Women entrepreneurs boost economy and have a record of low financial risk
A study conducted across 70 countries indicated that women are at much lower defaulting risk
While female-owned smalland medium-sized businesses are still in the minority in SA, women are closing the gap — fast.
A survey by SME South Africa found that 47% of small- and medium-sized enterprises (SMEs) are led by women, a 6% jump from the previous year.
Janeesha Perumal, area manager at Business Partners Limited, said if the trend continues, women will soon be SA’s leaders in entrepreneur-run businesses.
“This increase has also brought an interesting fact to the fore, which is that femaleowned businesses also present a lower statistical risk for business financiers. Our loan books reflect a difference in loan repayment between male- and female-led businesses. We have found that women entrepreneurs are consistently reliable as a group when it comes to maintaining good credit with lenders.”
Research that shows women are a better risk regarding loan repayments is linked to them being more sensible with risk, due to a greater level of business caution and probably common sense, said Mary Wrench, a national partner at Adviceworx, working from East London.
Wrench concedes that while some of her observations are tongue-in-cheek, the trends are undeniable.
“The risk aspect goes through to car insurance. If driving ability is measured on accidents, then women are better drivers; they simply have fewer accidents. They also live longer, which I suppose makes them the stronger sex.”
Wrench partnered with Adviceworx in 2014, prior to which she spent 11 years running a successful independent brokerage.
Wrench covers individual and corporate clients, specialising in risk management, matching medical aid plans, short term savings and retirement planning.
Perumal said non-performing loans — loans in arrears by 90 days or more — account for 4,5% percent of BPL’s total loan portfolio of R178m.
Of the loans to females, R64m in 2020, only 3.5% are overdue.
“In 2020 BPL made a concerted effort to increase loans to women-run SMEs, increasing investments to 38,9% of the BPL book, up 33.3% in 2019.
“In a Covid-19–hobbled economy it is important for more financiers to finance femaleowned businesses. Organisations that provide finance for SMEs are becoming increasingly risk-averse because many SMEs are already struggling to meet their existing payment obligation.”
Women’s reputation for honouring debt repayments is not just a phenomenon in SA, said Perumal.
The International Finance Corporation (IFC) has been observing women entrepreneurs’ financial performance for many years.
A study conducted across 70 countries indicated that women are at much lower defaulting risk. The study indicated that less than 1% of their non-performing loans were in their women’s SME portfolio.
“Female-owned businesses have always received less finance than their male counterparts,” said Perumal.
“The IFC’s report reveals that female business owners account for 15% to 25% of loans, across 34 financial institutions, linked to the IFC, in 25 countries.”
She said that with the bias still not favouring loans to women businesses, despite the recent changes in amounts loaned and that these loans have a measurable history of being repaid, finance houses must change policies.
“It is therefore important to highlight any positive insights about female business owners to financiers,” Perumal said.
With the prediction that post Covid-19 over 50% of South Africans that could work will not be able to find jobs, female entrepreneurs are one solution to boosting employment, and at lower financial threat to financiers.