Role of Inclusive Formal Financing Infrastructure for Promoting Women Entrepreneurship in Developing Economies

Introduction

In recent times, there has been increasing recognition of the crucial role that entrepreneurship plays in driving economic growth and achieving sustainable development goals. The significant contribution of women to economic development, demonstrated through their involvement in entrepreneurial activities, is particularly evident in developing countries. However, women-led enterprises frequently face significant obstacles in accessing formal financing, leading many to rely on informal funding sources for their entrepreneurial endeavors.

Pre-existing sociocultural norms often create barriers for women in obtaining operational capital, putting them at a disadvantage in establishing and sustaining successful businesses (Wasiuzzaman & Nurdin, 2019; Ogundana et al., 2021). Efforts have been made to alleviate the challenges faced by women entrepreneurs in accessing formal financing. This involves developing targeted financial programs and initiatives to provide women with the necessary resources and support to start and expand their businesses.

One example of such funding initiatives is the use of Rotating Savings Groups (RSG), a collaborative financial approach that has become prominent in empowering women to achieve their entrepreneurial goals, particularly in developing economies like Lagos State. RSG enables women to escape poverty and make significant contributions to the economic development of their regions (Bruton et al., 2011a; Chliova, Brinckmann & Rosenbusch, 2015).

Non-governmental organizations (NGOs) such as GIZ, MTN-Foundation, Pearl Rose Foundation, Smak-Foundation, and The Women with Helping Hands Initiatives (TWHHI) provide an alternative support system. Their goal is to uplift underprivileged women in vulnerable communities by equipping them with entrepreneurial skills and starter kits. The NGOs carefully select participants for their empowerment programs. For example, they may organize an empowerment program for “Egbe Alata,” which refers to the association of pepper sellers, a group mainly comprised of women, in town hall meetings and support them in boosting their businesses. These programs often group beneficiaries into clusters and establish non-interest cooperatives. Members contribute dues and voluntary donations, which are then distributed as interest-free loans to active members in need. They also provide starter kits, which typically include essential work tools and simple machinery necessary for the effective operation of their organizations for instance, those specialize in decorating local fabric with unique and colorful pattern also known as “Adire”- “tie and dye” or “batik.”

Raman et al. (2022) discovered that social barriers contribute to lower self-efficacy and self-perception among women, hindering their participation in entrepreneurship despite their eligibility for financing. Similarly, Shallangwa and Wilson (2022) identified sociological, religious, educational, and limited exposure to modern business skills as factors impeding women entrepreneurs' access to capital. Supporting this, Fieve and Chrysostome's (2022) study on women entrepreneurship in Ghana revealed that providing interest-free loans to women-owned businesses positively affects their growth. Additionally, credible cooperative lending groups offering interest-free loans to women-owned enterprises contribute to the advancement and promotion of women's entrepreneurship in Ghana. The support for women's skill development and startup tools has led to numerous success stories in Nigeria, demonstrated by organizations like “The Women with Helping Hands Initiatives (TWHHI).” Women and girls can now confidently meet their daily needs, benefiting from the skill training and service charges offered.