78152 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Foreword Foreword Vital Voices Global Partnership The current transitions taking place in the Middle East and North Africa (MENA) represent a great opportunity for economic growth in the region. Since the Arab Spring was fueled by people’s need for economic opportunity and justice, it is crucial to focus efforts on the development of strong economies that help all citizens to enhance their livelihoods. Unemployment is in the double digits throughout most of the region. The World Economic Forum estimates that MENA economies need to create 75 million new jobs by 2020 just to maintain the current level of employment. A key to accelerating job creation in the MENA region is fostering an entrepreneurial environment. Small to medium sized enterprises play a critical role as powerful engines for growth and innovation, and already represent about half of total employment in middle-income economies. Vital Voices believes that growing women-owned businesses will generate employment, addressing the region’s greatest development challenge. Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa illustrates that MENA women business owners are ready to grow their businesses and increase their contributions to their national economies. In collaboration with our partners, Vital Voices undertook this report to gain an understanding of women’s challenges and specific needs as a first step to identifying real solutions that accelerate business growth. The business owners we surveyed shared a consistent concern about access to finance and access to information. A majority are meeting their businesses’ capital needs through personal sources, such as personal savings and loans from family and friends, since lending conditions in their countries can be restrictive. In an effort to put forward solutions, we developed a set of recommendations that target governments, lending institutions, women’s business associations, international financial institutions, and non-governmental organizations who together form an ecosystem of support for women business owners. We know that only a confluence of stakeholders and efforts can make a difference for these women and their communities. At Vital Voices, we have seen the impact that investments in women can bring. Enabling the growth of women-owned firms has significant returns not only for the women and their businesses, but for their communities as well. Studies show that investments made in women deliver better-educated children, healthier families and more prosperous communities. With the continued support of Vital Voices and our partners, these women, and others like them, are poised to have a transformative impact on their countries and the region. Sincerely, Alyse Nelson President & CEO Vital Voices Global Partnership Ready for Growth: i Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Foreword Foreword IFC The growth and success of women-owned businesses is one of the most profound changes in the business world today. There is no doubt that women are an emerging market force. However, many businesswomen are not accessing commercial credit, an essential driver of business success. Lack of access to finance and financial services is repeatedly identified as the major constraint for women business owners. This report “Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Business in the Middle East and North Africa”, is designed to shed a light on those barriers. It is the result of a unique IFC partnership with Vital Voices and the MENA Businesswomen’s Network. Its purpose is to fill a critical gap in our knowledge of what women-owned businesses need in terms of financial products and services. Building on our knowledge of how commercial banks currently reach the women’s market, this survey data can provide banks in MENA with information to better serve women business owners. Globally, women-owned businesses are well represented in the entrepreneurship space, yet it is estimated that they only access between 2 and 10 percent of commercial bank finance. This holds true in emerging markets, where women-owned firms represent 31 percent to 38 percent of all small and medium enterprises (SMEs), but have unmet financial needs close to $300 billion every year. This market presents an untapped opportunity for financial institutions and other business providers that support women-owned businesses. Research indicates that women often are loyal customers and cautious investors, in addition to having better loan payback rates. As a result, IFC set itself the goal of ensuring that in the coming years, 25 percent of IFC loans provided to SMEs through financial intermediaries go to women-owned businesses. Serving this market not only makes business sense, but the promotion of women’s entrepreneurship also has a positive impact on society as a whole by fostering economic growth and job creation. Women are a particularly under-utilized asset in the Middle East and North Africa, which has the lowest rate of female labor force participation in the world. If the region is to realize its potential, then we must do more to support women business owners in their desire to grow their businesses. This is why IFC continues to work with financial institutions to raise awareness about the opportunity and viability of banking on women. For example, in Lebanon, IFC is working with BLC Bank to expand access to finance by providing a host of new products and services tailored to women-owned SMEs. But we won’t stop there. Much more needs to be done to break down the barriers to women’s economic participation. IFC looks forward to further collaboration with Vital Voices, the MENA Businesswomen’s Network, and other partners who can help us have a greater impact. We also hope that others can learn from this survey methodology to replicate similar studies in different regions of the world. Expanding financial service provision to women business owners starts with a better understanding of what they need. I wish to express my sincere thanks to the women who participated in this survey for sharing their personal views and experiences, which form the basis of this report. Mouayed Makhlouf Director for the Middle East and North Africa IFC ii Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Foreword Foreword MENA Businesswomen’s Network The Middle East and North Africa Businesswomen’s Network (MENA BWN) is one of the biggest platforms for businesswomen in the region. Its members are highly talented, business-oriented and empowered women that are set to lead development and change in their respective countries. Their economic contribution is key to how the region will perform in the coming years. MENA BWN, which consists of member associations in 10 countries, can reach over 25,000 business owners and professionals. Through each of its member associations, MENA BWN supports thousands more women from different business sectors who need role models, mentors and consultants to pave the road for their success. Since its inception in 2005, MENA BWN managed to build a strong knowledge base on how to train businesswomen and most importantly on how to share this knowledge base through networking and mentoring. These tools are vital in making a difference in scaling up businesses, particularly for women in the region. However, as noted in this report, women business owners face many challenges and obstacles that slow them down. From accessing finance to improving their business skills, the women clearly expressed the need for a more supportive local, national and international ecosystem. MENA BWN members are dedicated to make change a reality rather than a dream. With the support of a strong business ecosystem, MENA BWN will continue to empower more women to start, build, grow and sustain their own businesses. Shereen Allam President Middle East and North Africa Businesswomen’s Network Ready for Growth: iii Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa iv Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Executive Summary Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Business in the Middle East and North Africa Executive Summary Executive Summary The Middle East and North Africa (MENA) region is at one of the most critical turning points in its modern history. The Arab Spring was driven by the desire for economic opportunity and justice in the face of poverty and unemployment. The development of strong economies that enable both women and men to enhance their livelihoods is crucial for the future of the region. While there is limited data on the correlation between SME growth and job creation in the region, studies have shown that SMEs in middle-income economies generally contribute nearly half of employment and as much as a third of gross domestic product.1 SMEs often contribute more to employment growth than large firms. One global study found that as small firms (with 1 to 100 employees) grow, their rates of employment grow more than larger firms.2 Accessing finance is a key hurdle to SME growth, regardless of gender. However, a 2011 study showed that women-owned SMEs grow more slowly than their male-owned counterparts.3 One of the key factors the study associated with slower growth rates was access to finance, which includes gender-specific challenges such as lack of collateral and less control over assets. The partners in this report identified an opportunity to further explore the nature of this barrier for women. Over 75 percent of survey respondents in this report have fewer than 100 employees and want to grow their businesses. However, as shown in the findings, many women are not accessing commercial credit, an essential tool for business success. Based on World Bank Group Enterprise Surveys across developing countries, women-owned SMEs have unmet financial needs of close to $300 billion per year.4 Moreover, IFC’s work with the private sector has shown that many banks are unaware of the opportunity presented by women-owned SMEs. These women-owned SMEs are the “missing middle” in finance. By understanding their needs and the critical obstacles they face in accessing finance, this report identifies real solutions to increase the economic contributions of women-owned SMEs. It also shows the aspiration of MENA women business owners to grow their enterprises. The report partners believe their growth will generate employment, addressing the region’s greatest development challenge. This report surveyed 431 women business owners across 8 economies. All women surveyed are members of the MENA Businesswomen’s Network (MENA BWN) and the survey findings are representative of the larger MENA BWN membership. vi Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Executive Summary Key Findings MENA BWN members are ambitious owners of established, growth- oriented businesses. Members make strategic decisions about their business and growth trajectory, and 73 percent of respondents own at least half of their business. When asked to describe their goals over the 85% next three years, the majority chose growth-oriented responses such as “growth through expansion into new markets” (49 percent), “growth through greater profitability” (42 percent) or “growth through merger or acquisition” (12 percent). These women business owners have a strong appetite for expansion and are poised to contribute to national and regional economies. Growth and economic viability were chief concerns. The leading areas of concern to women business owners in the MENA region are: managing and maintaining business growth (83 percent); finding and keeping skilled employees (82 percent); and gaining access to new of respondents owned at markets (81 percent). Access to capital, while a key business concern, least half of their businesses comes behind growth management. Two-thirds (67 percent) of members surveyed say that access to capital is a very or extremely important issue. However, improved access to finance could also facilitate expansion and directly address the growth management concerns. With this in mind, women business owners’ access to finance is the key focus of this report. Two-thirds A majority of women business owners meet their capital needs through private sources, such as personal savings, family and friends (52 percent). Most women business owners surveyed are “banked” – with 80 percent using personal checking accounts and 69 percent using business checking accounts. Just 18 percent report having a commercial bank loan and even fewer respondents (10 percent) have a business line of credit. Business earnings are also commonly used (36 percent). These conditions reflect that few women business owners rely on financial of members surveyed say that institutions or outside investors for business needs, but instead they act access to capital is a very or predominantly as private citizens. MENA women business owners have extremely important issue access to financial institutions, yet they are not accessing formal finance itself. This is a significant and profitable opportunity for lending institutions. Ready for Growth: vii Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Executive Summary Access to Finance When asked specifically about difficulties seeking finance for their business over the past year, 64 Women’s access to percent of respondents had sought capital, and most — 41 percent overall — had encountered difficulties finance challenges: in accessing this needed finance. Women business owners ranked their difficulties in accessing finance as follows: 67 percent cite high interest rates as the major • hurdle 36 percent had difficulties due to lack of collateral • 67% guarantees 31 percent found the process too complicated • 17 percent lacked a business track record to secure • cited high interest rates as a financing hurdle they have encountered when seeking external financing. 16 percent felt mistreated by banks due to being a • woman business owner. In addition to these individual difficulties, 70 percent of MENA BWN members agree that lending 70% conditions in their economy are too restrictive and do not allow them to secure the financing needed for growth. These women business owners said found bank lending conditions were they wanted a stronger relationship with their banks. restrictive to the point of being Women surveyed felt that bank staff members often prohibitive lack adequate knowledge and experience to handle SME customers. Over two-thirds (67 percent) say that they would like to meet more regularly with their banker so that bankers better understand their needs. Despite challenges, women business owners are very interested in accessing finance for their business 71% growth needs. In regards to specific financial products, women business owners are more interested in long-term capital than short-term capital, with interest in supply chain and equity financing as well. A majority of respondents said that long-term financing would be of greatest value to their business over the next year (70 percent would of women entrepreneurs asserted that bank find it useful). Slightly fewer respondents (68 percent) staff members lacked adequate knowledge and said that short-term financing would be useful. One experience to handle SME customers effectively. in five respondents overall would find supply chain financing and equity capital very useful (22 percent and 19 percent respectively). viii Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Executive Summary Access to Information and Training: In addition to improved access to finance, women business owners expressed high demand for greater access to information and training in order to grow their businesses. Respondents said that learning about the following topics would be most useful in leading their business: General business management skills (76 percent) • Using financial products such as SME lending products or equity capital (69 percent) • Exporting (66 percent) • Accounting and financial management (63 percent) • Selling to large, multi-national corporations (60 percent). • As a majority of women business owners plan to expand operations and ramp up employment in the coming months and years, greater access to capital will be necessary to fuel this expansion. Targeted reforms and technical assistance for women-owned SMEs in the MENA region can have a powerful impact. This report provides recommendations for key stakeholders representing the SME ecosystem, including lending institutions, international financial institutions, governments, women’s business associations, donors, non-governmental organizations, corporations and educational institutions. The recommendations address the need to improve access to existing sources of financing; develop tailored financial tools for women business owners; and overcome the barriers that prevent women from accessing finance. They include supply-side actions, such as partial credit guarantee programs, as well as demand-side actions, such as training to improve business skills or better manage finances. Taking action on the recommendations in this report is key to economic development in MENA. Ready for Growth: ix Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Abbreviations AFEM Association des Femmes Chefs d’Entreprises du Maroc (Morocco) AME Association des Algériennes Managers et Entrepreneurs (Algeria) AWTAD Association for Women’s Total Advancement & Development (Egypt) BBS Bahrain Businesswomen’s Society BPW-A Business & Professional Women – Amman BWF Business Women Forum – Palestine CAWTAR Center of Arab Women for Training and Research CNFCE Chambre Nationale des Femmes Chefs D’Entreprises (Tunisia) DFID Department for International Development (UK) FI Financial Institution G8 Group of 8 GBA Global Banking Alliance for Women GDP Gross Domestic Product GPFI Global Partnership for Financial Inclusion G20 Group of 20 ICT Information