Women in trade: providing critical support to women traders based in East Africa’s rural areas

The importance of women in trade
Gender equality demands that men and women are granted the same rights and opportunities across all sectors of society. Through providing equal access to education, healthcare and employment and equal representation in political and economic decision-making processes, gender equality is thus essential for social development and economic growth. Furthermore, research from the UN highlights that women tend to invest more heavily than men in the education, healthcare and nutrition of their families and communities, thereby triggering a greater social impact from female employment.
According to the UN and McKinsey Global Institute, untapping the economic potential of female entrepreneurs may add an additional US$28 trillion to global GDP by 2025; whilst investing in programs that promote economic empowerment for women may provide a return of US$7 for every US$1 spent.
Standard economic theory argues that businesses may develop more when engaging in international trade due to the opportunities to benefit from economies of scale, technological spill over and to observe global best practices.
However, women continue to face obstacles to economic participation due to cultural, financial, regulatory and information barriers.
Challenges to women in trade
As mentioned above, women face numerous obstacles to economic participation, such as trade. In Kenya, women constitute 47% of the labour force, yet only 9% of businesses are female owned. The dominance of male owned businesses is likely reflected throughout East Africa and driven by a range of cultural, financial and regulatory obstacles (amongst others), described below.
East African culture has long favoured men, who are more likely to be the voice of the family, to be heirs and to own land. Naturally, such a cultural bias tends to edge women out of prominent positions in business, or from being entrepreneurs.
Throughout East Africa, women suffer lesser access to formal financial products than men, however the gender imbalance has steadily fallen over recent years, particularly following the introduction of mobile money around 2013 in most East African Countries. With the exception of Uganda (where financial exclusion has gender parity at 15% of the population), financial exclusion is greater for women in East Africa (figure 1). In Kenya, 53% of those excluded from all aspects of the financial sector are women, in Tanzania this figure is 55% and in Rwanda this figure is 59%.

Figure 1: Female access to finance


Source: FINSCOPE Kenya (2013), Rwanda (2016), Tanzania (2013) and Uganda (2013)

* For Tanzania, data is only available for women who are financially excluded.
However, the biggest difference lies in the form of financial inclusion attained. Men in East Africa are much more likely to own a formal bank account, whilst women are much more likely to use informal means to access finance.
One reason why women struggle to obtain formal financing is that female led businesses tend to be smaller and are more likely to operate in the informal sector. In Kenya again, of the 9% of businesses that are led by women, only 3% of large businesses are female led, compared to 15% of small businesses. Informal firms are unable to access formal finance altogether, but are also stifled in so much as they are prevented from bidding for public procurement contracts and from engaging in global trade chains. Of the smaller firms operating in the formal sector, their size may limit their available collateral and may be perceived as more risky by commercial banks. Given commercial bank’s relatively risk adverse behavior, they are likely to offer smaller loan values at higher interest rates to small female-run firms.
Finally, there are also regulatory barriers that affect women engaging in economic activities. For example, in Kenya and Uganda women do not have equal inheritance laws. A man’s property (recall that property is much more likely to be male owned, even if used by the family) will prioritise his male heirs over his wife or daughters (even if they are elder) upon his death. Thus women risk losing their assets and collateral upon the death of their husband or father, which may also dissuade commercial banks from offering formal finance channels.