Revolutionizing Access to Finance: We-Fi's Digital Cash Flow Lending

Picture this: You, a driven small business owner, sitting across from a bank's loan officer, eager to expand your successful venture and hire new employees. You've invested months in paperwork and documentation to reach this point. But to your dismay, the loan officer fixates on collateral, disregarding everything else.

This scenario is all too common for countless women-led small and medium-sized enterprises (WSMEs) in Africa. While developed markets embrace near-instant collateral-free digital credit products, African women entrepreneurs still face obstacles when seeking loans. These barriers include limited access to collateral, rigorous documentation requirements, high-interest rates, confusing application processes, and inconsistent communication with relationship managers.

In response to these challenges, the World Bank, with support from the Women Entrepreneurs Finance Initiative (We-Fi), has introduced a groundbreaking digital cash flow lending product tailored to the unique needs of WSMEs. This innovative program simplifies the loan application process, shifting the focus from collateral to cash flow. It expands loan opportunities for previously disadvantaged entrepreneurs and ushers in transparency in the lending process. Initial trials in Nigeria, in partnership with Access Bank and Sterling Bank, have yielded promising results.

Expanding the Digital Lending Revolution

The success in Nigeria has laid the foundation for expanding this model beyond the country's borders, incorporating internationally recognized best practices. This includes improved customer targeting, streamlined processes, robust database management, alternative credit scoring, biometric identification for faster KYC, last-mile outreach for remote areas, and building client confidence and skills. The challenges facing SMEs emphasize the untapped potential in the credit market.

In Sierra Leone and Ghana, the landscape of SME lending closely mirrors that of Nigeria. Major banks dominate, relying heavily on relationships for credit decisions. However, WSME-specific products are limited, and even when available, they're often under-promoted. Our survey of Ghanaian banks revealed that only five out of eight with WSME programs included concessional rates. In Sierra Leone, three out of nine banks surveyed provided a WSME program, with only one offering concessional rates. Astonishingly, of the 32 WSMEs engaged in these countries, only six were aware of WSME-specific financial products.

Bridging the Gender Gap

In Ghana, the hurdles for WSMEs are amplified by substantial collateral requirements. Some small business applicants must provide collateral equaling a staggering 244.8% of the loan value, an unattainable feat for most women entrepreneurs. As one entrepreneur candidly remarked, "Don't waste your time (applying for a loan) if you do not have collateral."

Adapting and Scaling for Impact

Given the similarities in the challenges faced by WSMEs in Sierra Leone and Ghana compared to Nigeria, along with supportive market structures and willing banking partners, replicating Nigeria's We-Fi initiative in these countries is a promising prospect. Inspired by Nigeria's success, Sierra Leone and Ghana could become launchpads for a broader expansion of similar products across Africa, catalyzing innovation among local banks and transforming the financial landscape for women entrepreneurs. However, it's essential to recognize that the needs of women entrepreneurs vary across countries due to unique cultural, social, and economic factors. A tailored approach is necessary to nurture the growth of WSMEs in Africa.