Women should consider lease finance

African women entrepreneurs are becoming more prominent in their respective economies as evidenced at the Women Achievers Awards ceremony held at the Serena on December 26, 2007.

African women entrepreneurs are becoming more prominent in their respective economies as evidenced at the Women Achievers Awards ceremony held at the Serena on December 26, 2007.

Despite several constraints including limited access to finance low levels of education and limited awareness, women have proved they can be a major force in economic development.

The government of Rwanda has made great strides in the area of gender equality, empowering women through representation in various government institutions.

In particular, Parliament, one of the highest levels of decision-making, has an exceptionally high percentage of women representatives (48.8 percent), exceeding levels of some developed countries.

In the past few months there have been several workshops and meetings held around the country relating to women and business.

Most recently the first Regional Roundtable of Women Entrepreneurs hosted by the Private Sector Federation (PSF) was held in Kigali, Rwanda.

The roundtable was attended by women entrepreneurs from Burundi, Uganda, Kenya and Tanzania.

From the presentations, it was clear that one of the most important ways to empower women is to facilitate entrepreneurship in order to foster economic independence particularly in the private sector.

The discussions revealed that one of the main hindrances for women entrepreneurs in Rwanda and the region as a whole is access to finance.

There are several factors that hinder Rwandan women’s efforts to access finance. But the three main ones are;

Generally most women engage in small and medium enterprises (SMEs), yet commercial banks perceive them as high risk clients that increase their costs in terms of rigorous application reviews and loan monitoring.

Around 99 percent of women-owned businesses fall under this category and are thus not a favoured group to receive financing.

Secondly, low levels of education seriously impacts on their (women) financial management. Lack of understanding of many of the credit processes is a problem women face when seeking finance. These processes often intimidate women with low levels of education as they perceive accessing finance through banks as beyond their personal capabilities.

Lastly, lack of ownership of property and assets to cover a loan is a major problem for Rwandan women. Many institutions require women to secure their husbands’ consent to use property or assets jointly or solely owned by their husbands before they can access the finance which often results in problems for the women when their husbands don’t believe in their wives business capability.

With access to finance being a major part of the success of a business, the factors outlined above have led to a situation where businesses owned by women are not reaching their optimum.

The question is; what options do women entrepreneurs in Rwanda have today other than struggling to get loans? The answer to this question is leasing.

Women entrepreneurs should lease just for the simple benefit it offers and the ease with which it can be accessed.

Keeping in mind the needs of women entrepreneurs in Rwanda, leasing is accessible. A business’s decision to lease is based on the equipment needs of the business. The equipment in effect can increase productivity, improve quality of the end product and also speed up efficiency in the business.

Since the lessor owns the leased asset and uses the leased asset as the primary security, women entrepreneurs (lessees) can still be eligible for lease financing when bank loans are not available.

Leasing can allow new businesses with limited capital and no credit history or small businesses without a history of financial statements to quickly boost their operations, as long as the cash flow from operations is sufficient to cover the lease service payments. It enables the borrower to avoid using operating capital to purchase an asset.

Many enterprises, and in particular women-owned enterprises, often have no access to medium and long term financing (over one year). Leases provide one option for longer term financing, often with terms from one to five years. Unlike some forms of loan finance which are repayable on demand or subject to annual review, lease finance cannot be curtailed or withdrawn in the event of a credit squeeze or a change in economic conditions.

Lease payments can be structured to the cash flow patterns of the business, for example, women entrepreneurs doing business that is seasonal like agriculture can have their repayments structured according to high seasons of productivity, in contrast to bank loans, which have standardized repayment schedules.

The appeal of leasing is that almost any kind of equipment can be leased. Major equipment such as vehicles, agriculture and construction equipment may be leased.

A great success story of how leasing is working for women is SERO Lease and Finance Limited (SELFINA).

SELFINA was established in Tanzania in 1995 out of the SERO group of companies. It was established to provide lease finance to women entrepreneurs. Their success is evidenced in their current portfolio of over 10,000 economically empowered women with a total credit worth over US$ 7.5 million.

More than 46,000 lives have been positively impacted through the benefits accrued. Women are now proud owners of their own businesses and more than 18,400 jobs have been created.

There is a boost to the women’s self-confidence and esteem in managing these businesses and in searching for markets in Tanzania and abroad.

There has also been a clear improvement in these women’s standards of living and capacity to meet basic needs like sending children to school, paying hospital bills, affording more nutritious food for their families.

Victoria Kisyombe, the founder and Managing Director of SELFINA, said that Micro-leasing has been a useful tool for development in Tanzania. Through their micro-leasing facility, major issues like poverty and marginalization of women have been and continue to be addressed.

Again the main causes of these problems are poor access to financial support and equipment for women -owned businesses as they are not considered to be creditworthy.

Through leasing SELFINA has successfully been able to offer finance to women despite their lack of collateral and financial experience when other financial institutions would not.

Leasing is still a fairly new concept in Rwanda, with the leasing law only having been enacted in 2005. Currently three banks are doing leasing with three others soon to introduce leasing products in 2008.

Presently financial institutions face a problem of sourcing long term financing to be able to offer the same to their clients.

The writer is an Operation Analyst with IFC

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