The gender gap in female SME ownership in SA

A recent World Bank Report on the micro-, small- and medium business sector (MSME) in South Africa indicated that female ownership of these businesses has declined in the past decade by a whopping ten percent, from 48% in 2008 to just 38% in 2017.

It is clear that, rather than following global trend of making progress – albeit slow – in closing the gender gap in most areas, this gap is widening alarmingly in the SME sector. I would argue that one of the core reasons for this is quite simple – the banking sector is not taking into account the non-financial support that women need to succeed in their SME endeavours.

What do female entrepreneurs need?

It is undeniable that entrepreneurs face multiple struggles in keeping their businesses going. The 2017/2018 Global Entrepreneurship Monitor reports that South Africa has one of the lowest established business rates – the rate of entrepreneurial businesses over 3.5 years old – of the 54 countries surveyed, ranking in 48the place. This is really concerning, given that a large proportion of employment in our country is provided by these companies.

But it’s important to note that, for female entrepreneurs, the barriers to small business success are even more pronounced. Research conducted by Mercantile Bank in September last year indicated that female SME owners need more than just financial support to achieve business success; they need non-financial support too.

Our research findings are backed by a 2018 survey by the Global Banking Alliance for Women (GBA) which noted that, in order to increase the success of women-owned businesses, banking institutions needed to be more cognisant of the additional needs of these entrepreneurs – information, education, networking and recognition. This same report had more alarming figures to share, this time from a global perspective – women are particularly under-represented in business banking; only 26% of the micro-enterprise customers of the banks surveyed were female.

Barriers to thriving female owned SMES

Mercantile Bank’s 2018 study researched the opinions of over 200 female entrepreneurs in South Africa. Forty-nine percent of the women we surveyed stated that they faced additional challenges that male men small business owners don’t. These female entrepreneurs did not only define themselves as strong and independent business owners but as mothers, wives, daughters and friends. Eighty-three percent of the female business owners who were part of our study had young children and were married. Additionally, they often have the responsibility of looking after the physical and financial needs of their parents or older relatives. Bearing these factors in mind, female entrepreneurs undoubtedly have to make trade-offs between the demands of their business and the demands of their personal lives.

Another barrier faced by female SME owners is that they feel undermined in their business environment and have to work hard to be accepted as equals. Our Mercantile research indicated that this challenge was largely dependent on the type of business the women were in. Those in traditionally male dominated industries such as construction, for example, found that they had to work a lot harder than their male counterparts to be accepted as equals.

Networking opportunities are another area where the circumstances of the female SME owner were not taken into account. Although 55% of the women surveyed agreed that networking was crucial to business success, they also stated that they did not have much time for this, due to their other responsibilities. It is not surprising, then, that only 17% of them belonged to a formal business networking organisation.

Female entrepreneurs also lack business mentors and the opportunity to get valuable advice from trusted sources. This is rather concerning, as 94% of them admitted to facing business management challenges – such as how to get clients, acquire credit, and manage business administration – but only 16% had formal qualifications in this arena.

How can banking institutions assist

Financial institutions and large corporations have a responsibility to address these obstacles that female SME owners face, especially those involving lending. One of these major lending challenges is access to collateral; banks need to ringfence financing specifically for female entrepreneurs, which should have more flexible arrangements in respect of collateral. Research shows that women display more positive risk behaviour and lower non-performing loan rates; for example, the 2018 GBA study revealed that only 3.8% of female owners of micro enterprises had non-performing loans, versus 5.8% for men.

Corporates should also create better access to markets, by providing more opportunities for their businesses to be part of their supply chain. Helping these SME owners find clients and develop relationships is crucial; business success is inextricably intertwined with strong relationships. However, developing these relationships take time – and time is something that female business owners lack.

Organising networking opportunities specifically aimed at the needs and realities of women entrepreneurs is one way that banks and large organisations can help them grow their networks. It is vital, though, that these events address the time poor reality of these women and be targeted. Many so-called networking opportunities targeted solely at women are often little more than tea parties. The entrepreneurs are talked at by a guest speaker, snacks are served, and the women then leave – these events are simply not going to cut it as relationship builders.

Banking institutions should focus on creating informal platforms for proper engagement that are targeted at specific industries so each individual at the event can be a valuable connection for the female business owners. These events should not only include female entrepreneurs; building relationships with male business owners is of course a key element to business success, seeing as they represent a large portion of the business market. Efficiency is also important; events should not take up too much precious business or family time. These events would also give the entrepreneurs an opportunity to share knowledge and so address the female entrepreneurs’ gaps in business management expertise.

Entrepreneurship is key to securing a thriving economy and more employment for South Africa, and women small business owners undoubtedly need to play an important role in achieving this prosperity. It is time that corporates and banking institutions start catering for the specific needs of female owners of SMEs, so that more women achieve success with their entrepreneurial endeavours, and other women are encouraged to start their own businesses.


Dalene Sechele-Manana

Head: Specialised Markets

Mercantile Bank