[Owner and operator of M38, Clara Mankata, and her son Ralph. -- E+Co]
Amidst all the global effort and resources aimed at improving the lives of women, there is one vehicle for change that does not often figure into the discussion: the businesses that employ them. Small and medium sized enterprises (SMEs) represent the majority of businesses that put women to work, which starts a domino effect of rising income, improved social standing, advanced education, healthier children, and ultimately a more stable world.
SMEs create more jobs and more wealth and contribute more to global GDP than micro-businesses or large corporations. It takes no major mathematical calculation to see that supporting the world’s SMEs will go a long way toward advancing the world’s women.
But SMEs, such potent forces for improving women’s lives, very often fail. The banking and finance sectors consider them too informal and too risky.
“I had an idea for a business,” says Clara Mankata of Accra, Ghana. “Some friends said I should talk to some of the banks in Ghana for a loan, but they were asking for collateral which I could not provide.” Three banks turned her down.
It’s a classic problem for the millions of entrepreneurs like Mankata, who had started a one-woman liquefied petroleum gas (LPG) delivery service, but began to outgrow her success and needed funding to add employees and build a service station.
“Clara saw a business opportunity. Even though she was working in a bank at the time and had put together an informed business plan and application for funding, she was denied,” explains Christine Singer, CEO of E+Co, a clean energy investment firm. Mankata’s business appealed to the firm because it offers a cleaner alternative to firewood for heating and cooking.
With a loan from E+Co, Mankata took her business to the next level and now has over 1,200 customers, seven employees, including a number of women, and a plan for a large expansion in the next year. Today, those three banks may wonder what was so risky about Mankata.
She is representative of women business owners generally – statistics show that women small business owners have a higher loan repayment rate than their male counterparts. She has already repaid one loan to E+Co, almost finished repaying the second, and will soon receive one more. It will likely be her last from E+Co.
“We think after this next loan she will have grown her business sufficiently to actually access local bank financing,” says Singer. “Along the way she’s gone to school and she sent her oldest son to school. He is the first college graduate of their family and that’s really on the back of her business.”
That, too, is typical of women who run SMEs – they are more likely to reinvest their profits into their businesses and also to put their money to work advancing their families, particularly through education.
Mankata knows a partnership like hers with E+CO is rare; “I consider myself lucky,” she says.
Luck may work on a small scale, but more potent solutions to the problem exist. An innovative search for them has yielded some winning proposals to make financing more accessible for companies like Makata’s: The G-20 SME Finance Challenge issued an online open call for proven solutions that will be scaled up and expanded as part of the G-20s push to support these critical engines of economic growth and stability. The idea of a global online competition to find solutions to the world’s great social challenges was pioneered by Ashoka’s Changemakers, which partnered with the G-20 in this effort.
“Mankata’s story is illustrative of the broader challenges facing many micro and small firms in developing countries,” said Nancy Lee, Deputy Assistant Secretary of the U.S. Treasury Department and a judge in the Challenge. “There is enormous growth potential that is ready to be unlocked, particularly among firms owned by women around the world. The paradox is that, though women own and operate the majority of micro and small firms in many developing countries, firms owned by men show more growth.”
“Governments should prioritize efforts to encourage the growth of microenterprises and SMEs, particularly those owned by women. The G-20′s work on financial inclusion is one step on the path to help countries find new solutions, particularly in terms of unlocking financing,” Lee said.
Among the winners of the SME Finance Challenge are initiatives from around the world that: provide training and support to SMEs; restructure and innovatively manage risk; raise the profile of SMEs and their potential for investment returns; find leverage in untapped places.
The G-20 has invited the innovators behind these solutions to the Seoul Summit and is committed to scaling these programs with an initial $20 million USD commitment from Canada and ongoing support from international development banks, and interested bilateral donors.
If these solutions result in thousands upon thousands of Clara Mankatas, the power of SMEs to transform the global economy may ultimately end up being the sideshow to their power to transform the social and economic status of half the world’s population.
Alison Craiglow Hockenberry is an Emmy and Peabody Award winning journalist who is a consultant for Ashoka’s Changemakers.
Ashoka’s Changemakers has attracted over 340 innovations from all corners of the globe in the G20 SME Challenge. A panel of expert judges from the finance sector chose 14 winners. But the competition is not over. Anyone interested in supporting innovations in SME finance can vote online until November 5th for a favorite solution. The three top vote getters will win a people’s choice award and accompany the other winners to Seoul for the November 11-12 Summit where Korean President Lee Myung-bak will present them to the G20 leaders and the world.