and Communication Technology IDB Inter-American Development Bank IFC International Finance Corporation IFI International Financial Institution LLWB Lebanese League for Women in Business MENA Middle East and North Africa MENA BWN Middle East and North Africa Businesswomen’s Network MIF Multilateral Investment Fund NGO Non-Governmental Organization OECD Organization for Economic Co-Operation and Development SMEs Small- and Medium-Sized Enterprises UNDP United Nations Development Programme VV/VVGP Vital Voices Global Partnership WBO Women’s Business Organization x Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Acknowledgements This report is a collaborative effort involving the staff of Vital Voices Global Partnership, IFC, the Middle East and North Africa Businesswomen’s Network and its members and supporters. The continued support and engagement of the following member organizations of the Middle East and North Africa Businesswomen’s Network was critical to ensuring that the voices of women business owners were captured: Association des Femmes Chefs d’Entreprises du Maroc (AFEM); Association des Algériennes Managers et Entrepreneurs (AME); Association for Women’s Total Advancement & Development (AWTAD); Bahrain Businesswomen’s Society (BBS); Business & Professional Women – Amman (BPW-A); Business Women Forum – Palestine (BWF); Chambre Nationale des Femmes Chefs D’Entreprises (CNFCE); and Lebanese League for Women in Business (LLWB). This report is based on an in-depth survey of over 430 women from eight economies of the MENA region. We would like to acknowledge the survey coordinators and staff from the MENA BWN member organizations listed above for their tireless efforts and commitment to gathering the integral data. We also thank all members of the MENA BWN who participated in the survey for taking their time to share their perspectives. We sincerely thank all writers, reviewers and contributors to the report for their time, energy and enthusiasm. It is with their insight and passion for supporting women business owners that this report was possible. Ready for Growth: xi Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Report Partners Vital Voices Global Partnership identifies, invests in and brings visibility to extraordinary women around the world by unleashing their leadership potential to transform lives and accelerate peace and prosperity in their communities Vital Voices’ international staff and team of over 1,000 partners, pro bono experts and leaders, including senior government, corporate and NGO executives, have trained and mentored more than 14,000 emerging women leaders from over 144 countries in Africa, Asia, Eurasia, Latin America and the Caribbean, and the Middle East since 1997. These women have returned home to train and mentor more than 500,000 additional women and girls in their communities. Learn more at www.vitalvoices.org. ***** IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. IFC helps developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. In FY12, IFC’s investments reached an all-time high of more than $20 billion, leveraging the power of the private sector to create jobs, spark innovation, and tackle the world’s most pressing development challenges. Recognizing that aspiring businesswomen are often prevented from realizing their economic potential, IFC is committed to creating opportunities for women and business. A suite of IFC investment products and advisory services has been developed to increase women’s access to finance; reduce gender- based barriers in the business environment; and, promote the business case for women as leaders, entrepreneurs, employees, customers, and stakeholders. For more information, visit www.ifc.org. ***** Incorporated in 2010, the MENA Businesswomen’s Network (MENA BWN) represents over 4,000 individual members in organizations in 10 countries across North Africa, the Levant and the Gulf. Their mission is to promote the advancement of women, help women business owners and entrepreneurs from across the region grow more successful businesses and support the next generation of women in business, within the larger goal of supporting economic and professional growth. The Network represents a unified voice for women in the MENA region committed to progress through economic development. MENA BWN has outreached to over 20,000 women through its various activities during the past years and impacted the lives of many. Learn more at www.menabwn.org. xii Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Table of Contents INTRODUCTION................................................................................................................................................. 1 A. An Unprecedented Opportunity for Women in MENA............................................................................ 2 B. SMEs & Women-Owned Enterprises......................................................................................................... 3 C. Access to Finance........................................................................................................................................ 4 D. Access to Professional Networks and Information.................................................................................... 5 E. The Survey & Methodology........................................................................................................................ 6 SURVEY FINDINGS & INTERPRETATION....................................................................................................... 9 A. Who are the Women Business Owners?.................................................................................................. 10 B. Women-Owned Businesses in MENA are Ambitious but Face Obstacles........................................... 10 1. Firms are Mostly Established, Focused on both Services and Manufacturing............................... 10 2. Owners Want to Expand – but Need Capital................................................................................... 12 C. Many Face Barriers in Access to Finance................................................................................................. 13 1. Most Work without Access to Business Credit................................................................................. 13 2. Capital is Sourced from Personal Networks, not Banks................................................................... 13 3. Impediments to Financing.................................................................................................................. 15 4. The Role of Financial Institutions: Opportunities for Banking......................................................... 16 D. Access to Information and Training is also an Obstacle to Growth....................................................... 18 1. Women Business Owners Want to Learn More about Business..................................................... 18 2. There are Gaps in Knowledge of Financial Products & Services..................................................... 19 E. Conclusion: Opportunities for Action...................................................................................................... 19 RECOMMENDATIONS.................................................................................................................................... 23 BIBLIOGRAPHY................................................................................................................................................. 29 Endnotes........................................................................................................................................................ 33 ANNEX I: SUB-REGIONAL HIGHLIGHTS & ORGANIZATION TRENDS...................................................... 36 Annex 2............................................................................................................................................................ 45 Survey Instrument.............................................................................................................................................. 45 Annex 3............................................................................................................................................................ 55 Final Survey Summary of Question Results..................................................................................................... 55 Ready for Growth: xiii Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa xiv Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Introduction Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Business in the Middle East and North Africa Introduction An Unprecedented Opportunity for A.  Women in MENA The Middle East and North Africa (MENA) region is at one of the most critical points in its modern history. The root causes of the Arab Spring stemmed from long-standing societal demands for greater political inclusion and justice, as well as frustration with joblessness and weak economic growth. This is a time when innovation, creation and reinvention have never been more important, creating significant opportunities for women to bring prosperity and greater stability to their communities. There has been significant progress in recent years relating to human development and growth for women in the region. Over the last decade, almost all MENA countries have closed 90 percent or more of the gender gap in education.5 Women in MENA are now more likely than men to attend university.6 Maternal mortality is among the lowest in the world. Female labor market participation and women’s entrepreneurship rates, however, do not reflect these gains made in human development. Women face disproportionately high barriers when trying to start new businesses, and women’s entrepreneurship rates are half that of their male counterparts at 11 percent.7 The rate of female youth unemployment in MENA, at 36.3 percent, is nearly twice that of male youth unemployment.8 Globally, the MENA region has the lowest representation of women-owned formal SMEs – 12-15 percent, compared to 31-38 percent of women-owned formal SMEs in emerging markets.9 The low levels of women’s SME ownership are a missed opportunity for increased job creation and economic growth. Moreover, because women tend to spend income on those around them, investing in women can also produce a significant multiplier effect, bringing increased revenue to local economies,10 better- educated children,11 healthier families, and more stable, secure, and prosperous communities. Leaders of the MENA BWN meet to discuss their businesses and explore business opportunities with one another. 2 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Introduction B. SMEs & Women-Owned Enterprises SMEs are increasingly recognized as drivers of economic growth in developing countries. Globally, studies have shown that in middle income economies, SMEs contribute up to half of employment and as much as a third of GDP.12 For example, in Egypt, SMEs contribute at least 38 percent of total employment and 33 percent of GDP.13 The impact is even greater when SMEs in the informal sector are included. According to a European Union study, between 2002 and 2010, 85 percent of total employment growth was attributable to SMEs, and data demonstrated that SMEs have a higher employment growth rate than larger enterprises.14 Furthermore, as SMEs grew, their rates of employment also grew. A 2011 study of almost 50,000 firms in 99 countries found that small firms (1-100 employees) have the highest employment growth rates in regressions controlling for country, industry, and year fixed effects.15 SMEs can help to fuel employment and encouraging SME growth in developing countries can yield great contributions to economic development16, helping to drive exports and contribute to innovation.17 In the MENA region, the SME sector holds particular strategic importance because it helps reduce unemployment and diversifies economic activity, preventing over-reliance on limited natural resources.18 As their critical contributions to economic growth are increasingly recognized, SMEs are getting more political focus at the global level. The Deauville Partnership with Arab Countries in Transition is a global effort to support MENA countries toward “free, democratic and tolerant societies,” launched by the G8 in May of 2011. The alliance focuses on the vital role of access to finance and SME development while aiming to “unlock the potential of a vibrant SME sector that employs millions of people and capitalizes on the spirit of entrepreneurship in the region.” The Partnership is reviewing legal, regulatory, and administrative practices and a number of member countries have committed to developing plans of action to foster SME growth. In addition, the latest OECD’s Women in Business report explores women’s entrepreneurship as a means for growth. The report provides policy recommendations to accelerate women’s entrepreneurship. It specifically recommends further research on women-owned growth-oriented enterprises and the promotion of international good practices in financial products and services to meet the financing needs of women entrepreneurs.19 Though both initiatives cite SMEs’ potential to grow, a 2011 IFC study showed that women-owned SMEs grow more slowly than their male-owned counterparts.20 One of the key factors the study attributed with slower growth rates was access to finance, which includes gender-specific challenges such as lack of collateral and less control over assets. Women SME owners also have limited access to training, technology, markets, role models, and protection under the law. Women face procedural and societal obstacles, as well as traditions that often define their roles within society. Even though women do not always perceive overt gender discrimination, institutionalized gender barriers such as restrictive banking policies and practices, limited property rights under personal status law, unequal tax code, and limited outreach to women-owned SMEs create gendered barriers to growth. Ready for Growth: 3 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Introduction C. Access to Finance The problems women face in access to finance must be understood in the context of problems in access to finance for the developing world as a whole. About 60 percent of the developing world’s population is not served by formal lenders, according to one study.21 MENA lags other regions in economic and financial inclusion, has the second least developed capital markets of all regions, and has relatively limited external financing options.22 National credit information systems are still developing, and rarely include non-bank microfinance providers. Lenders rely on collateral that is expensive to register and may not be readily enforceable.23 On average, only 18 percent of adults have an account with a formal financial institution compared to a global average of 50 percent. Only 5 percent of adults in the Arab World have received a loan in the last year.24 According to the Global Partnership for Financial Inclusion (GPFI) and IFC, women typically run small and informal firms in lower value-added sectors, which offer smaller returns to creditors, thus impeding their access to finance.25 Though microcredit can be useful in expanding financing options for the poor, especially women, it is not enough to meet the needs of SMEs. Women entrepreneurs expanding their businesses have financing needs that exceed micro-credit ceilings. One of the chief complaints of women entrepreneurs in the MENA region has been the inability to secure the formal financing necessary to grow their businesses. In a 2007 report by IFC and the Center of Arab Women for Training and Research (CAWTAR) surveying over 1200 women entrepreneurs in five Arab countries (Bahrain, Jordan, Lebanon, Tunisia, and UAE), an overwhelming majority of women planning to grow their businesses were unsuccessful in obtaining finance from formal institutions.26 The need to increase SME women’s access to financial services was also recognized by the G20 Finance Ministers in 2012. This was due, in part, to a campaign by the La Pietra Coalition, which Need for More Personal Banking Relationships: Access to Financing As the eldest child, Houda Tekaya, General Manager of Tunisia’s Stimad, took over her family’s aluminum business, growing it from a dozen employees to a thriving company of around 60 people. For Houda, being a woman has made it more difficult to get banks on board. When she wanted to start exporting products to the region, she approached local banks to apply for loans. She says that while she didn’t experience outright discrimination, she sensed that “banks are more difficult with women than with men. They would more likely give credit to a man than they would a woman. They’re not real partners with business owners — especially not with women.” Houda explained: “You don’t feel like the bank’s a partner who is invested in your idea or in your business. It’s just a place where you can leave your money but they don’t care about your business and they’re not really supportive.” Over half of survey respondents — 67 percent — agreed with Houda’s assessment of impersonal banking relationships and expressed the desire for banks that invested in building relationships with their customers, rather than taking a transactional approach to their business. Houda emphasized that she wanted banks to “take equal risks with their clients.” Banking relationships, she feels “should be more of a partnership… after all, starting a business is a risk for everyone involved.” 