Every morning, a 40-something-year-old woman lays out fish on one of Lake Tanganyika’s beaches. Once it has dried, she will sell it in Kalemie, a town a few miles away in the eastern region of the Democratic Republic of Congo (DRC). She has a little stand there, strategically located at the intersection of two main roads where passersby and commuters often stop to buy their food for the day. If everything goes well, at the end of the week she will have enough money to feed her eight children and buy extra fish to dry.
On the other side of the country, in the capital city of Kinshasa, Kany Véronique Mafuta runs a small company that produces flour from the cassava root. Local demand for her product is booming, but she doesn’t have the necessary resources to buy new equipment and expand production. When Kany looked for capital, local banks could only offer her loans with high interest rates that she could not afford.
A multifaceted reality
As a fragile state, DRC is home to two different types of women entrepreneurs: those who start a small business out of necessity to make ends meet – these are the women who try to earn a living by cooking extra food and selling it on the streets; who resell manufactured goods or mass-market products in rural areas; or who cross the border to trade small quantities of goods from neighboring countries – and those who launch and try to scale a company to pursue a market opportunity. Research shows that in urban areas, these women-led SMEs are mainly concentrated in small-scale trade, services, and agriculture.
“Women entrepreneurs play an important role in DRC’s economy. We wanted to better understand the challenges they face in order to plan future projects and initiatives that support their efforts to be viable, productive business owners,” said DRC Country Director Moustapha Ndiaye. “We are making strides in improving the business environment for women – and men – in both urban and rural areas.”
Both Kany and the woman from Kalemie have an entrepreneurial spirit, but their aspirations, challenges, and needs are very different and require tailored support programs.
Necessity entrepreneurs reflect the reality of a fragile state’s economy.
“In a country grappling with high levels of unemployment, most women have no other option but to establish their own micro-enterprise to support their families,” said Milaine Rossanaly, a World Bank private sector specialist. “The Congolese micro and small entrepreneurs are thus driven much more by fighting for survival than seeking profits.”
These entrepreneurs, according to Rossanaly, need to be supported through a holistic approach that combines the direct supply of technical equipment with access to education, health care, and social support.
On the other hand, growth-oriented women entrepreneurs need targeted support to address the legal, institutional, and financial challenges they face in scaling their companies.
Women entrepreneurs — necessity and growth-oriented alike — must grapple with several challenges, including inadequate regulations, social prejudices, disproportionate family responsibilities, lower rates of education and, above all, limited access to finance. And, gender issues aside, they also face general challenges common to all small and medium enterprises in the country. With an underdeveloped banking sector, domestic credit is scarce and expensive, particularly for micro, small, and medium enterprises. According to the World Bank’s Enterprise Survey, in 2013 only 7% of Congolese firms used banks to finance investment.
“Gender inequality has significant economic implications,” said Klaus Tilmes, Director in the World Bank Group’s Trade & Competitiveness Global Practice. “From cultural norms to access to finance, understanding these barriers is the first step to not only empower women, but also help developing countries increase productivity and foster job creation.”
Lack of technical knowledge and resources, along with restricted access to land and other assets, also undermines a woman’s ability to invest time and capital in her enterprise.
Addressing the challenges
To better understand DRC’s complex entrepreneurial environment, the World Bank Group in 2016 launched a pilot study on women-led small businesses. The study included multiple stakeholders who analyzed the status of women’s entrepreneurship at the national and local level, and identified areas of future intervention. One area of focus was DRC’s Family Code.
For years, the Family Code contained a number of legal provisions that prevented married women from signing contracts, registering companies, opening bank accounts, or obtaining loans without the permission of their husband. In June 2016, after reform efforts supported by the Ministries of Gender and Justice, a new Family Code was adopted by Parliament.
In addition to legal constraints, the pilot study identified access to finance as a critical challenge faced by growth-oriented women entrepreneurs across the country. Data show that only 3.6% of women-led firms have a bank loan, compared to 10.2% of male-led firms. This discrepancy was partially explained by the restrictions imposed by the old Family Code, but was also attributed to women’s lower levels of business training and financial literacy, as well as their limited access to professional networks. Additionally, the study found that only a limited number of financial products were tailored to the needs of women entrepreneurs in growing sectors like light manufacturing and agribusiness.
To help address these challenges, the pilot study identified potential solution areas, such as alternative sources of early finance, the nascent leasing market, and targeted training programs. The World Bank Group, in partnership with the government, is now planning for phase 2 of the pilot, which would provide financing and advice to test and implement proposed solutions.