation of UGX 200 billion from the government and participating financial institutions (PFIs), the SBRF aimed to aid micro and small businesses grappling with the economic fallout of the COVID-19 pandemic. However, despite these efforts, a mere 17% of the funds had been disbursed by September 2023, highlighting systemic challenges in reaching the intended beneficiaries.
“The land and buildings make up the largest share of collateral asked from borrowers by PFIs (93.8 percent),” noted the EPRC brief, revealing a stark disparity as many women entrepreneurs lack access to such assets. This requirement, coupled with demands for business licenses, sales records, and bank statements, further compounds the obstacles faced by women seeking financial assistance.
“Me as a woman, when I go there, they will ask me for a land title, I don’t have those things they ask for…,” lamented one businesswoman in a key informant interview cited in the brief.
Moreover, the report underscored that over 75 percent of SBRF beneficiaries were existing clients of PFIs, a practice that disadvantages women who are underrepresented among these client bases. Despite efforts to amend the Memorandum of Agreement governing the fund, such as increasing maximum loan amounts and allowing refinancing options, the gender gap persists.
“All PFIs had less than 40.0 percent of women-owned businesses as their beneficiaries, with Opportunity Bank having the highest percentage at 37.3 percent,” highlighted the report, illustrating the pervasive underrepresentation of women in accessing financial resources.
Furthermore, women borrowers received significantly smaller loan amounts compared to their male counterparts, further hampering their business growth potential.
In response to these findings, the EPRC outlined several policy recommendations aimed at improving gender equity in accessing financial resources. These include increasing awareness about alternative funding mechanisms like block allocations, enhancing the creditworthiness of women-owned enterprises through capacity-building initiatives, and promoting financial inclusion by encouraging women to open bank accounts and engage in formal banking services.
The disparities revealed by the EPRC brief not only underscore the urgent need for policy reforms but also highlight the broader systemic challenges faced by women entrepreneurs in Uganda’s economic landscape.