In Zambia, a Focus on Women-led Enterprises Stimulates the Economy

It was a warm December afternoon in Lusaka, Zambia, and the room rang with chants of “Women Power!” as more than a hundred women came together under the We-Fi Zambia banner to celebrate their completion of the We-Fi Pipeline Development Program. The program combines in-person and online financial management training with credit clinics led by financial institutions, such as Zanaco, Zambia Industrial and Commercial Bank (ZICB), Finca, AB Bank, Investrust, FMC Finance and First Capital Bank. The process of acquiring credit is explained and lenders are connected with borrowers seeking to grow their Small and Medium-size Enterprises (SMEs) portfolios.

We-Fi Zambia tackles some of the key constraints facing SMEs, particularly women-led SMEs , in Zambia, such as gaps in financial management and documentation that can make assessing an SME’s creditworthiness difficult. Women from SMEs say turnaround times on loan applications are long, and that financial institutions require overcollateralization, such as the ownership of land.

Interest rates—of 15% and higher--also factor into their reluctance to borrow from formal financial institutions, such as banks. We-Fi Zambia addresses this by pre-selecting potential borrowers, investing in improving their management practices, and supporting outreach for financial institutions. The eligibility criteria for participating in the program are SMEs that are formal and women-led, with five or more employees operating in any sector in any location in the country.

We-Fi Zambia has conducted financial management training for 360 women (who employ more than 2,000 workers) in the cities of Lusaka and Kitwe, as well as elsewhere in Zambia since September 2022. About 600 more women have applied from businesses across the country and are expected to complete their training by June 2023. Agribusiness is dominant, though a good proportion of firms work in the hospitality, education, and manufacturing sectors. Emerging sectors like tech and creative industries are also represented, highlighting the broad reach of the program.

By leveraging local growth in digital access, most of the training is delivered online, thus broadening the services available to women outside larger cities. In addition to the commercial centers of Lusaka province and the Copperbelt, the country’s Southern and Eastern provinces are also emerging hubs of demand. SMEs that graduate prepare credit applications and submit them to financial institutions partnering with the World Bank Group. At times, these institutions prioritize the reviewing of applications from We-Fi participants.

The program has spillover effects, such as the networking women initiate through WhatsApp groups. The portfolio of joint ventures among We-Fi participants is also growing. These new networks help participants develop business links across sectors and seek services from other women-led firms .

Although better financial practices and documentation go a long way towards improving the creditworthiness of women-led SMEs, the market’s demand for liquidity still needs to be met. Financial institutions tend to think of SME lending as high-risk by definition, especially in an economy where government borrowing continues to crowd out private lending. During the COVID-19 pandemic, the Bank of Zambia made strategic decisions to address this, in part by launching the Targeted Medium Term Refinance Facility (TMTRF) to offer liquidity to cash-strapped businesses. Not many SMEs and women-led SMEs were able to access the funding, though, with financial institutions preferring to refinance existing clients and larger enterprises in their portfolios.

The business case for SME lending needs to be demonstrated by de-risking SME lending through partial credit guarantees, where financial institutions and guarantee schemes share in the risk of lending. With Zambia making progress in macroeconomic stabilization, more support for the private sector is timely: A multidimensional approach that combines financial management training with de-risking mechanisms—like the partial credit guarantees I mentioned—offers a viable way to scale up access to finance for the growth of business and creation of jobs.