4 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Introduction emerged from a gathering of business leaders, media, academia, civil society, government and elected officials convened in October 2009 by Vital Voices. Such efforts were informed by timely research. The report “Strengthening Access to Finance for Women-Owned SMEs in Developing Countries” was produced by IFC on behalf of the G20 Global Partnership for Financial Inclusion’s (GPFI) SME Finance Sub- Group. Launched at the G20 Summit in November 2011, the report highlights key trends, challenges, and opportunities for advancing women’s entrepreneurship globally and increasing their access to finance. Just as there are gendered barriers to the growth of women-owned SMEs, there are also gendered barriers to women’s access to finance. A study by the MENA-OECD Investment Program found that “women in all countries of the MENA region have the right to apply for loans and access credit, to own property, and to enter into legal contracts.”27 However, other laws may be “gendered” (e.g. personal status laws and labor laws that contain gender-specific provisions) that influence business growth. All 14 MENA economies covered in the World Bank Group’s 2012 Women, Business and the Law report have at least one legal differentiation between the ability of men and women to access institutions and use property, with a startling average of 17.2 legal differentiations for the economies in the region. This was the highest global average.28 One example of how these laws affect a woman’s ability to access financing is the way in which property arrangements or inheritance laws affect women’s ability to use property as collateral. Although women are legally allowed to own property, in practice their husbands may own house deeds, preventing women’s use of collateral. Commercial banks’ lending policies and practices in many MENA countries may also build on non-legal procedural barriers. For example, women may be required to include their husband as a co-signer.29 Access to Professional Networks D.  and Information Facilitating access to finance also involves access to people, support and networks. As a vital source of business and industry knowledge, networks are among the most pivotal resources an enterprise can leverage for growth. They provide leads on contracts, market information, logistical support and distribution channels, as well as linkages to suppliers, investors, financing and technology. Employment and social networks that include other entrepreneurs are stronger predictors of women’s entrepreneurship globally than educational attainment or household income.30 Research shows that women entrepreneurs also benefit more from early-stage strategic assistance and coaching. Strong networks encourage women to take the risks necessary to grow.31 They also offer indications of reputation for women business owners in industries such as professional business services. Professionally-oriented connections with banks, business consultants, accountants, lawyers, and chambers of commerce, are often hard to access and require a significant investment of time. As a result, smaller ventures are more likely to draw upon friends and family for support than larger ventures. However, Ready for Growth: 5 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Introduction network diversity that leverages both personal and professionally-oriented contacts is critical for the success of entrepreneurial initiatives. Women business owners and their enterprises would therefore benefit from structured and purposeful networking opportunities. Greater diversity in networks also provides a wider variety of resources, viewpoints, ideas and information. If an entrepreneur’s network cannot provide valuable information about business, the performance of the firm is likely to suffer in comparison to that of a company whose owner takes advantage of a diverse, high- quality network.32 Access to mentorship opportunities and contacts who are knowledgeable about the regulatory environment and business operations are cited by a World Bank study as important factors for successful enterprise growth.33 It is integral for entrepreneurs to have an ecosystem of support to access networks, information, mentorship and capacity building opportunities. Research shows that many women do not have adequate connections for credible introductions to industry associations, chambers of commerce and other key business networks. Consequently, women entrepreneurs tend to be at a disadvantage in terms of getting the resources, information and advice needed to succeed.34 Money alone does not solve this issue. E. The Survey & Methodology The scope and depth of this report and its foundational survey explore the demand-side conditions affecting women SME owners’ access to finance as a key growth challenge, as well as their perception of key supply-side hurdles presented by lending institutions at the local and national level across the region. The precise definition of what constitutes a small and medium-sized enterprise differs widely between sectors, organizations and countries. The IFC defines an SME as an enterprise with 5 to 250 employees. Vital Voices defines an SME based on a combination of factors including an annual average of three paid employees, annual revenue greater than $25,000, three or more years in operation, and annual sales (dependent on sector). This amalgamation of SME criteria allows for global, regional and local diversity. This nuanced definition captures women- MENA BWN members conduct business owned businesses in the missing middle between while together in Dubai, UAE. microenterprises and large-scale businesses. 6 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Introduction This report surveyed the membership of eight women’s business organizations which make up the MENA Businesswomen’s Network - Association des Femmes Chefs d’Entreprises du Maroc (AFEM); Association des Algériennes Managers et Entrepreneurs (AME); Association for Women’s Total Advancement & Development (AWTAD); Bahrain Businesswomen’s Society (BBS); Business & Professional Women – Amman (BPW-A); Business Women Forum – Palestine (BWF); Chambre Nationale des Femmes Chefs D’Entreprises (CNFCE); and Lebanese League for Women in Business (LLWB). The 431 women business owners surveyed were all members of the MENA BWN. For the purpose of this report, Algerian, Moroccan and Tunisian respondents comprise the North Africa sub-region while Bahraini, Egyptian, Jordanian, Lebanese and Palestinian responses comprise the Middle East. While survey respondents represent eight economies across the Middle East and North Africa, the most responses were registered from AFEM, AME and AWTAD.35 This report focuses on the common challenges facing women business owners throughout the eight surveyed economies in the MENA region. While maintaining a regional focus throughout the report, it is important to note that there are differences between economies surveyed. Most economies followed sub- regional trends and these are presented in the findings. Significant differences from these sub-regional trends are highlighted in organization-specific analysis included in Annex 1. Business owners were surveyed during the month of July 2012. Interviews were conducted largely in person or via phone interviews with research or network staff. The survey instrument was designed in English and translated into Arabic and French. Vital Voices completed data entry. The survey and results can be found in Annex 2 and 3. From a population pool of approximately 1,560 network members who are business owners in the MENA BWN, the completion of 431 interviews represents a response rate of 27.6 percent. The sampling error of a survey of N=431 is +/- 4.8 percent at the 95 percent level of confidence. This means that, 95 times out of 100, survey responses will be within 4.8 percent of true population values. Survey Composition by Association LLWB 3.2% BPWA 3.2% BWF 4.4% BBS 5.1% CNFCE 10.4% AME 20.6% AWTAD 26.0% AFEM 26.9% Ready for Growth: 7 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Introduction A Secret Recipe to Success: Finding and Keeping Skilled Employees Sawsan Wazzan Jabri is founder of the Diet Center, Lebanon’s first dietary and nutrition center. Sawsan, who has been a dietician for 25 years, co-founded the Diet Center with her husband, a food technologist, in Beirut in 1990. Building on the success of the business, they franchised operations in Saudi Arabia, Kuwait and Qatar. Today in Lebanon, she employs 105 people and franchises in Kuwait and Qatar each employ around the same number while the Saudi Arabia franchisor employs around 500 people. Reflecting on the phenomenal growth of her business, Sawsan notes that the greatest challenge she has faced has been to find skilled — and loyal — employees who won’t compromise the exclusivity of her creations and recipes. “A lot of good employees I’ve had have stolen my business’ information,” Sawsan said. “Because Sawsan Wazzan Jabri explains her human of Lebanon’s political issues and stresses, your resources challenges in expanding her business rights aren’t enforced and you can’t nutrition business in Lebanon. enforce contracts; it would take 2-3 years to resolve things in court. Technology is so advanced that, with smart phones, people can take information from you without your ever noticing.” The World Bank Group’s Doing Business 2012 report reinforces her view, ranking Lebanon at 120 out of 183 economies in regards to enforcing contracts; the report finds that the average time it takes to resolve a commercial dispute through the courts is 721 days. The lack of IP rights, difficulty in enforcing contracts, and advances in technology that make it easy to steal trade secrets, all lend support to Sawsan’s claim that finding trustworthy, skilled employees is a challenge. It is an “extremely important” issue, 83 percent of survey respondents agree. “In Lebanon, we find employees by headhunting. If you need a good chef, you go to a place where there are good chefs and you offer them more money. I don’t like this at all. A lot of people use this method to get a good employee,” she says. Sawsan explains that staffing is one of the issue areas where a mentor with sound advice would be extremely valuable. 8 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Business in the Middle East and North Africa Survey Findings & Interpretation A. Who are the Women Business Owners? The majority of women business owners surveyed were between the ages of 45 and 54 (30 percent), followed by those aged between 35 and 44 (26 percent) and those under 35 (16 percent). The majority of Egyptian, Lebanese and Moroccan respondents were under the age of 45. Overall, 34 percent of respondents were sole owners of their businesses, with 21 percent reporting half-ownership and 18 percent claiming ownership of some proportion between 50 and 100 percent. Thus, 73 percent of the women owned at least half of their businesses. Of those that did not own their firms outright, 31 percent shared ownership with their husbands, 33 percent with other family members, 29 percent with unrelated individuals and a combined 22 percent with their parents or children. Within the region, Algerian, Bahraini and Tunisian women business owners were most likely to be sole owners of their enterprises. These ownership structure findings are similar to those in the 2007 Women Entrepreneurs in MENA report released by IFC and CAWTAR. Women-Owned Businesses in MENA are B.  Ambitious but Face Obstacles Firms are Mostly Established, Focused on both Services 1.  and Manufacturing Overall, businesses surveyed were established, with over half (62 percent) of those surveyed having been in business for over three years. This varied between economies. Forty percent have been in business for six or more years with 21 percent having been in business for more than ten years. The youngest businesses were found among Egyptian survey-respondents with 48 percent of respondents having been in business for less than three years. Nearly a quarter of the businesses (22 percent) generated between $25,000 and $50,000 in annual gross revenue in 2011. This is followed closely by 21 percent of businesses that generated between $50,000 and $500,000 and 11 percent reporting revenues of $10,000 to $25,000, with almost a quarter of respondents (24 percent) declining to specify. In terms of employment, 40 percent of all respondents employ 1 to 9 employees, and 32 percent employ between 10 and 99, while those reporting either sole employment or more than 100 employees were in the single digits. These figures demonstrate that the preponderance of survey respondents run small businesses that are responsible for the highest employment growth rates.36 10 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation Size of Surveyed SMEs (Employment) 250 or More Employees 2% 100-249 Employees 4% 50-99 Employees 12% 10-49 Employees 20% 1-9 Employees 40% None in Addition to Myself 5% While globally, many women business owners operate in the informal sector, MENA survey respondents primarily own formal businesses. A strong majority of MENA BWN members have taken a step toward formalization: 67 percent had registered their business name; 64 percent had registered their firms with the tax registry; and just over 23 percent of businesses had been incorporated.37 With respect to industry, the largest portion of women-owned SMEs offered business services (30 percent), followed by non-durable manufacturing such as food, clothing and crafts (17 percent), tourism- related services (11 percent) and durable manufacturing (5 percent). The least represented industries were technology/ICT and agriculture (3 percent each). The concentration in non-durable goods reflects the relatively lower capital requirement, as compared to more expensive, capital-intensive durable goods such as machines, steel, or tires. The industries in which SMEs of the Middle East sub-region are most active are manufacturing and trade as opposed to business services. Twenty-five percent of Middle Eastern firms are active in non-durable manufacturing, versus only 8 percent in North Africa. Women-owned firms in North Africa are most active in business services, with 37 percent in the sector, as opposed to only 7 percent in the Middle East. Industries Represented Other Agriculture 20% 3% Travel/tourism 11% Nat. resource dev’t Multi-Industry 0.2% Conglomerate 1% Wholesale/retail trade 4% Non-durable manufacturing 17% Technology/ICT 3% Personal services 6% Durable manufacturing 5% Business services 30% Ready for Growth: 11 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation Results indicate that women-owned SMEs primarily derive sales from individual customers (44 percent) and other SMEs (24 percent), while fewer report a majority of their sales coming from corporations (13 percent), governments (6 percent) and NGOs (3 percent). With nearly a quarter of surveyed SMEs across the MENA region relying on other SMEs for their business, supporting access to finance for the broader SME community could have a multiplier effect. 2. Owners Want to Expand – but Need Capital The women business owners surveyed are growth-oriented. Expansion into new markets over the next three years was a chief goal for 49 percent of the businesses surveyed and 42 percent cite growth through greater profitability. Growth through a merger or acquisition was cited by 12 percent, and 10 percent through organizational restructuring. Only 7 percent of respondents were aiming to keep the status quo and less than 2 percent were aiming to sell or close their firms altogether. The survey also captured women business owners’ perspectives on growth strategy over the next 12 months. Sixty percent of surveyed enterprises planned to expand into new markets, 59 percent planned to increase their capital investment and 47 percent planned to hire new employees. A much lower percentage of surveyed women business owners intended to keep levels of employment or investment the same (23 and 18 percent, respectively), or reduce these levels (8 and 7 percent, respectively). Seventy six percent in the Middle East planned to increase capital investment, while 45 percent of North African respondents planned to do so. In North Africa, 66 percent desired expansion into new markets compared to 53 percent in the Middle East. Only 11 percent of regional respondent intended to reduce employment or capital investment. The most commonly cited concern was managing and maintaining business growth (83 percent), followed closely by finding and keeping skilled employees (82 percent) and access to new markets (81 percent). Subsequently, keeping up with new technologies (69 percent) and access to capital (67 percent) were also widely deemed very or extremely important. Legal and social constraints were considered less important for women-owned businesses. Only 37 percent of the women surveyed considered social constraints of great importance, with 34 percent reporting the same regarding legal constraints. These results clearly indicate that women business owners place great emphasis on the growth of their businesses — central to which is access to capital. Issues of Importance (Very/Extremely Important) Legal Constraints 34% Social Constraints 37% High Utility Cost 51% Laws & Regs 58% Access to Capital 67% New Technologies 69% Access to New Markets 81% Finding/Keeping 82% Skilled Employees 83% Maintain Growth 12 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation C. Many Face Barriers in Access to Finance Almost 24 percent of respondents said they had not sought financing for their businesses, indicating either insufficient demand or factors such as discouragement or discomfort with the process, lack of networks or insufficient information on financial products available. Nearly a quarter (23 percent) of total respondents cited no difficulties in financing their businesses. Forty-one percent of women business owners reported facing barriers in accessing financing during the last 12 months. Sub-regionally, 38 percent of women-owned SMEs in the Middle East reported difficulties seeking capital, compared to a slightly higher percentage (43 percent) in North Africa. The survey found that 80 percent of women business owners currently use or have recently used personal checking accounts and 69 percent used business checking accounts. Fewer maintained online banking accounts or insurance products, at 28 percent and 25 percent, respectively, and only 16 percent held any retirement savings plans. It is worth noting the predominance of deposit accounts. On an individual level or via deposit-based banking, access to financial institutions is less of a concern than access to finance itself. As the report will explore further, while most of the women are “banked,” they are using personal capital for business. 