Lending to women and women-led businesses has always made sense. Data from lenders in developing countries across the world has shown time and again that non-performing loans to women SMEs are consistently lower than in portfolios comprising men and women.
In a similar vein, data from leading listed companies in the US and UK has also demonstrated that a more diverse board will generate better returns for investors. Christine Lagarde, then head of the IMF, famously said, in reference to the Lehman Brothers collapse, that had it been Lehman Sisters, the outcome for the bank would have been different. The firm would most probably have been better run, more conservative in its risk taking and would have avoided massive gambles on products it didn’t understand.
Yet female entrepreneurs face structural and cultural barriers to expanding their businesses. As a result, women accounted for just 33% of the continent’s GDP in 2018 and the African Development Bank estimates the financing gap for women-led businesses at $42bn a year. Closing this gap requires a concerted and deliberate approach, according to Josephine Anan-Ankomah, Ecobank’s Group Executive for Commercial Banking.
Can you outline the bank’s performance in Commercial Banking based on the trends from last year and Covid-19?
Covid-19 has been a mixed bag of events. Given Ecobank’s extensive footprint across 33 markets across Africa we were able to see first-hand the effects of the pandemic. This has been a period characterised by border closures, curfews, lockdowns and restrictions on the movement of people.
But Covid-19 has not been all doom and gloom. There is a silver lining. The tremendous uptake on our digital platforms and solutions is a major positive outcome. Our investment in technology and digital solutions in prior years paid off, making the transition from in-branch banking to banking on digital platforms quite seamless. Customers did not face disruptions in making and receiving payments. Our customers who are employers were able to continue paying salaries to their employees using our digital platforms and reducing the use of cash, which could be a vector of transmission. Another positive was a rebound in the savings habit as customers held onto their cash savings given the uncertainty caused by the pandemic.
The pandemic also led to an important collaboration with the African Union’s Development Agency – AUDA-NEPAD – focused on strengthening Africa’s response to micro, small and medium enterprises (MSMEs) as they recover from the impact of the pandemic. This initiative aims at empowering MSMEs with access to capabilities, markets and finance as governments restart Africa’s economies.
Ecobank also launched its Ellevate programme, in which 10% of the loan portfolio will be dedicated to women-led businesses and businesses with a strong representation of women on boards. How will it work?
Let’s put the Ellevate by Ecobank programme in context. Women constitute roughly half of the population in Africa. SMEs account for up to 90% of all businesses in Africa and women own about a third of all registered African SMEs. One in four female adults in Africa starts or manages a business, making the continent one of the highest in terms of women entrepreneurs across the world. Women also invest as much as 90% of their incomes into their families and communities.
Ellevate by Ecobank offers women an end-to-end partnership in which they gain access to financial and non-financial services. The non-financial services extend to financial education, information on products and services, networking opportunities and recognition. This is our value proposition and it distinguishes us from other women’s programmes. Today, you will find dedicated Ellevate by Ecobank desk managers ready to attend to the needs of women across our footprint.
This means that any business founded by a woman or at least 50% owned by a woman or women qualifies for the programme. A business whose management or board is made up of 20% or more women also qualifies. Another criterion we consider is the number of women employed by a business. If the business employs more than 30% women, it qualifies for the programme and so do companies that manufacture products specifically for women, for example, cosmetics, sanitary and mother-care products.
We are committed to devoting approximately 10% of our commercial banking loan book to support this market. We will do this through tailored loan products and on favourable terms.
Do banks need to be proactive about changing the way they go about business to lend to SMEs and overlooked sectors of the economy?
We recognise three basic needs – access to credit, markets and capabilities. We like to provide solutions from the point of view of the customer, what we call the “outside in” approach. Thus in lending to SMEs, we recognise that most of them do not have audited financial statements. We have therefore designed credit programmes that enable us to lend to them, for example, on the back of confirmed contracts and cashflows that we can ringfence.
We use the value chain approach, which enables us to identify and “follow” the cashflows they generate from work that they do for large corporates who typically bank with us. We also have tailor-made lending products around the services they provide to credible large corporates.
Our regional collection accounts and internet banking platform, which is customised for SMEs, have helped to facilitate cross-border payments and put us in pole position to leverage the opportunities that the African Continental Free Trade Area (AfCFTA) presents. We have further strategically partnered with Google to develop an online presence tailored for SMEs.
At the launch of the initiative, you said that women entrepreneurs needed a different relationship with their banks. Can you explain what you meant by this?
The women’s market is not simply a gender issue, it is an economic priority. Women are said to be risk averse but we believe instead that they are rather risk aware. Women value personal relationships and take into consideration other issues rather than simply focusing on the transactional side of the business.
Typically, they want to have as much information as they possibly can before taking a decision. They view the opportunity to discuss issues with their financial service provider as a chance to explore possible options before arriving at a decision.
The success of Ellevate will depend on our ability to understand that women are not looking for pretty products tied with pink ribbons – they are looking for insightful solutions that meet their needs as they juggle different roles. For example, they are as interested in expanding their business as in planning for the children’s education or ensuring that they stay in good shape and health. Our ability to design products that meet these needs end-to-end will ensure that we are successful.
How can data help to improve the programme and lending to women?
Our decision to launch a women’s programme has opened up the possibility of building very useful data that can enhance the programme as we go along. In developing the programme, we recognised the need to have gender disaggregated data. The data to be collected in terms of women-owned businesses, product performance, loan repayment patterns, etc, would help us assess the situation and develop appropriate, evidence-based information to meet the needs of our women.
The data gathered could feed back into improved services and products and this would ultimately have a positive impact on our women as we build up their skills and enable them to scale up their businesses.
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