The World Bank recently established a line of credit for female entrepreneurs in the world’s poorest nations. The program has already helped more than 3,000 female entrepreneurs in Ethiopia start their own businesses and escape poverty.
In poor communities, women are far less likely than men to own valuable assets to use as collateral to get a loan. Without these loans, many business ventures never make it off the ground.
An estimated 70 percent of women who own small or medium-sized businesses are unable to stabilize and improve them because of a lack of funding credit. This challenge creates a huge loss in potential income within a community.
According to World Bank economists Francesco Strobbe and Salman Alibhai, investing in female-owned businesses results in one of the “highest return opportunities available in emerging markets.”
The World Bank is helping to put an end to this opportunity loss and stagnation of female business opportunities by offering female entrepreneurs loans through the International Development Association and several international development organizations in Canada and the United Kingdom.
Between January 2014 and September 2015, Ethiopia’s Women’s Entrepreneurship Development Project disbursed 768 million birr (about $38 million) worth of credit to 3,227 female entrepreneurs. Currently, nearly $2 million in credit is being disbursed each month with an average individual loan size of approximately 219,605 birr (approximately $11,000).
Research shows that female entrepreneurs are more likely to hire other women to work in their businesses, opening up employment opportunities in communities where positions for women were scarce before.
Thus far, 76 percent of the women who have taken advantage of the program are first-time borrowers, unlocking untapped capital and opening up a new route to closing the gendered financial gap.
Despite the majority being first-time borrowers with little to no collateral, the repayment rate is 99.4 percent. Besides the success of the small loans, the program also offers entrepreneurship training to inspired women throughout the nation.
So far, more than 5,000 women have taken advantage of training and hope to enter into the exciting realm of business ownership. This trend is likely to drive down the overall rate of unemployment throughout Ethiopia, which currently stands at 17 percent.
– Claire Colby