1. Most Work without Access to Business Credit More than half of women business owners surveyed (53 percent) run businesses without any bank credit and only 10 percent have a business line of credit. The use of commercial credit exceeds 40 percent only for Bahraini (54 percent) and Lebanese (44 percent) respondents. These women were also the most likely to have a line of credit for their enterprises (29 and 40 percent). With a majority of women-run businesses unable to finance purchases needed for day-to-day operations, even incremental expansions, advance inventory orders or improvements in profitability based on economies of scale are often difficult to achieve. Among the 34 percent of women-owned businesses that currently have bank credit, 32 percent have less than $10,000 available to them, 17 percent have between $50,000 and $100,000, and 21 percent have $100,000 or more. Overall, 58 percent of those with credit had lines of less than $50,000. While some larger credit lines are reported, women business owners’ current lack of bank credit suggests a clear disadvantage. 2. Capital is Sourced from Personal Networks, not Banks A majority of women business owners meet their businesses’ capital needs through private sources, such as personal savings, family and friends (52 percent). These private sources are difficult for growing businesses to leverage. Other current financing sources include credit cards and personal bank loans (41 and 37 percent). Finally retained, business earnings are closely behind at 36 percent of cases. A far lower percentage of women business owners meet their capital needs through a business or commercial bank loan at 18 percent, with only 10 percent of cases involving equity capital, equipment financing or leasing, or a business line of credit. These latter sources often offer better terms and conditions than personal loans or credit cards. These results reflect that relatively few women business owners apply for commercial financing from financial institutions or outside investors. Instead, they access financing as individuals, drawing first on personal networks to meet their businesses’ capital needs. This embodies the problem at hand: a lack of financial services available to formal businesses owned by women in the region. Ready for Growth: 13 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation Current Financing Sources (Includes Multiple Responses) Trade Financing Product 3% Islamic/Sharia Compliant 5% Financing from MFI 6% Moneylender 7% Equip. Financing/Leasing 10% Business Line of Credit 10% Equity Capital 10% Govt Guaranteed Loan/Grant 11% Business Loan 18% Business Earnings 36% Personal Bank Loan 37% Credit Cards 41% Private Sources 52% The findings reveal a fairly even distribution of reported financing gaps facing firms. It is worth noting, however, that a cumulative 33 percent of respondents anticipated a need of $50,000 to $500,000. Following this, 27 percent report needing between $10,000 and $50,000 over the next three years to grow their businesses. This level of capital is frequently dubbed the missing middle as it falls above microfinance thresholds but below the minimum loan amounts of commercial banks. These larger capital requirements reflect ambitions for accelerated business growth. Capital Needed for Business Growth (Over 3 years) $1m + 2% $500 - $999.9k 3% $100k - $499.9k 18% $50k - $99.9k 15% $25k - -$49.9k 13% $10k - $24.9k 14% Less than $10k 5% No Capital Needed 9% No Answer 22% When asked to rank the most useful modes of financing, 70 percent of women business owners cited long- term financing as the most useful, followed by short-term financing at 68 percent. Leasing was also deemed useful (59 percent), followed by supply-chain financing (54 percent). Equity capital and factoring trailed the series in terms of perceived benefits, with 50 percent and 46 percent finding any use to them at all. 14 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation 3. Impediments to Financing Among the 41 percent of respondents reporting challenges in accessing needed capital, a majority (67 percent) cite high interest rates as a hurdle they have encountered when seeking external financing. This was followed by lack of collateral guarantees (36 percent), a general perception of the process as “too complicated” (31 percent) and lack of a business track record (17 percent).38 Only 16 percent of respondents felt mistreated due to their gender and less than 11 percent had unsuccessfully sought external equity investors. Situations Faced When Seeking External Financing Interest rates were too high 67% Denied financing because of lack of collateral or guarantee 36% Found the process too complicated 31% Denied financing due to lack of business track record 17% Felt mistreated due to being a woman 16% Sought but could not find external equity investors 11% No answer 13% Collateral Complications: Restraining Growth Collateral challenges remain an issue for women business owners at various stages of growth – a fact with which Tamara Abdel-Jaber is very familiar. As a co-founder and CEO of Palma, a business and information technology consulting firm based in Amman, Tamara has successfully led the growth of her business over the last 14 years. Recognized as one of the fastest growing companies in the region by All World Network, Palma now delivers strategic management and business consulting services to organizations across the region including in Saudi Arabia, the UAE, Libya and Qatar and plans to keep expanding. In pursuit of this expansion, Tamara has faced challenges in securing the necessary bank guarantees to submit bids for public tenders. These public tenders in countries such as Iraq offer enormous business opportunity and are a key means for growth. However, banks’ high collateral requirements for issuing these letters of guarantee can hinder this growth. Tamara explains her experience in seeking a bank guarantee before bidding for a public tender, “After a 2-month gruesome process, and assurances that our request was a simple one, the bank asked for personal asset-based collateral from me to be able to start a credit line.” In some cases, collateral amounting to as much as 110 percent of the requested guarantee amount may be required by banks. Over a third of survey respondents who had difficulty in securing financing cited this same concern – being denied financing because of lack of collateral. Even when international financial institutions offer credit facilities and programs to ease access to finance challenges, these programs are often directed through local banks and high collateral requirements remain unchanged. With over 20 full-time employees, 150 contractors and a standard growth rate of 52 percent over the last three years, Palma is the quintessential example of a growth- oriented woman-owned SME. Reduced collateral requirements can support businesses like Tamara’s to continue to grow, employ more people and expand internationally. Ready for Growth: 15 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation As a whole, these results reinforce the perceived dominant hurdles among survey respondents and as previously discussed in the Introduction. They address primary economic considerations within lending institutions (high interest rates), as well as procedural, legal or administrative hurdles such as collateral and pre-requisites. Some of the economic considerations may emerge from commercial banks’ traditional aversion to lending for entrepreneurial ventures, start-ups and SMEs, which are often perceived as higher risk. While women surveyed may not perceive their challenges as specifically caused by their gender, their collateral, process and track record concerns are gendered issues in the region. Women’s limited access to networks, information and bank contacts, further discussed in Section D, also contributes to their perception of an overcomplicated process. As discussed in the World Bank Group’s 2012 Women, Business and the Law report, all MENA economies covered in this survey have at least one legal differentiation between the ability of men and women to use property, with an average of 17.2 legal differentiations for MENA economies. These legal differentiations can make it more difficult for women to own property in their own names, thus limiting their track record and hindering their ability to use immovable collateral to gain financing. While women are legally entitled to own property in all surveyed economies, joint titling of a home between men and women may not be practiced. Gendered laws, policies and procedures are major barriers to women’s access to finance and general economic opportunity. 4. The Role of Financial Institutions: Opportunities for Banking A necessary part of access to finance for business owners is a healthy relationship with banks and bankers. Findings suggest that the role of bankers themselves in the process has considerable room for improvement. Nearly two-thirds of respondents (64 percent) favored banks with a relationship orientation rather than a transaction orientation in their business approach, with 67 percent preferring their banks contact them or visit them more often to better understand their business needs. A substantial majority of 68 percent of business owners indicated that bank staff members lacked adequate knowledge and experience to handle small and medium sized business customers effectively. When asked if bank lending conditions were too restrictive to the point of being prohibitive, 70 percent agreed to varying extents. Seventy-nine percent of women business owners think that businesses like theirs require flexible loan conditions and fast decision-making. Different Perspectives from Bankers “Many SMEs, especially those in the early stage of their maturity, do not come with business plans •  demonstrating their plan for the next 3, 6, or 10 years. They frequently have limited track financial records such as balance sheets and audits. Banks are nervous of releasing large amounts of their depositors’ cash to these types of risky investments without the documentation showing business assets, assessments, and strategy.” -Name Withheld, Banker “Building the SME business has to be the joint responsibility of risk and relationship management. •  [Bank staff] must go beyond numbers to understand the business model of the enterprise to structure facilities and products that bring tangible benefits to their customers.” Source: Shekar Ganesh, Former Senior Business Banker. Ganesh (2012). • “Bankers can reduce revenue stream from interest rates, which are often of high concern to potential borrowers, if they also engage in trade and other financial products. Building the relationship with women as long-term customers is integral to both parties in the transaction.” -Name Withheld, Banker 16 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation Fifty percent of respondents reported that their financial institutions had no programs or products specifically targeted for women business owners. A total of 15 percent of respondents across participating economies reported that they knew of such programs at banks, while 10 percent had no relationship with a financial institution. Twenty-nine of respondents from the Middle East reported some programs, compared to only 6 percent in North Africa. The quality of financial service delivery for women business owners is one area to be addressed across the region, whether in regards to training bankers themselves, the expansion of existing programs to better target women business owners, the introduction of new programs tailored for women or the exploration of less stringent lending conditions and requirements as presented above. Positively, when asked if they felt their bank treated them with respect and made them, as women business owners, feel welcome, 67 percent agreed. Twenty-one percent neither agreed nor disagreed and only 11 percent disagreed. This demonstrates that the issue is likely not overt gender discrimination on the part of banks and their staff, but a missed opportunity for banks to expand their client base. Banking Relationship (Somewhat/Strongly Agree) Favor Relationship, not Transaction Approach 64% Banks Treat me with Respect as a Woman 64% Would Like More Bank Contact 67% Bank Staff Lack SME Knowledge/Experience 68% Lending Conditions Too Restrictive/Prohibitive 70% Require Flexible Conditions & Fast Decisions 79% Raising Awareness: Founded in 2000, the Global Banking Alliance for Women (GBA) is the leading organization of financial institutions driving women’s wealth creation worldwide. Twenty-five member institutions work in 135 countries to build innovative, comprehensive programs that provide women’s business enterprises with vital access to capital, markets, education, and training. Membership in the Alliance in turn provides member institutions with technical assistance and peer learning as well as a global clearinghouse for best practices. Along with building members’ capacity to serve their women customers, the GBA uses its collective voice to advocate for the needs of women entrepreneurs. “GBA members recognize the immense potential that the women’s market represents. Women are now creating small and medium enterprises at rates approaching or surpassing those of men in many markets. We look forward to increasing awareness about the business case for banks to focus on women, to expanding our membership, and as a result, to increasing opportunities for women in business worldwide.” - Chris Sullivan, CEO, Corporate Banking Division for Royal Bank of Scotland. For more information, visit www.gbaforwomen.org. Ready for Growth: 17 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation Access to Information and Training is D.  also an Obstacle to Growth 1. Women Business Owners Want to Learn More about Business Survey responses indicate an eagerness to learn more about business operations. Nearly all respondents (93 percent) thought that learning additional business management skills would be somewhat or extremely helpful. This was followed closely by learning how to use financial products (90 percent), accounting and financial management (89 percent), expanding geographically and exporting to other countries (85 percent), and legal advice (84 percent). These identified areas closely correlate to women business owners’ aspirations of growth. Closely following these key issues were finding a mentor, selling to large multinational companies, and learning about the business registration process itself, 82 percent, 80 percent, and 75 percent respectively, finding them helpful in some measure. Women business owners were asked which resources they use in making business decisions, who they consulted most for managerial assistance and how frequently. By proportion of respondents stating “frequent” consultations, 37 percent most often referred to their husbands or family members involved with the business, 36 percent to accountants or financial advisors, and 35 percent consulted with fellow business owners. An average of 38 percent of respondents rarely or never consult their respective networks, personal or professional, for advice when making important business decisions. While women business owners noted many areas of interest, technical, financial or business acumen are the most needed in order to support business growth. A combined 82 percent of women surveyed deem mentorship helpful to some extent, reflecting a need for business advice that can potentially be met through mentoring initiatives. Ranked by respondents’ combined incidences of at least an occasional consultation, the following frequencies emerged: Professional Consultation (Occasional/Frequent) Bank/loan officer 39% Attorney 49% Mentor 53% Family outside business 54% Friends 58% Board of directors/advisors 59% Fellow business owners 61% Senior managers 63% Family within Firm 68% Account/financial advisor 73% 18 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation 2. There are Gaps in Knowledge of Financial Products & Services The data also highlights an opportunity to address the knowledge gaps regarding financial products and services. Though a majority of women business owners surveyed cited familiarity with long-term financing, short-term financing, and leasing39, a majority of women business owners had little to no knowledge of factoring40, equity capital41, or supply chain financing.42 This distribution indicates a familiarity with basic concepts such as loans but less awareness of other tools. Understandably, respondents claimed needs that were identical to their familiarity with the financial tools suggested. Based on the data, increasing financial awareness and access to information could directly affect the tools sought, used and, consequently, the financing and development of woman-owned SMEs in MENA. Alternatively, the results could also reflect a genuine need for simple loan financing to expand, fill larger purchase orders or hire additional workers quickly. Conclusion: Opportunities for Action E.  