Factors Affecting Women Entrepreneur’s Access to Finance: A Study Conducted in Addis Ababa City; Ethiopia
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Date
2023-07-03
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A.A.U.
Abstract
This research investigated the essential facet influencing women entrepreneurs' access to credit in 10 sub-cities of Addis Ababa, Ethiopia. The research applied a mixed approach of qualitative and quantitative analysis. The method of descriptive analysis was employed to convey the correlation and impact between accessing finance, collateral requirements, rate of interest, and level of formal education. other variables like business management expertise, finance history age, and marital status have been analyzed using descriptive analysis based on the questionnaire administered. Six women micro-enterprises have also been interviewed and their responses have been analyzed with other descriptive analyses. 400 women entrepreneurs were selected for this study. 200 formal and informal businesses were sorted out. This means out of the 10 sub-cities being examined each sub-city has a quota of 40 women enterprises out of which 20 are formal and 20 are informal (unregistered) businesses. The survey revealed that women entrepreneurs faced various challenges in accessing credit, including high-interest rates and service charges, lengthy loan disbursement processes, and excessive collateral requirements. A descriptive analysis was employed on the data collected and a comparison analysis was made between formal and informal enterprises. The descriptive analysis is also supported by the qualitative analysis per the life story interview conducted with six women- owned micro-enterprises. It concluded that the more women are educated the better they are in making financial decisions. The study concluded that financial institutions should mainstream gender in credit access and be more transparent in their loan approval processes. FIs should consider designing women-centric products specifically tailored to address the need of women entrepreneurs, with much focus given to women in informal businesses as they are less educated and lack an asset to provide as collateral. The study recommended that financial institutions should revise their loan products to be more inclusive and flexible, consider alternative collateral types, and simplify loan terms and conditions. Policymakers and finance institutions, should also implement affirmative action policies that prioritize lending to women-owned businesses, increase the availability of financial products tailored to women’s needs, and invest in training and capacity-building programs.