While female-owned businesses are still in the minority in South Africa, the growth of entrepreneurship among women in the country has been encouraging.
In the last year, a survey conducted by SME South Africa found that around 47 percent of South African small and medium enterprises (SMEs) are led by women – a 6 percent increase from the previous year. This increase has brought an interesting fact to the fore, which is that female-owned businesses also present a lower statistical risk for business financiers.
This is according to Janeesha Perumal, Area Manager at Business Partners Limited (BUSINESS/PARTNERS) – who notes that the company’s own loan books reflect a difference in loan repayment between male- and female-led businesses.
“At present, non-performing loans – loans in arrears by 90 days or more – account for 4,5 percent of our total loan portfolio of around R3.18 billion. If we take a more detailed look at only the loans that have been extended to female-owned businesses, we see that only 3,5 percent of that total portfolio of around R1.14 billion is non-performing. Over the years, we have made a concerted effort to increase the number of female-owned businesses that BUSINESS/PARTNERS finances increasing investments approved to female-owned businesses to 38,9 percent in the 2020 financial year from 33,3 percent in 2019. We have found that women entrepreneurs are consistently very reliable as a group when it comes to maintaining good credit with lenders,” said Perumal.
Perumal points out that, especially in an economy that has been severely hobbled by the nationwide Covid-19 lockdown, this trend is very important to acknowledge in an effort to encourage more financiers to finance female-owned businesses. “Organisations that provide finance for SMEs are becoming increasingly risk-averse because many SMEs are already struggling to meet their existing payment obligation.”
Any factors that positively affect a company’s risk profile are therefore becoming increasingly important. “A study conducted across 70 countries seems to indicate that women are at much lower risk of defaulting on their debts. In fact, when it comes to microfinance, women globally display significantly better repayment rates. The International Finance Corporation (the IFC) also found that less than 1 percent of their non-performing loans were in their women’s SME portfolio,” adds Perumal.
“Since female-owned businesses have always received less finance than their male counterparts – with the IFC reporting that female business owners account for 15 to 25 percent of loans across 34 IFC client financial institutions in 25 countries in their Establishing a baseline for lending to women-owned SMEs 2013 report. It is therefore important to highlight any positive insights about female business owners to financiers,” concluded Perumal.