Key changes must be made to foster the ability of women-owned SMEs to contribute to economic development and employment generation across the region. A majority of women business owners plan to expand operations and increase employment. A majority also indicate a demand for formal financing as well as a real difficulty in obtaining it. For women-owned SMEs to grow or manage their growth, they must access financing. A cumulative 33 percent need $50,000-$500,000 over the next three years to support their business growth goals. This highlights an additional opportunity for banks to increase their client base by engaging these potentially new long-term customers. This report demonstrates that although accessing finance is an integral issue women face when growing their business, it cannot be resolved in isolation of other related impediments. Action to improve women’s access must be taken holistically — along with increased access to training, information, and networks. The survey results demonstrate that issues exist with access to financing on the supply and demand sides of the equation and that both must be addressed for real change to be made. Tamara Abdel-Jaber has faced collateral challenges in growing her business over the last 14 years in Jordan. Ready for Growth: 19 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation Supply Side In their attempts to access financing from commercial banks, women in the MENA region agree that banks can be wary of small businesses and are often risk averse. Many of the women interviewed noted that banks in the MENA region were reluctant to assume the risks associated with SMEs without a proven track record. Almost three-quarters of women surveyed found that bank lending conditions were restrictive to the point of being prohibitive. High interest rates and lack of collateral were commonly cited obstacles across the region. Additional factors include an overly complicated process, lack of business track record and discrimination due to being a woman (which was noticeably highest amongst Algerian respondents). Most of the women surveyed pointed to a general need for lower interest rates, flexible loan conditions and fast decision-making. Meanwhile, a greater understanding of women business owners’ banking needs and the general business environment facing women-owned SMEs are also required of banking professionals in the MENA region. Over two-thirds of survey respondents say that local bank staff lack the knowledge and experience to deal with SMEs effectively and are ill equipped to deal with women-owned businesses in the region. Women also cite a strong preference for banks to be ‘partners,’ rather than dealing with them in a merely transactional relationship. Over half of the women surveyed also reported that their financial institutions lacked programs or products specifically targeted to women business owners. Demand Side At the same time, greater financial literacy and familiarity with financial services and products geared for SME owners have emerged as important needs. Women expressed a great need for long-term financing, along with short-term financing and leasing. On the other hand, women had little familiarity with factoring, equity capital or supply chain financing. Increasing financial awareness of these products may lead to an increase in demand, while greater access to long-term financing meets current stated needs. The majority of women business owners surveyed expressed an interest in accessing information and training on accounting and financial management and how to use financial products. In other words, technical assistance, capacity building and financial institution outreach are in demand across all surveyed communities within the MENA region. Additionally, a strong majority throughout the region indicated a desire for business mentorship and professional networking, reiterating the need to provide information and connections to support women business owners. 20 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation **** There are a number of actors that can provide support for women-owned SMEs on both the supply and demand side. Governments43, lending institutions and IFIs can work together to address supply-side issues to access to finance. Women’s business associations and other ecosystem partners such as NGOs, higher education institutions and corporations can work collectively to address demand-side issues. More specific recommendations can be found in the following section. Women in the region own growth-oriented businesses and require capital to grow, but their current financial needs are not being met. These findings indicate tangible ways in which the ecosystem can better serve women business owners to contribute to economic growth for their communities and region. Striving to Success: Managing for Growth Lama Abdelhadi, founder of Jolie Femme, saw that there was a unique business opportunity in Jordan for a first of its kind one-stop beauty center. In 2007, Lama started the business with a loan from her parents and attributes much of her success to the critical support she received from her family in those early stages. However, after the first year Lama needed a bank loan to hire more people, take training courses, and pay for more decorations. Like many in Jordan, it was easier for her to finance her business with the help of friends and professional connections. For Lama, accessing financing went smoothly given her proof Lama Abdelhadi agreed with of steady monthly income and the use of her apartment as other MENA BWN members collateral. But for others, Lama observes, the process is not surveyed in citing a need to so easy. She says she knows many talented women with good strengthen their business business ideas who stay at home because they need to be management skills. lent money to start their businesses. The high interest rate discourages people from taking a risk, she adds. Lama’s biggest challenge involves finding skilled employees. Part of Lama’s problem is the dearth of women stylists in Jordan that meet her professional standards. This is consistent with the survey data, in which 83 percent of respondents ranked the need to “find and keep skilled employees” as “very or extremely important.” The other problem Lama has in sourcing skilled workers is a legal one. All the nail technicians in Jordan are from Philippines and getting them work visas is very hard. “If the police come to inspect, and they catch just one girl, they’ll close the salon,” she says. “I’m not sure what to do; everyone I’ve talked to says there’s nothing they can do.” Lama’s legal challenges to growing her business are consistent with over half of the survey respondents (53 percent) who stated that “legal advice,” would be “extremely helpful.” When asked about the business skills she would like to acquire to help her grow her business, Lama pointed out without any hesitation, “Management skills. If you don’t manage your business well, it can all fall apart. Managing people is the hardest.” The highest percentage of survey respondents – 79 percent – agreed with this sentiment, ranking learning additional business management skills very or extremely helpful. Ready for Growth: 21 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Survey Findings & Interpretation The Importance of Good Laws and Regulations Taghreed Najjar, founder of independent publishing house Al Salwa Publishing House, started her business because she was passionate about writing children’s books and saw a gap in the market for publishing houses. Since 1996, when she was a one-woman show, she has encountered her share of red tape associated with growing a business in Jordan. Accessing finance to grow her business was difficult, Taghreed recalls, but not impossible. Similar to over half (52 percent) of the women business owners surveyed in this report, Taghreed funded her business’ initial capital needs through private sources. “I started with a personal loan from my brother.” As her business grew, she needed to apply for a loan. Even though she ended up getting the Taghreed Najjar is the author of over 40 loan, she explained: “They [the bank] wouldn’t Arabic books for children and owns her own take me seriously. They wanted so much business, Al Salwa Publishing House. collateral. I needed the loan to print a large quantity of books for Royal Jordanian as gifts. Although I showed them an official contract with Royal Jordanian, they still needed my husband to be my guarantor and they also asked us if we had a house to mortgage… they just didn’t want to take a risk.” Taghreed explains that it was only after she inherited some money that the banks were more accommodating, since she used her inheritance as collateral. Now, she says, she has worked out “a system” with the printing press so whenever she prints a book she pays them in installments. This has lessened her need to apply for bank loans. One of Taghreed’s business challenges is property registration for her new office space. Her landlord is holding back a paper she needs to finalize registration. To put this issue in perspective, Jordan ranks 105th out of 185 global economies in the 2012 World Bank Group’s Doing Business report. Registering property takes, on average, 21 days to complete seven procedures. 22 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Recommendations Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Business in the Middle East and North Africa Recommendations Vital Voices, IFC and MENA BWN offer the following recommendations as practical interventions adapted to the MENA region’s particular economic, political and social environment. Drawing on the survey responses and international best practice, these recommendations are aimed at a range of stakeholders within the ecosystem of support for women business owners, including governments, lending institutions, women’s business associations, international financial institutions, and other ecosystem partners including donor agencies, angel investors, NGOs, corporations, and educational institutions. Recommendations which correlate to a specific finding are noted by section (ex. [c.3]). All recommendations below contribute to a more enabling environment for SMEs in general yet apply to women business owners in this particular context. Ecosystem actors can take action in the following four areas to improve women’s access to finance: 1) Strengthen policies and procedures; 2) Create innovative financial solutions; 3) Provide practical training and technical assistance; and 4) Build knowledge and awareness. Each actor brings different solutions in these areas and has much to benefit from improving and expanding access to finance for women. The more supportive the enabling environment is for women- owned businesses, the more those businesses will grow, creating profitable markets for lending institutions, improving the economic empowerment of women and leading to greater economic growth as a whole. Representatives of the MENA BWN convene to support the next generation of women in business. Successful Lending Institution Strategies: DFCU Bank in Uganda has built a successful portfolio of business loans, leases, mortgages, and other products targeting women entrepreneurs. The effort began in 2007 after IFC research showed that Ugandan women owned nearly 40 percent of registered businesses but were receiving less than 10 percent of commercial credit. Lack of information on these businesses was a key barrier. Working with IFC, DFCU started emphasizing equipment leases over traditional loans to help build credit history. Group borrowing was introduced, as well as a land loan to enable women to acquire collateral. Financial training and business support completed the picture, helping DFCU develop its new clientele. DFCU’s Women in Business program has focused its outreach on a previously invisible market segment. It has disbursed tens of millions of dollars to women-owned SMEs, with a lower average rate of non- performing loans than in its men’s portfolio. Other banks are now following DFCU’s lead. 24 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Recommendations KEY RECOMMENDATIONS Policy & Procedure Set and incentivize internal organizational and individual loan officer staff • targets for loans to women-owned SMEs and track the targets yearly through performance management systems. [C.4] Motivate and compensate loan officers who meet women-owned SME lending • Lending targets with new and existing clients. [C.4] Institutions Implement more efficient decision-making procedures to improve turn-around- • time in the credit approval process, especially for existing bank clients. [C.4] Offer women-only sections or dedicated banking professionals to extend • special services to women business owners, when deemed useful. [C.4] Encourage lending institutions to develop policies and procedures that • International incentivize targets for loans to women-owned SMEs. [C.4] Financial Help banks develop a viable and profitable value proposition for the women’s • Institutions (IFIs) market. Foster public-private dialogue by including businesswomen’s organizations • in decisions on economic and regulatory policy and funding for economic development. Ensure national development strategies and SME laws and policies pay specific • attention to women-owned SMEs. Increase women’s ability to own and leverage assets as collateral, addressing • Governments issues such as property, housing deeds, bank accounts and inheritance. [C.3] Ensure relevant laws, policies and government-supported finance opportunities • affecting women business owners are transparent and easily accessible to the public. [B.2 and C.2] Create an environment which allows for smart financial investments from a • broad spectrum of sources Advocate for the inclusion of women business owners as active participants in • Women’s Business economic decision-making. Associations Advocate for changes in laws and policies which pose barriers to the growth of • women-owned SMEs Support economic advocacy campaigns to promote women’s financial inclusion, • increased property rights and equal access to services. [C.3] Other Ecosystem Set and meet targets for women’s participation in local, regional, and • Partners international market access opportunities such as trade missions and shows. [B.2] Government Solutions: Government programs and initiatives toward loan guarantees have proven successful in Eastern Europe and the Balkan countries, most recently in Serbia. These would effectively incentivize greater formal lending to SMEs by reducing perceived and calculated risk, as public financing would be called upon to cover losses only in the event of a default by the small business owner. The government of Lebanon, in an effort to support the growth of SMEs, has partnered with a loan guarantee agency, Kafalat, to provide lower interest loans and loan guarantees with no collateral for businesses in a few select sectors. The loans are subsidized by the Lebanese treasury at an interest rate of 6.1 percent, and administered by the Central Bank of Lebanon. Ready for Growth: 25 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Recommendations KEY RECOMMENDATIONS Finance Develop SME loan products to meet current sector-specific needs for sectors • in which women are operating growing business (particularly in services and durable and non-durable manufacturing). [B.1] Partner with institutions that provide loan guarantees or risk sharing facilities in • order to provide long term financing. Partners could include IFIs and national governments. [C.2 and C.3] Reduce stringent collateral requirements through non-asset backed or contract- • based loans. [C.3] Offer graduated interest rates for SMEs, enticing new clients while gradually • Lending building up profitability. [C.3] Institutions Test innovative risk evaluation methodologies, such as psychometric screening • developed by the Entrepreneurial Finance Lab at Harvard University, which evaluates the risk of lending to an entrepreneur based on personality, intelligence, and character as opposed to traditional credit history. Offer interest rates commensurate with new risk profiles. [C.3] Evaluate loan applications based on a variety of factors including business • potential and deposit history, rather than past track record alone. [C.3] Develop deposit products targeted to women that will establish a partial • financial track record. [C.3] Incentivize banks to innovate by providing training to staff, support the • development of new loan products, and develop new risk assessment and sharing techniques. [C.3 and C.4] International Pursue partnerships with commercial banks and MFIs to provide guarantees • Financial and risk-sharing agreements for the development and implementation of Institutions (IFIs) products for women-owned SMEs. [C.3] Support local lending institutions to develop loan products that allow moveable • assets as collateral in instances where women own such assets in their own names. [C.3] Strengthen and expand the financial infrastructure with credit bureaus and • collateral registries to support women building credit histories in their own Governments names and reduce the cost of borrowing. [C.3] Incentivize banks to lend to women through programs such as credit subsidies • or partial credit guarantee programs. [C.2 and C.3] Host business growth competitions targeted at women-owned SMEs and in • cooperation with financial institutions, offering loans or grants to selected winners. These could be focused on industries or regions of interest, or on export expansion. [C.3] Women’s Business Create partnerships with financial institutions and other non-bank partners to • Associations inform the development of SME loan products specifically geared towards the needs of women-owned SMEs. [C.4] Support formation of mutual guarantee associations among women business • owners. Focus