By Mansoor Ahmad
LAHORE: Women successfully running their businesses with the support of microfinance loans seldom develop into small or medium-sized entrepreneurs due not only to gender-specific impediments but also due to their inability to access institutions established to facilitate them.
A study conducted by The News reveals cities like Sialkot and Gujranwala have produced a number of male entrepreneurs who started their business at micro level but later graduated and made their enterprises medium and large ones. However, it is rare to see a woman entrepreneur developing her small venture into a small or medium enterprise. Of course, there are some exceptions but they are deceptive and do not give a real picture.
Women from the affluent class, who started on a small scale and are doing a flourishing business, owe their success partly to the influence exerted by their male family members. This is not meant to deny the credit for their success but the point is that it is almost impossible for a woman without influence in Pakistan to expand her business beyond a certain limit.
The approach of the circles concerned in this regard is also flawed. Lahore Chapter of the Federation of Pakistan Chambers of Commerce and Industry recently organised a roundtable conference of women entrepreneurs who are at the threshold of entering into small business.
Almost all the participating women were from rich families and did not lack resources. Genuine women entrepreneurs who started from scrap through microfinance were missing. The findings and the recommendations of the conference were general.
Conventionally, a microfinance enterprise is one under which business is managed by a single person and can be started with a very small amount like Rs20,000 (US$238).
However, the International Labour Organisation and the State Bank of Pakistan consider micro enterprises as the ones run by a small team, led by an entrepreneur, but which operate on a relatively bigger scale.
Of 1.6 million microfinance borrowers in Pakistan, around 100,000 enterprises are exclusively owned by women. According to a research conducted by the Civil Society Human and Institutional Development Programme for the European Union in 2005, 26 to 32 per cent of microfinance borrowers drop out of the loan after one year whereas 63 per cent of drop-outs are due to organisational design and policy in particular loan product design (35 per cent) as the borrowers consider loan size inadequate and also payment time unfavourable.
Sixteen per cent of borrowers drop out because of idiosyncratic shocks (unexpected events) while 15 per cent drop out because they do not need it any more.
About 15pc borrowers drop out because they generate sufficient income as retained earning so that they become self-sufficient or they want to go ahead with commercial banks for larger amounts.
Microfinance experts think that at least 5 per cent of small-loan borrowers upgrade themselves and start living off their retained earnings or opt for commercial banks for larger size loans.
This is the group of women entrepreneurs, who exceed 13,000, needs facilitation and policy intervention for further growth.
Already 70pc of small and medium enterprises prefer to borrow funds from friends and families, which are easily and immediately available. This means that if banks want to sell loans to the SMEs, they must compare their product with the ones offered by friends, families or other informal channels.
Key characteristics of the informal channel are quick access, reliability, cheap or free loan and small amounts. If an entrepreneur needs money and banks do not offer similar terms, the entrepreneurs will tend to return to better-known sources. This further limits the amount of investment and growth that can take place in an SME.
Women entrepreneurs in the SME sector are most likely to be in the age cohort of 20-49 years, at least have a graduate/vocational degree, are computer literate, have one or two children and have initiated the business on their own. It has been established through various studies that asset-less women entrepreneurs lack access to finance, access to markets, access to training and skills and access to networks (dealing with bureaucracy).
Source: The News