Breaking Barriers: Women Entrepreneurs Lead in Global Trade Finance

The International Finance Corporation’s report, “Banking Women Who Trade Across Borders,” highlights the urgent need for gender equality in international trade and trade finance. Women-owned businesses are essential for economic growth and poverty reduction in emerging markets. Yet these businesses face many barriers in accessing trade finance, including gender discrimination, limited networks, and unequal access to information. Based on interviews with women entrepreneurs and financiers in Brazil, Kenya, and Nigeria, this comprehensive report outlines the challenges and offers potential solutions.

Women-owned businesses often face many barriers that make it difficult to access financing. These businesses are often small, young and informally operated, which makes it difficult for them to access the financing they need to grow and expand. Financial institutions view these businesses as high risk, leading to strict collateral requirements and higher interest rates.

One of the main obstacles identified in the report is the collateral requirement, which many women entrepreneurs find difficult to meet. Furthermore, complex documentation processes and a lack of market information further compound women’s difficulties in obtaining trade finance. These obstacles create a vicious cycle that weakens the growth and survival prospects of women-owned businesses.

Insights from Brazil, Kenya and Nigeria

The report presents insights from interviews with women entrepreneurs in Brazil, Kenya and Nigeria, highlighting challenges common to these different markets. In Brazil in particular, high collateral requirements were found to be the biggest obstacle. In Kenya, high interest rates and fees create further financial constraints for women traders. Bureaucratic procedures in Nigeria pose further difficulties, highlighting the need for streamlined procedures to support SMEs. Knowledge gaps around trade finance products also pose a major challenge. Many women entrepreneurs lack the education and training necessary to navigate the complex world of trade finance. This lack of understanding limits their ability to effectively use available financial tools.

Strategies to Improve Access to Trade Finance

To address these challenges, the report suggests several strategies aimed at improving women’s access to trade finance. Reducing information gaps through the introduction of collateral and credit registries can expand access to finance by providing a more comprehensive view of creditworthiness. Digitalization is also a key strategy, as simplification of financial products through legal reforms to accept electronic platforms and electronic documents can make trade finance processes more efficient and accessible. Promoting fintech by utilizing modern technologies to assess creditworthiness and provide diverse sources of financing could open new opportunities for women entrepreneurs. Additionally, providing capacity-building training programs for both women entrepreneurs and financial institutions can improve their understanding and use of trade finance tools.

Blended finance, which combines private capital with low-interest financing and donor support, has emerged as an innovative approach to strengthening women’s entrepreneurship. By reducing risk, blended finance can encourage financial institutions to lend to women-led small and medium-sized enterprises and promote more equitable financial inclusion. An inspiring example is Mamounata Beregda, a successful entrepreneur from Burkina Faso. With support from IFC’s Banking on Women initiative, she built a thriving seed and grain processing plant, creating more than 300 jobs and contributing significantly to the local economy. Her success story highlights the potential of well-implemented financial support programs to improve the prospects of women entrepreneurs.

Recommendations for Stakeholders

The report concludes with practical suggestions for various stakeholders: Financial institutions should offer tailored training programs and risk-sharing arrangements to better support women-owned businesses. Governments should improve regulatory frameworks and facilitate approval of risk-sharing agreements to improve the overall financial ecosystem. Development partners should provide capacity training on innovative trade finance tools to empower women entrepreneurs. Women-owned businesses should actively participate in industry associations to build networks and access key resources.

IFC’s Banking on Women Across Borders report is an important step toward understanding and closing the gender gap in trade finance. By implementing the suggested strategies, stakeholders can work together to create a more inclusive and supportive environment for women entrepreneurs, ultimately driving sustainable economic growth in emerging markets.