more angel investments and crowd funding on women’s business growth. • Other Ecosystem [C.2 and C.3] Partners Encourage successful women business owners (with higher risk tolerance) to • become angel investors to growing SMES. [C.2 and C.3] 26 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Recommendations KEY RECOMMENDATIONS Training Provide training to loan staff on underwriting business loans and meeting the • needs of women business owners. [C.4] Lending Offer financial literacy trainings programs or other capacity building courses to • Institutions promote women’s understanding of financial products in both urban and rural areas. [C.4 and D.2] International Provide finance and technical assistance to business service providers of • Financial women-owned businesses. [D.1] Institutions (IFIs) Collaborate with lending institutions as well as technical and management • service providers to increase women’s knowledge and skills. [C.4 and D.2] Establish structured mentoring relationships to provide access to information • on existing resources and guidance on navigating the loan application process. [C.3 and D.1] Women’s Business Facilitate networking opportunities by organizing events to exchange • Associations experiences and lessons learned, including supporting the convening of women business owner forums. [D.1] Encourage business-to-business connections among SME women business • owners in the country and across the region to offer immediate opportunities to expand into new markets. [B.2] Promote the development of partnerships between ecosystem stakeholders to • provide a package of financing, training, mentoring and technical assistance to women SME owners that holistically supports their growth and leadership. [D.1] Support business women’s associations to meet the needs of women-owned • SMEs throughout the region Other Ecosystem Offer SME growth mentoring to support women to grow their businesses, • Partners especially through increased access to finance. [B.2 and D.1] Sponsor practical business skills training and follow on services for women • business owners in the areas of business planning, business management skills, accounting and financial management, utilizing a broad range of financial products and services, human resource management, and managing growth. [D.1 and D.2] IFI Solutions: Financial institutions can profitably expand services to women business owners when their programs respond to women’s needs. IFC has helped to prove this. Common constraints—such as a lack of collateral or inexperience with the requirements of financial institutions—can be overcome. IFC’s Banking on Women Program is playing a key role working with partners and financial institutions worldwide to profitably and sustainably serve businesses owned and run by women. Its offering includes equity/ capital, loans/credit lines, risk-sharing facilities with banking and non-banking partners, credit insurance, as well as supply chain finance and distributor finance. IFC also offers advisory services to financial institutions to deepen their ability to reach women-owned businesses through strategic planning, market positioning/segmentation, product repositioning and staff training. For example, with assistance from IFC, IFC clients such as BII in Indonesia and BLC in Lebanon are using a new approach to capitalize on this opportunity. Targeted products and services, a specific outreach strategy, financial and management skills courses, and even dedicated bank staff are all part of their efforts. IFC is also a lead sponsor of knowledge sharing in this area through the Global Banking Alliance for Women. Ready for Growth: 27 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Recommendations KEY RECOMMENDATIONS Awareness & Information Partner with women’s business associations to host regular meetings with • Lending women business owners in order to better understand their needs and build Institutions relationships with potential, profitable clients. [C.4] Disseminate reports that provide commercial banks with evidence of the • benefits of developing financial products for women — including specific case studies or examples of good practices, with the aim of increasing the banks’ interest in targeting women business clients and their understanding of the risk International profiles of these clients. [C.4] Financial Improve the coordination of efforts among different stakeholders by building • Institutions (IFIs) formal connections and initiating communication between government institutions and women’s NGOs and women’s business associations. Share global innovative approaches to risk analysis and loan product • development for women-owned SMEs. Collect and monitor gender-disaggregated data on women-owned SMEs to • measure effectiveness of interventions and monitor financial inclusion. Governments Build awareness of women-owned SMEs’ contribution to national economic • growth. • Help ensure that governments take action on gender data collection. Women’s Business Serve as a hub of information for accessing both public and private sources of • Associations finance. [D.2] • Highlight successes of women-owned SMEs access to finance. [C.3] Build and/or expand networks of business professionals to serve as a resource • and a support base for women business owners. [D.1] Raise awareness on the implementation of regulatory frameworks and • international policy around women’s economic inclusion. Other Ecosystem Collect and disseminate data on women business owners and their specific • Partners needs to increase gender-specific government and finance institution programming and products. Highlight the success of women owned businesses and the efforts of innovative • bank and non-bank financial institutions, which effectively support them. [C.4] IFI Solutions: International financial institutions can also play a role in increasing women’s access to finance. One positive example of this is the IDB and MIF’s women entrepreneurshipBanking (weB) program which combines two incentives: 1) technical assistance grants from the MIF and 2) credit lines, partial credit guarantees and risk-sharing mechanisms to strengthen tenor and liquidity in institutions seeking to expand loans offered to women owned SMEs. This creates a more long-term customer base. This unique combination of capital and technical assistance will maximize the success of financial institutions seeking to expand their customer base to include more women-owned SMEs. 28 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Bibliography Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Business in the Middle East and North Africa Bibliography African Development Bank (2012). 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The Status of Bank Lending to SMEs in the Middle East and North Africa Region: The Results of a Joint Survey of the Union of Arab Bank and the World Bank, World Bank Policy Research Working Paper 5607. The World Bank, Washington DC. Saadi, Joe, Ahmed Youssef, and Raymond Soueid (2011). Accelerating Entrepreneurship in the Arab World. World Economic Forum. UN Women (2009). Women’s Control over Economic Resources and Access to Financial Resources, including Microfinance. UNDP and the Arab Fund for Economic and Social Development (2002). Arab Human Development Report 2002: Creating Opportunities for Future Generations. UNDP and the Arab Fund for Economic and Social Development (2005). Arab Human Development Report 2005: Towards the Rise of Women in the Arab World. Ready for Growth: 31 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Bibliography Vishwanath, Tara (2010, October). “Bridging the gap: improving capabilities and expanding opportunities for women in the Middle East and North Africa Region.” Working Paper 57518. Watson, John (2007, November). “Modeling the Relationship Between Networking and Firm Performance,” Journal of Business Venturing. Retrieved from http://www.sciencedirect.com/science/ article/pii/S0883902606000826. World Bank (2003). “Overview: Creating 100 Million Jobs for a Fast-Growing Work Force.” Retrieved from http://siteresources.worldbank.org/INTMENA/Publications/20262209/Empoverview.pdf World Bank (2004). Gender and Development in the Middle East and North Africa: Women in the Public Sphere. World Bank. World Bank (2010). “Middle East and North Africa: Women in the Workforce.” World Bank. 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World Bank. 32 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Endnotes Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Business in the Middle East and North Africa Endnotes 1 IFC and G20 Seoul Summit SME Finance Sub-Group (2010) 2 Ayyagari (2011) 3 GPFI and IFC (2011) 4 World Bank Enterprise Surveys. 5 Hausmann (2010) 6 World Bank (2010) 7 Hausmann (2010 8 World Development Indicators, World Bank 9 GPFI and IFC (2011) 10 GPFI and IFC (2011) 11 Demirguc-Kunt et al. (2008) 12 IFC and G20 Seoul Summit SME Finance Sub-Group (2010) 13 Saadi et al (2011) 14 de Kok (2011) 15 Ayyagari (2011) 16 Hausman (2010 17 MasterCard Worldwide (2010) 18 Ibid. 19 OECD (2012) 20 GPFI and IFC (2011) 21 Demirguc-Kunt et al (2008) 22 OECD-MENA (2011, February) 23 World Bank (2011a) 24 Gähwiler, Barbara (2012). 25 GPFI and IFC (2011) 26 IFC and CAWTAR (2007) 27 OECD (2010). 28 World Bank (2011b) 29 Chamlou (2008) 30 Global Entrepreneurship Monitor (2007) 31 Piras (2011) 32 Robinson and Stubberud (2009) 33 World Bank, GTZ, IDB (2010) 34 Robinson and Stubberud (2009) 35 Responses were weighted to be in alignment with MENA BWN membership, so that findings are generalizable to the association membership, but not to all Women’s Business Organizations (WBOs) in the region. 36 Ayyagari (2011) 37 A small number of survey questions allow for multiple answers to provide a more complete representation. Responses are tallied by total frequency and thus percent of cases in key questions with potentially overlapping or illustrative list responses may total over 100 percent. 38 This question was answered by a sub-set of respondents, causing many surveyed economies to have lower response rates. 39 Renting equipment instead of purchasing. 40 Receiving financing leveraging the value of accounts receivable. 41 Venture capital funds or angel investors financing the growth of enterprises; repaid over longer periods. 42 Financing based on value addition. 43 Though this report did not specifically evaluate the role of governments in maintaining barriers to women’s access to finance, international best practices demonstrate that governments can successfully take proactive steps to support women SME owners in accessing finance. Newly emerging and existing governments in the MENA region should promote policies and regulations that would enable and incentivize institutions and providers to offer women business owners a broad range of financial services. Within the region, there are good examples of such government support to facilitate access to finance. 34 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Business in the Middle East and North Africa Annexes ANNEX I: SUB-REGIONAL HIGHLIGHTS & ORGANIZATION TRENDS This report surveyed the membership of eight women’s business organizations which make up the MENA Businesswomen’s Network - Association des Femmes Chefs d’Entreprises du Maroc (AFEM); Association des Algériennes Managers et Entrepreneurs (AME); Association for Women’s Total Advancement & Development (AWTAD); Bahrain Businesswomen’s Society (BBS); Business & Professional Women – Amman (BPW-A); Business Women Forum – Palestine (BWF); Chambre Nationale des Femmes Chefs D’Entreprises (CNFCE); and Lebanese League for Women in Business (LLWB). The 431 women business owners surveyed were all members of the MENA BWN. For the purpose of this report, Algerian, Moroccan and Tunisian respondents comprise the North Africa sub-region while Bahraini, Egyptian, Jordanian, Lebanese and Palestinian responses comprise the Middle East. Organization-level findings discussed in this section focus only on significant deviations (if any) from regional and sub-regional trends. Unless noted, organization-level results followed the regional information presented. A. The Middle East Middle Eastern SMEs More Likely to be in Manufacturing 1.  and Trade Middle Eastern SMEs had a greater representation in manufacturing and trade, as opposed to the dominance of business services in North Africa. Of Middle Eastern firms, 25 percent were active in non- durable manufacturing, against only 8 percent in North Africa. The highest connections to corporate partners were also reported in ME countries, particularly among Lebanese and Jordanian respondents. A large majority (82 percent) of Middle Eastern women-owned SMEs deemed assistance on expanding geographically and exporting to other countries very or extremely helpful. This was particularly true for Egyptian and Lebanese respondents, compared to only 58 percent in North Africa. To some extent, these distinctions point to a greater relative development of the SME sector across the Middle East. Business registry was also significant among Middle Eastern firms, with an exception among Egyptian respondents. Jordanian, Palestinian, Lebanese and Bahraini women-owned SMEs reported a rate of registration of business names at 95 percent, 84 percent, 79 percent and 67 percent. 36 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes 2. Access to Finance is Less of an Issue in Middle East When asked about difficulties in seeking capital, a fundamental point of inquiry for the survey, 38 percent of Middle Eastern women-owned SMEs reported difficulties compared to a slightly higher 43 percent in North Africa. Even this sub-regional average is mainly driven by high levels reported by Egyptian and Bahraini respondents. Around twice as many respondents from the other Middle East economies had no difficulties in securing capital compared to those facing hurdles; in each economy in North Africa the opposite was true. This is consistent with North Africa’s more pronounced financing impediments for women-owned SMEs. While nearly all respondents reported high interest rates as the chief barrier, often just as considerable were reports of denial of financing due to a lack of collateral or guarantee. Economies grouped under the Middle East sub-region reported few challenges beyond interest rates and collateral requirements. In the sub-region as a whole, 17 percent found the process too complicated, 2 percent were denied financing for lack of business track record and 4 percent felt mistreated due to being a woman. saw these issues as a challenge. This is compared with 40 percent, 26 percent and 23 percent respectively in North Africa. While the majority of women business owners across MENA reported no availability of special programs for women within financial institutions, the Middle East was much more split on the question, with 29 percent identifying some existing programs (led by Egyptian, Bahraini and Lebanese respondents), compared to only 6 percent in North Africa. Financial Institutions (FI) Offering Special Women Programs 69% 70% 60% 61% 42% 36% 35% 32% 31% 27% 27% 19% 10% 12% 11% 7% 8% 5% 6% 0% 0% 4% 0% 0% AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Have No FI Relationship None of them Do A Few/All Do 3. Middle East is Well-Informed, but Seeks More Knowledge The Middle East sub-region is also distinguished by greater financial literacy and familiarity with products and services. While bolstered by the exceptionally high familiarity of Egyptian women business owners, there was an average of 82 percent of familiarity across the board, compared to only 37 percent among North African counterparts. While the tools themselves may be relatively well known across the region, training in vital business functions remains of interest to Middle Eastern women business owners. A large demand for additional training and assistance sets the sub-region apart. Ready for Growth: 37 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Financial Product & Service Familiarity (By Sub-Region; Somewhat/Very Familiar) 25% Equity Capital 72% 16% Factoring 73% 46% Leasing 83% 55% Long-Term Financing 95% 52% Short-Term Financing 93% 27% Supply Chain Financing 79% North Africa MiddleEast B. North Africa 1. North African SMEs Mainly in Services Women-owned firms in North Africa are more likely to be in the business service sector, with 37 percent in the sector as opposed to only 7 percent in the Middle East. While both sub-regions relied on selling to individuals for their business (32 percent against 57 percent in the Middle East), business owners in North Africa were far more dependent on other SMEs (39 percent compared to 9 percent). As a sub-region, North Africa is far more diversified in this regard, compared to a greater concentration on individual buyers in the Middle East. While 47 percent aspired to hire new employees (the same as in the Middle East), only 45 percent planned to increase capital investment (compared to 76 percent in the Middle East). A slightly higher 66 percent sought expansion into new markets to grow (compared to 53 percent). In addition, while a minority of 11 percent intended to reduce employment or capital investment, North African firms were more than twice as likely as their Middle Eastern counterparts to consider the former, and almost four times as likely to contemplate the latter. 