Côte d’Ivoire puts $3.8m behind women-led businesses

A construction company needs equipment for a new contract. A transport operator wants to add another vehicle. An agribusiness needs cash to buy stock before customers pay. For a small business, those can be the moments when growth gets stuck. In Côte d’Ivoire, 20 women led businesses have received CFA2.219 billion, roughly $3.8 million, in financing from NSIA Banque Côte d’Ivoire.

The businesses work across sectors including construction, transport, agribusiness, hospitality and education. The financing is part of the African Development Bank's AFAWA programme, which is focused on improving access to finance for women-owned businesses. The interesting bit is not really the $3.8 million. It is who is taking some of the risk.

Banks still have to protect their money

A small business can have customers and make regular sales and still struggle to get a large bank loan. The problem is often collateral. A company might need Rands? no. A company might need machinery, a vehicle or working capital, but have little property to offer the bank as security. That leaves the bank with a difficult calculation: if the business fails to repay, how much of the loan can it recover?

The AFAWA programme uses guarantees to reduce some of that risk for participating financial institutions. The African Development Bank says its guarantee mechanism can cover part of the losses on qualifying loans.  So NSIA Banque is still lending its money and assessing the businesses. But it is not carrying the entire risk alone. That can make a difference when lending to smaller companies.

This is about ordinary businesses

The 20 companies receiving the money are spread across sectors that make up much of the SME economy. Think of a contractor needing equipment to fulfil a job, a transport company trying to increase its fleet, or an agribusiness buying products before it receives payment from customers. These companies don't necessarily need venture capital. They need working capital and equipment finance. That distinction is important because much of the African funding conversation still revolves around technology startups and big investment rounds. A large number of businesses simply need a bank to say yes to a loan.

The risk-sharing model

The AfDB's wider Guarantee for Growth initiative aims to help unlock up to $3 billion in financing for women-owned and women-led SMEs. The idea is fairly practical. Rather than a development institution trying to finance every small business itself, it can work with banks and take on part of the risk.

That leaves the commercial bank to do what it normally does: assess the borrower, approve the loan and collect repayments. If the arrangement works, more businesses can potentially get access to bank finance without the development institution having to provide every dollar directly.

The numbers will tell the story

The $3.8 million has already reached the 20 businesses. The harder part comes afterwards. Did the businesses use the money to increase production? Did they buy equipment? Did they employ more people? And, perhaps most importantly for the bank, are the loans being repaid? Those results will tell banks much more than the initial announcement.

If the loans perform well, NSIA Banque and other lenders may have more reason to finance women-led SMEs with similar profiles. If they do not, the guarantee may prove less useful as a way of changing how banks view the market. For now, Côte d’Ivoire is trying to tackle a very specific problem: getting commercial bank money into businesses that may not have enough assets to satisfy traditional lending requirements. The $3.8 million is the visible part. The risk sharing arrangement underneath it is where the more interesting experiment is taking place.