Boosting the financial success of female entrepreneurs in Nigeria

With approximately 223 million people, Nigeria is the most populated country in Africa and has the largest economy, with its entrepreneurs and their enterprises the engine of the economy. They account for roughly 96% of all businesses (most of which are micro, small and medium enterprises, also known as MSMEs) and 33% are owned by women. Harnessing the enormous potential of entrepreneurs is one of Nigeria’s major goals, as their financial success would spur job growth, alleviate poverty, and contribute to the country’s economic development.    

A typical entrepreneur in Nigeria, however, faces many challenges – and these challenges are even more acute if you’re a woman. Take the example of this female entrepreneur who wanted to take out a loan to grow her business in the education sector: “The bank agent wanted me to bribe him for the loan and frustrated the process for me when I wasn’t forthcoming. I had to forfeit it.”

Her experience was uncovered as part of a project to understand why so few Nigerian female entrepreneurs get access to finance – even when there are targeted products designed to help their businesses grow. The project was spearheaded by SMEDAN (the Small and Medium Enterprises Development Agency of Nigeria), a government agency with a mandate to design programmes and implement policies to create a better environment for MSMEs. 

Working towards a solution 

The problem SMEDAN identified required a holistic solution, one that could more easily be found in consultation with partners who have specialist business knowledge. The agency approached the Investment Climate Reform Facility after a positive experience in 2021.

SMEDAN had worked with the ICR Facility once before, when they requested an intervention to help implement a new national policy for MSMEs. That intervention achieved “some mileage” that otherwise would have been difficult, reflects Daberuje Onesi-Lawani, the director of monitoring and evaluation at the agency. So, it’s natural that they’d contact them with this newer problem affecting female business owners. “We felt that the ICR [Facility] would be able to address the challenge of access to finance because they have that expertise and experience,” he explains over the phone from Nigeria.

A typical intervention, or project, lasts six months and includes a technical lead who analyses the situation, proposes solutions, and oversees a final report. In this instance, Irene Danquah, the technical lead, concluded that simply having financial products for women business owners wasn’t enough. “Availability doesn’t solve the problem of access to finance for women,” she says. The problem of low take-up goes beyond that, she adds.

Barriers impacting female Nigerian entrepreneurs^[1] 

As part of the project, the ICR Facility carried out a survey of female business owners that spanned all 36 states in Nigeria. It took in the views of 450 women business owners, while more focused group sessions heard from nearly 200. A range of barriers were identified, including: 

• A low level of financial literacy, leading to fear about taking out a loan.
• Lack of business registration, which automatically disqualifies them for a loan.  
• An inability to meet the level of annual turnover required by most commercial banks for loans, a problem for nearly 90% of respondents. 
• Too much demand for the services of microfinance banks and not enough capital and assets to meet it. 
• Not enough business development services to upskill or grow enterprises, reported by 88% of women. 
• Motherhood and domestic duties, as well as cultural factors, such as lack of access to education, strict religious laws and political marginalisation^[2]. 

While these were reported frequently, there were additional obstacles, some ingrained institutionally. Tellingly, loans from commercial banks to MSMEs account for only 1.29% of the 34.1 trillion Naira (approximately €19.3bn) loaned to the private sector, as the report pointed out. In 1996, by contrast, commercial banks had a mandatory loan target of 20% for MSMEs. One of the solutions proposed was to reinstate this target and create additional targets specifically for female entrepreneurs^[3].

Improving gender equality and data

Women in Nigeria, like in other parts of Africa, face a significant gender gap, which further reinforces financial exclusion. The country ranks poorly in this year’s global gender gap index, where it ranked 125th out of 146 countries. The World Bank estimates that closing the gender gap in key economic sectors in Nigeria could unlock USD$9.3bn. 