2. North African SMEs Face More Problems in Access to Finance North African respondents registered far higher and more widespread impediments with respect to access to finance. Many found the financing process too complicated. For example, 53 percent of Algerian women business owners cited this as a major concern. This figure was slightly lower (at 32 and 31 percent) for Tunisian and Moroccan respondents. Lack of a track record as a serious impediment also seemed to exist predominantly in the sub-region: 36 percent of Algerian respondents, 25 percent of Moroccans 38 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes and 11 percent of Tunisians found their records working against them, compared to a sub-regional average of just 2 percent in the Middle East. Gender-based discrimination also emerged in two of the three economies in the sub-region, which demonstrated a 23 percent incidence, nearly six times the level in the Middle East. Bank staff shortcomings with respect to specialized SME knowledge, were an issue, but were far less prevalent in this sub-region, according to respondents. Hurdles for North African women business owners in accessing finance appear regardless of well-trained financial institution staff. Bank Staff Lack SME Knowledge (By Sub-Region) 5% Strongly Disagree 0% 9% Somewhat Disagree 3% 28% Neither Agree nor Disagree 9% 27% Somewhat Agree 53% 31% Strongly Agree 35% North Africa MiddleEast 3. North Africa and Business Learning Needs Financial literacy and knowledge of available products and services may be lower across North Africa, but a different trend emerges with respect to business learning. A desire to learn about key functions is lower than in the Middle East, reflecting either a lesser need among women business owners or a diminished perception of need. Learning More About Business Issues (By Sub-Region; Very/Extremely Helpful) 64% Finding a Mentor 53% 72% Business Management Skills 89% 62% Accounting & Financial Mgt 73% 64% How to use Financial Products 81% North Africa MiddleEast Ready for Growth: 39 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Despite sub-regional variations, majorities across MENA deem additional assistance on key issues decidedly helpful. Consultation with professional networks, disaggregated by economy, shows not only an acceptance across North Africa of mentorship, but a suggestion that such networks could be further strengthened. This inference is based on reported needs and a strong reliance on internal sources such as boards of advisors and senior management over external, possibly more advantageous perspectives from similarly positioned women business-owners. Professional Consultation (By Organization) 95% 92% 88% 78% 80% 77% 78% 76% 75% 71% 70% 68% 64% 65% 60% 58% 61% 58% 55% 52% 52% 51% 53% 48% 46% 48% 44% 35% 35% 29% 23% 18% AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Fellow Business Owners Senior Management Board of Advisors Mentors AWTAD: Ambitious Informal-Sector C.  Owners seek Information With respect to AWTAD’s membership, 47 percent of Egyptian women-owned firms surveyed were active in either non-durable or durable manufacturing (34 and 13 percent respectively), which was much greater than all their counterparts. Firms had the highest involvement in the tourism sector with an 18 percent affiliation. Only 60 percent of women-owned firms registered their business name — the lowest among counterpart organizations. Confirming the dominance of the informal sector, a region-wide high of 84 percent of Egyptian women business owners deemed learning more about the business registration process either “very” or “extremely” helpful, compared to 56 percent across MENA. When not fully owned by respondents, Egyptian women business owners reported a majority of firms co-owned with other family members, the highest among counterparts at 51 percent. 40 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes An overwhelming majority of AWTAD’s women-owned SMEs reported high interest rates as their chief impediment to financing. Virtually no other challenges were reported. None deemed gender discrimination, collateral or business track record requirements as hurdles. Egyptian business owners reported the highest proportion of existing bank programs dedicated to women among counterparts, at 35 percent. The women were also highest in concurrence with the notion that bank staff treated them with respect and made them feel welcome as clients, at 88 percent (against a regional average of 67 percent). To further stress the point, 99 percent of Egyptian women business owners somewhat or strongly agreed that lending conditions were too restrictive, the highest among all counterparts. These reflect a dominant impediment to capital injections into Egypt’s women-owned SMEs: high interest rates and restrictive conditions. While highly reliant on personal checking accounts, AWTAD’s women business owners have the lowest stated use of business checking accounts (29 percent compared to an average of 85 percent), the lowest access to credit cards (4 percent compared to 66 percent) and business/ commercial loans (1 percent compared to 34 percent), with no reported access to business lines of credit, government guaranteed loans or grants or equity capital. Instead, Egyptian women business owners rely more on money lenders, private sources and personal bank loans, reporting the second highest reliance on each. This pattern is suggestive of a greater proportion of women-owned SMEs active in the informal sector. Egyptian women-owned SMEs are also among the most interested in learning about expanding geographically and exporting abroad, with 88 percent reporting it very or extremely helpful, against a regional average of 69 percent. Such demand creates potential for technical assistance or mentorship development. D. AME: Highest Level of Obstacles AME’s women business owners reported the highest degree of interconnectedness with other SMEs in terms of sales, at over 40 percent compared to an average of 24 percent of all respondents. Algerian women business owners had among the highest incidences of obstacles in most categories. They stand apart in another important dimension as well. Over 56 percent of women business owners reported they had felt mistreated because of their gender. Respondents from other organizations did not report percentages this high. Algerian women business owners reported the lowest concurrence with the idea that bank staff treated women clients with respect and made them feel welcome: 33 percent disagreed with the hypothesis, compared to a region-wide average of 12 percent. While gender discrimination may be prevalent within financial institutions, Algerian women business owners did not entirely share the widespread disapproval of bank staff professional competencies: 27 percent disagreed with the judgment (compared to 10 percent regionally). Algerian women business Ready for Growth: 41 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes owners reported the highest need for additional direct contact from their bankers, with 92 percent in relative or strong agreement compared to a 70 percent regional average. This depicts a climate skewed against business owners, with a rare combination of a relatively proficient bank system yet an unwelcoming banking environment. E. CNFCE: Good Access to Capital CNFCE women business owners reported a very high utilization of personal and business checking accounts in line with their counterparts and enjoyed the highest access to equity capital (50 percent compared to an average of 6 percent). In addition, Tunisian respondents cited the highest access to government guaranteed loans or grants (60 percent compared to 10 percent), personal bank loans (79 percent compared to 29 percent), loans from private sources (81 percent compared to 53 percent), bank credit (76 percent compared to 34 percent) and the second highest access to credit cards (90 percent, after Bahrain’s 100 percent). Tunisian women business owners were also, alongside Egyptian counterparts, the highest in concurrence with the notion that bank staff treated them with respect and made them feel welcome as clients, at 88 percent against an average of 67 percent across the region. With most other indicators in line with the average findings on hurdles and larger economic challenges, these responses seem to indicate comparatively good access to capital. F. LLWB: Highly Developed SMEs LLWB member firms surveyed appear to be part of one of the most developed SME sectors for women. Surveyed firms showed among the highest representation in wholesale or retail trade services, identical to its share of business service related sectors (20 percent each). In addition, Lebanese women-owned businesses were most reliant on corporate clients, with 36 percent against an average of 13 percent. Lebanese SMEs were also the most interested in support for expanding geographically and exporting abroad, with 93 percent reporting it very or extremely helpful, against a regional average of 69 percent. 42 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Lebanese women-owned SMEs, however, faced the highest utility cost challenges among counterparts, with 72 percent deeming the matter “extremely important,” compared to a 51 percent average across MENA. G. BWF: Equality Challenges BWF members’ women-owned firms were among the highest in representation of the wholesale/ retail trade sector (21 percent), though the non-durable manufacturing and business service sectors were dominant (56 and 47 percent). Palestinian women business owners cited keeping up with new technologies as a key business concern, with 89 percent of respondents facing this issue, as opposed to 69 percent region-wide. Respondents also cited high utility cost challenges. Palestinian women business owners also represented a sub-regional deviation with respect to challenges to financing. Despite low levels in neighboring economies, 67 percent of women business owners there reported they found the process prohibitively complicated. In addition, 33 percent of Palestinian women business owners felt they were not treated equally to men, second only to their Algerian counterparts. H. BBS: Financing Hurdles BBS members surveyed reported the highest proportion of co-ownership with their husbands, at 71 percent, followed by 29 percent co-owned with other family members. Bahraini women-owned SMEs also reported the highest use of Islamic finance (Shariah-compliant) products and services, at 29 percent compared to an average of 6 percent in the region. Since Bahrain is widely considered one of the world leaders in Islamic finance, this is to be expected. Despite this, financing hurdles were reported, with a near-record 57 percent of Bahraini women business owners finding local financing procedures too complicated. Ready for Growth: 43 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes I. AFEM: Managing for Growth AFEM’s surveyed members largely followed the regional trends of this report. Nearly 52 percent of Moroccan women surveyed owned business in the business service sector. Women are generally well “banked” with personal and business checking accounts as well as credit cards. Of those surveyed who are currently accessing finance, Moroccan business owners had relatively high lines of credit with 58 percent having loans ranging from $50,000 to $500,000. Despite this, Moroccan women business owners expressed interest in gaining more financial management skills in order to expand their businesses into new markets. J. BPWA: Banked Business Owners BPWA members surveyed largely followed regional trends identified within the report and the Middle East sub-region. Jordanian women business owners are comparatively well “banked” with 86 percent having a business checking account, compared to a region-wide average of 69 percent. In addition, 76 percent of women surveyed conducted online banking, compared to a regional average of only 28 percent. This potentially displays a technologically advanced banking sector and more technologically savvy business owners. Jordanian respondents also noted higher than average use of certain financial products to meet their businesses’ capital needs, with 38 percent using a commercial loan and 19 percent using a government loan (compared to a regional 18 percent and 11 percent respectively). While 24 percent of survey respondents across the MENA region did not seek financing in the last year, this number was significantly higher amongst Jordanian respondents, where 50 percent had not sought financing. 44 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes ANNEX 2: Survey Instrument MENA Businesswomen’s Network Survey Questionnaire Hello, I’m NAME ________________________________________________________ and I’m calling from ASSOCIATION NAME ____________________________________________________. We’re calling today to ask you about some of the important issues you are facing in your business today. This should take no more than 15 minutes of your time. Is now a good time to talk? (If not, reschedule and call back when convenient to respondent.) Hundreds of other women business owners like you in 10 countries in the Middle East and North Africa Businesswomen’s Network are also participating in this survey. The results of this research will provide input into policy and program development, which will help small and medium-sized businesses in COUNTRY ______________________________________________ and the entire region grow and prosper. Please be assured that your answers to this survey are completely confidential. There is no information in this survey that can identify you or your business. If you own more than one business, please refer to your primary business only (largest business in terms of turnover) when answering this survey. Before we get started, I’d like to ask if you are one of our members who own and manage your own A.  business, or if you are a senior manager in a business owned by someone else? 1. Own/manage a business (CONTINUE) 2. Senior manager/professional in a business owned by someone else (THANK AND TERMINATE INTERVIEW: Thank you very much for your willingness to speak with me today, but at this time we are speaking only with business owners.) Business Confidence and Overview First, a few questions about some of the most pressing issues facing your business today … For each of the following please tell me how important the issue is in your business at the present 1.  time, using the following scale: extremely important, very important, somewhat important, not very important, or not at all important. (READ EACH ITEM.) Not at all Not very Somewhat Very Extremely important important important important important a. Access to capital for your business  inding and keeping skilled b. F 1 2 3 4 5 employees Access to new markets, such c.  1 2 3 4 5 as new types of customers or international trade Ready for Growth: 45 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes High cost of public utilities d.  1 2 3 4 5 (electricity, telephone, water, etc.) e. Keeping up with new technologies 1 2 3 4 5  anaging and maintaining f. M 1 2 3 4 5 business growth Laws and regulations that g.  1 2 3 4 5 negatively impact the overall business environment Social constraints that make it h.  1 2 3 4 5 harder for you, as a woman in business  egal constraints that make it i. L 1 2 3 4 5 harder for you as a woman in business During the next twelve months, will your business (READ ITEMS ONE BY ONE)…? 2.  (circle all that apply) 1 Hire new employees 2 Increase capital investment 3 Expand into new markets 4 Reduce employment 5 Reduce capital investment 6 Close stores or branches 7 Keep employment about the same 8 Keep investment about the same 9 No answer 46 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Access to Capital Next, I’d like to ask you a few questions about what tools you are using to grow your business. Some business owners reinvest profits to grow their business, others use external capital, and many use a combination of both… Growing a business almost always requires capital investment. Could you tell me how familiar you are 3.  with each of the following financial tools that may be available to you? (READ EACH ITEM) Not at all Not very Somewhat Very familiar/ familiar familiar familiar Don’t know  upply chain financing – which refers to a. S 1 2 3 4 receiving financing based on the value of goods or components that are added along the process from raw materials to finished products Short-term financing – which typically refers to b.  1 2 3 4 loans or financial products that must be repaid within one year  ong-term financing – which typically refers c. L 1 2 3 4 to loans or financial products that can be paid back over a period longer than one year  easing – which refers to financing capital d. L 1 2 3 4 equipment by renting it instead of purchasing it  actoring – which refers to receiving financing e. F 1 2 3 4 leveraging the value of your accounts receivable Equity capital – which refers to groups (venture f.  1 2 3 4 capital) or individuals (angels) that invest in the growth of your business and are repaid over a longer period of time than a loan, such as when you would sell your company or take it public Ready for Growth: 47 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Again thinking of each of the different financial tools just mentioned, how useful would they be for you 4.  in your business now or in the next 12 months? (READ EACH ITEM) Not at all Not very Somewhat Very useful useful/ useful useful Don’t know  upply chain financing – which refers to a. S 1 2 3 4 receiving financing based on the value of goods or components that are added along the process from raw materials to finished products Short-term financing – which typically refers to b.  1 2 3 4 loans or financial products that must be repaid within one year  ong-term financing – which typically refers to c. L 1 2 3 4 loans or financial products that can be paid back over a period longer than one year Leasing – which refers to financing capital d.  1 2 3 4 equipment by renting it instead of purchasing it Factoring – which refers to receiving financing e.  1 2 3 4 leveraging the value of your accounts receivable Equity capital – which refers to groups (venture f.  1 2 3 4 capital) or individuals (angels) that invest in the growth of your business and are repaid over a longer period of time than a loan, such as when you would sell your company or take it public ’m now going to read you a list of financial products. Please tell me, for each one, whether you are 5. I currently using that product, or have done so at some time over the past year. (CIRCLE AS MANY AS APPLY – MULTIPLE RESPONSES ALLOWED) 1 Personal checking account 2 Business checking account 3 Online banking 4 Insurance products (life, business) 5 Retirement savings plans 8 None of them 9 No answer Now I’ll read you a list of loan products – and for each one, please tell me whether you are currently 6.  