One of the results of gender inequality is the perception that loans to women borrowers are riskier than those to men. In fact, most female entrepreneurs in Nigeria reliably pay back loans. The project analysis found that 70% had fully paid back loans while a further 27% have a good repayment history. In interviews with approximately 30 key banks, financial institutions and development partners, some echoed these findings in comments that were included in the report. 

“Women are more responsible when it comes to paying loans,” said one business development provider. A commercial bank representative, meanwhile, said that despite their low financial literacy, they are generally more “prudent”. 

Yet the study for this business intervention found that commercial banks and similar institutions didn’t have sex-segregated data to prove precisely how many women seek financial assistance, let alone default on loans. “They were making assumptions,” reports Danquah. As a result, one of the first recommendations was to ensure this lack of data transparency was addressed. 

Actionable solutions 

In July and August 2024, the ICR Facility worked with SMEDAN to validate the report findings in partnership with private and public stakeholders and to seek buy-in for 17 separate recommendations. Some of these related to making policy changes, with SMEDAN to lobby and champion their implementation. For instance, one specific area was reducing the cost of business registration. 

There were several best practice suggestions to improve the overall ecosystem for female entrepreneurs, including providing more support through gender-specific networks and education, and increasing the funds available from commercial banks. . 

Since those validation meetings, SMEDAN has more ambitious goals, says Daberuje Onesi-Lawani. The agency is looking at putting in place a monitoring system to measure the impact of the business intervention, and it’s assessing opportunities outside of Nigeria. “We also want to see how we can tap into the global opportunities when it comes to access to finance,” he adds.

The ultimate aim is to make progress on women’s economic and social inclusion – a goal that is much needed. When a meeting was convened with actors across public and private spheres in the early stages of this project, women business owners were invited to participate, but they sat at the back of the room and weren’t consulted. Danquah, the ICR’s technical lead, noticed this and intervened. When the female entrepreneurs were eventually asked for their opinions, she says, they all began to speak. 

“It’s not enough to say, ‘let’s include women in a private/public dialogue process’, it’s not enough to bring them to the venue, we also have to intentionally involve them in the conversation,” Danquah points out. It’s a reminder that while laws and the political climate may change, human behaviour can take longer[4]. 

Three project takeaways

1. SMEDAN, a government organisation, actively supports the private sector by identifying problems and developing solutions in collaboration with external partners. Their proactive approach is something which others could emulate. 
2. Availability doesn’t solve the problem of access to finance for women. Intentional steps need to be taken, including considering the unique differences that may prevent a woman from taking up a financial product. Ask yourself if you are collecting sex-segregated data to understand the scale of the problem and evaluate the progress.   
3. Development partners need to consider the length of business intervention reports, because policymakers often want the headlines. In this case, two reports were produced: a longer one with more context and one that could be easily digested. It demonstrates the importance of tailoring writing to the needs of the audience.

[1] The ICR Facility has published a report diving deep in the administrative, regulatory and cultural barriers women entrepreneurs face in ACP Countries – see here: https://www.icr-facility.eu/knowledge-hub/resource/business-environment-reforms-to-support-women-owned-businesses-in-acp-countries/ and in Nigeria in particular – will be uploaded soon

[2] The ICR Facility has published an ICReport on Business Environment Reforms and the Care Economy: The Case of Childcare and Parental Leave Policies, see here: https://www.icr-facility.eu/knowledge-hub/resource/business-environment-reforms-and-the-care-economy-the-case-of-childcare-and-parental-leave-policies/

[3] The ICR Facility has developed a Massive Open Online Course (MOOC) on developing a gender approach for DFIs, see here:  https://www.icr-facility.eu/event/online-training-for-development-finance-institutions-how-to-develop-a-gender-approach/

and a tool for all stakeholders involved in supporting access to finance for women owned businesses – reference here when it is published

[4] also see our ICReport on this topic for more information: Promoting Women’s Organisations into Public-Private Dialogues in order to Foster Women’s Economic Empowerment in ACP Countries | ICR Facility