using that product, or have done so at some time over the past year, to meet your business’ capital needs? (CIRCLE AS MANY AS APPLY – MULTIPLE RESPONSES ALLOWED) 1 Credit cards 2 Business earnings 3 Business line of credit 4 Business/commercial bank loan 5 Financing from a microfinance institution 6 Money lender 7 Private sources (personal savings, family, friends) 8 Personal bank loan 48 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes 9 Government guaranteed or direct loan or grant program 10 Loans from community groups/NGOs 11 Equity capital (angel, venture capital) 12 Trade finance products 13 Equipment financing or leasing 14 Islamic finance/Shariah compliant products 97 None of the above 99 No answer Have you encountered any difficulties over the past year when seeking financing for your business? 7.  1 Yes (GO TO 8) 2 No, no difficulties (SKIP TO Q9) 3 No, did not seek external financing (SKIP TO Q9) 8 Don’t know (SKIP TO Q9) 9 No answer (SKIP TO Q9) (IF YES:) I’m going to read you some situations that businesses like yours have faced. For each one, 8.  please tell me if this was one of the situations you have encountered when seeking external financing? (CIRCLE AS MANY AS APPLY – MULTIPLE RESPONSES ALLOWED) 1 Interest rates were too high 2 Denied financing because of lack of collateral or guarantee 3 Denied financing because of lack of business track record 4 Found the process too complicated 5 Felt mistreated due to being a woman 6 Sought but could not find external equity investors 9 No answer Do you currently have any form of bank credit, such as a loan or line of credit? 9.  1 Yes (GO TO Q10) 2 No (SKIP TO Q11) 8 Don’t know (SKIP TO Q11) 9 No answer (SKIP TO Q11) (IF YES:) How much credit do you currently have available to you in your business, including all 10.  outstanding loans and lines of credit? 1 Under $5,000 2 $5,000-$9,999 3 $10,000-$24,999 4 $25,000-$49,999 5 $50,000-$99,999 6 $100,000-$499,999 7 $500,000-$999,999 8 $1,000,000 or more How much additional capital do you anticipate needing over the next three years to grow your 11.  business? Just tell me when I’ve reached the right category. (READ EACH ITEM) 1 No additional capital needed 2 Less than $10,000 3 $10,000 to $24,999 4 $25,000 to $49,999 5 $50,000 to $99,999 6 $100,000 to $499,999 7 $500,000 to $999,999 Ready for Growth: 49 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes 8 $1 million or more 9 No answer Thinking about the financial institutions with which you have relationships, do any of them have 12.  programs or products that are specifically targeted to women business owners? 1 Yes, they all do 2 Yes, a few of them do 3 No, none of them do 4 Don’t have a relationship with any financial institutions 8 Don’t know 9 No answer Again referring to the relationship you have with financial institutions, I’d like to read a few statements. 13.  For each one, please tell me whether you strongly agree, agree somewhat, disagree somewhat, or strongly disagree? Strongly Some-what Neither Some-what Strongly disagree disagree agree nor agree agree disagree Bank lending conditions are too a.  1 2 3 4 5 restrictive and do not allow me to get the financing I need I favor banks with a relationship b.  1 2 3 4 5 rather than a transaction orientation in their business approach  usinesses like mine require c. B 1 2 3 4 5 flexible loan conditions and fast decision-making Many bank staff members lack d.  1 2 3 4 5 the knowledge and experience to handle small- and medium-sized business customers I would like my bank to contact e.  1 2 3 4 5 me or visit more often to better understand my business needs  feel that my bank treats me with f. I 1 2 3 4 5 respect and makes me, as a woman business owner, feel welcome 50 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Business Growth/Accessing New Markets Next, let’s talk briefly about your business goals going forward … Please tell me which ONE of the following best describes your business goal over the next three 14.  years? (READ EACH ITEM) 1 Growth through greater profitability 2 Growth through expansion into new markets 3 Growth through merger or acquisition 4 Organizational change, restructuring the company 5 Keeping most things as they are now 6 Survival 7 Downsizing 8 Selling, closing, exiting the business 9 Other (SPECIFY: _____________________________________________________________) As we know, business owners often consult a number of people when making business decisions. As 15.  I read you a list of people, please tell me how regularly you consult with each of them when making important business decisions. Do you consult with them frequently, occasionally, rarely, or never? Never Rarely Occas- Frequ- ionally ently a. Fellow business owners 1 2 3 4 Senior managers or key employees in your b.  1 2 3 4 business c. Attorney 1 2 3 4 d. Accountant, financial advisor 1 2 3 4 Husband or other family members who ARE e.  1 2 3 4 involved in the business Husband or other family members who are NOT f.  1 2 3 4 involved in the business g. Company board of directors or advisory board 1 2 3 4 h. Banker or loan officer 1 2 3 4 i. Mentor or advisor 1 2 3 4 j. Friends or acquaintances 1 2 3 4 Ready for Growth: 51 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Business owners are often interested in learning more about certain business issues. For each of 16.  the following, please tell me if you would find learning about this extremely helpful, very helpful, somewhat helpful, not very helpful, or not at all helpful? Not at all Not very Somewhat Very Extremely helpful helpful helpful helpful helpful  ow to use financial products such a. H 1 2 3 4 5 as SME lending or equity capital to grow your business Expanding geographically and b.  1 2 3 4 5 exporting to other countries  elling your company’s goods and c. S 1 2 3 4 5 services to large, multi-national companies d. The business registration process 1 2 3 4 5 Accounting and financial e.  1 2 3 4 5 management Business management skills as you f.  1 2 3 4 5 grow your business Finding a mentor to help you grow g.  1 2 3 4 5 your business to the next level h. Legal advice for business 1 2 3 4 5 s there anything else that you would find very helpful at this point in your business? (OPEN-ENDED 17. I QUESTION; WRITE VERBATIM RESPONSE) _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ _____________________________________________________________________________________________ 52 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Personal/Business Background Questions Finally, I have just a few questions for background purposes. Again, none of this information identifies you or your business – it will only be used in combination with all other survey responses. How many years have you owned this business? 18.  1 Less than three years 2 Three to five years 3 Six to ten years 4 More than 10 years 9 No answer In what industry is your primary business? 19.  1 Agriculture 2 Natural resource development (oil, gas, coal) 3 Non-durable manufacturing (food, clothing, crafts) 4 Durable manufacturing (machines, steel, tires, other) 5 Wholesale/retail trade 6 Services: travel/tourism 7 Services: business svcs 8 Services: personal svcs 9 Technology/ICT 10 Multi-industry conglomerate 99 Other (SPECIFY: _____________________________________________________________________) Please describe the main products and/or services of your business. (WRITE IN _____________________________________________________________________________) What percent of this business do you personally own? (CHECK ONE) 20.  1 100% (SKIP TO Q22) 2 51 to 99% (GO TO Q21) 3 50% (GO TO Q21) 4 Less than 50% (GO TO Q21) 8 Don’t know (GO TO Q21) 9 No answer (SKIP TO Q22) (IF LESS THAN 100%:) Are any of the following individuals involved in the ownership of this business? 21.  (MULTIPLE RESPONSES ALLOWED) 1 Husband 2 Parent/Parents 3 Child/Children 4 Other family members 5 Other non-related individuals 8 Don’t know 9 No answer What is the total number of employees (including part-time and contract workers) that your business 22.  currently employs, not including yourself? Just stop me when I reach the right category. 1 None in addition to myself 2 1-9 employees 3 10-49 employees 4 50-99 employees 5 100-249 employees 6 250 or more employees Ready for Growth: 53 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes 23. What were the approximate annual gross (total, before accounting for costs) revenues of your business in 2011? Just stop me when I reach the right category. 1 Under $5,000 2 $5,000-$9,999 3 $10,000-$24,999 4 $25,000-$49,999 5 $50,000-$99,999 6 $100,000-$499,999 7 $500,000-$999,999 8 $1,000,000+ In 2011, what percentage of your sales came from each of the following customer groups? 24  (ENTER APPROXIMATE PERCENTAGE – NUMBERS MUST ADD TO 100%) ___ ___ ___ Individuals ___ ___ ___ Small or medium-sized businesses ___ ___ ___ Large corporations ___ ___ ___ Voluntary associations/Non-profit organizations ___ ___ ___ Government agency(ies) – local or national ___ ___ ___ Other 25. In which category is your current age? Just stop me when I reach the right category. 1 Under 25 2 25 to 34 3 35 to 44 4 45 to 54 5 55 or older 9 No answer Thank you very much for taking the time to speak with me today, and to share your views on these important business issues. We will be sharing the combined results of the entire 10-country survey with you and your fellow association members when our analysis has been completed. 54 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes ANNEX 3: Final Survey Summary of Question Results (N=431 women business owners; Numbers are percentages unless otherwise noted) Business Confidence and Overview First, a few questions about some of the most pressing issues facing your business today … For each of the following, please tell me how important the issue is in your business at the present 1.  time, using the following scale: extremely important, very important, somewhat important, not very important, or not at all important. Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Managing & maintaining business growth V/E important 83% 88% 91% 87% 69% 93% 78% 100% 50% Somewht imp 12 7 9 3 23 7 22 -- 28 NV/Not imp 4 5 -- -- 8 -- 1 -- 22 Finding & keeping skilled employees V/E important 82 87 91 89 86 93 72 95 74 Somewht imp 9 4 5 11 14 7 16 6 7 NV/Not imp 7 8 5 -- -- -- 12 -- 19 Access to new markets, such as new types of customers or international trade V/E important 81 90 82 95 57 79 79 58 60 Somewht imp 12 6 17 3 36 21 16 37 18 NV/Not imp 6 5 -- 3 7 -- 5 5 22 Keeping up with new technologies V/E important 69 74 78 90 67 53 47 89 64 Somewht imp 18 12 17 5 13 40 35 5 13 NV/Not imp 12 11 4 5 13 7 18 5 22 Access to capital for your business V/E important 67 52 91 98 43 64 55 68 50 Somewht imp 14 11 9 2 43 21 22 16 21 NV/Not imp 18 37 -- -- 14 14 23 16 30 Laws & regulations that negatively impact the overall business environment V/E important 58 78 74 55 67 60 51 69 33 Somewht imp 29 9 22 40 20 33 37 21 36 NV/Not imp 12 13 4 5 13 7 12 11 31 High cost of public utilities (electricity, telephone, water, etc.) V/E important 51 44 49 65 43 72 40 58 53 Somewht imp 28 28 41 23 29 21 34 32 24 NV/Not imp 20 27 -- 12 29 7 27 11 22 Social constraints that make it harder for you, as a woman in business Ready for Growth: 55 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes V/E important 51 44 49 65 43 72 40 58 53 Somewht imp 28 28 41 23 29 21 34 32 24 NV/Not imp 20 27 -- 12 29 7 27 11 22 Legal constraints that make it harder for you, as a woman in business V/E important 37 63 17 45 7 15 25 26 36 Somewht imp 36 15 17 50 21 46 49 37 20 NV/Not imp 26 22 65 5 54 39 26 37 44 Number of (431) (87) (24) (105) (21) (25) (78) (19) (72) Cases During the next twelve months, will your business (READ ITEMS ONE BY ONE)…? (circle all that apply) 2.  Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Expand into 60 77 50 53 48 84 62 37 52 new markets Increase 59 65 54 96 33 48 38 37 24 capital investment Hire new 47 60 54 42 57 76 45 42 27 employees Keep employ- 23 7 50 25 48 12 23 26 30 ment about the same Keep 18 6 38 3 38 16 18 37 58 investment about the same Reduce 8 1 4 4 5 4 5 5 44 employ-ment Reduce capital 7 8 4 -- 5 16 10 5 20 investment Close stores, 4 1 4 -- -- -- -- -- 35 branches 56 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Access to Capital Next, I’d like to ask you a few questions about what tools you are using to grow your business. Some business owners reinvest profits to grow their business, others use external capital, and many use a combination of both… Growing a business almost always requires capital investment. Could you tell me how familiar you are 3.  with each of the following financial tools that may be available to you? Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Long-term financing – which typically refers to loans or financial products that can be paid back over a period longer than one year Very familiar 30 17 59 38 50 43 22 58 26 Somewht fam 40 34 36 60 50 36 38 21 24 NV/Not fam 30 50 5 1 -- 21 40 21 50 Short-term financing – which typically refers to loans or financial products that must be repaid within one year Very familiar 30 18 61 49 39 29 12 53 26 Somewht fam 38 41 23 50 46 43 30 32 39 NV/Not fam 32 42 16 1 15 29 58 16 35 Leasing – which refers to financing capital equipment by renting it instead of purchasing it Very familiar 22 35 23 26 36 31 8 32 18 Somewht fam 39 17 36 71 21 31 35 32 27 NV/Not fam 39 48 41 2 43 39 57 37 56 Supply chain financing, which refers to receiving financing based on the value of goods or components that are added along the process from raw materials to finished products Very familiar 16 2 26 42 21 14 -- 11 17 Somewht fam 32 24 35 57 29 14 17 21 37 NV/Not fam 52 72 39 -- 43 72 82 68 46 Equity capital – which refers to groups (venture capital) or individuals (angels) that invest in the growth of your business and are repaid over a longer period of time than a loan, such as when you would sell your company or take it public Very familiar 13 5 26 17 15 31 6 26 15 Somewht fam 33 18 13 73 39 15 17 16 17 NV/Not fam 54 77 61 9 46 54 77 58 67 Factoring – which refers to receiving financing leveraging the value of your accounts receivable Very familiar 10 5 9 24 8 8 1 16 7 Somewht fam 29 4 22 73 8 33 12 21 25 NV/Not fam 61 92 70 2 83 58 87 63 68 Ready for Growth: 57 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Again thinking of each of the different financial tools just mentioned, how useful would they be for you 4.  in your business now or in the next 12 months? Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Long-term financing – which typically refers to loans or financial products that can be paid back over a period longer than one year Very useful 36 62 46 38 54 54 32 21 24 Somewhat 34 33 41 56 23 23 27 47 22 useful NV/Not useful 30 5 14 5 23 23 41 32 54 Supply chain financing, which refers to receiving financing based on the value of goods or components that are added along the process from raw materials to finished products Very useful 22 40 41 33 14 23 6 -- 28 Somewhat 32 35 27 67 -- 23 7 26 39 useful NV/Not useful 46 25 32 -- 79 54 87 74 33 Short-term financing – which typically refers to loans or financial products that must be repaid within one year Very useful 19 46 32 11 21 23 15 -- 24 Somewhat 49 45 36 88 43 46 29 72 42 useful NV/Not useful 32 9 32 2 36 31 57 28 33 Equity capital – which refers to groups (venture capital) or individuals (angels) that invest in the growth of your business and are repaid over a longer period of time than a loan, such as when you would sell your company or take it public Very useful 19 30 27 23 17 21 15 -- 20 Somewhat 31 25 18 71 25 21 15 32 18 useful NV/Not useful 50 45 55 6 50 57 71 68 62 Leasing – which refers to financing capital equipment by renting it instead of purchasing it Very useful 18 51 5 13 8 23 14 26 16 Somewhat 41 40 38 86 8 15 29 26 20 useful NV/Not useful 41 9 57 2 85 62 57 47 64 Factoring – which refers to receiving financing leveraging the value of your accounts receivable Very useful 13 27 4 22 8 8 3 5 13 Somewhat 33 25 22 76 17 17 18 37 13 useful NV/Not useful 54 48 74 2 75 75 80 58 74 58 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes I’m now going to read you a list of financial products. Please tell me, for each one, whether you are 5.  currently using that product, or have done so at some time over the past year. (CIRCLE AS MANY AS APPLY – MULTIPLE RESPONSES ALLOWED) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Personal 80 78 83 75 81 76 83 79 88 checking account Business 69 85 91 29 86 92 84 74 79 checking account Online 28 15 70 5 76 76 34 68 26 banking Insurance 25 23 74 3 81 52 29 53 10 products (life, business) Retirement 16 7 35 1 67 36 30 16 -- savings plans None of 3 1 -- 11 -- -- 1 -- -- them Now I’ll read you a list of loan products – and for each one, please tell me whether you are currently 6.  using that product, or have done so at some time over the past year, to meet your business’ capital needs? (CIRCLE AS MANY AS APPLY – MULTIPLE RESPONSES ALLOWED) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Private sources 52 41 54 68 62 56 26 68 81 (personal savings, family, friends) Credit cards 41 11 100 4 76 76 56 53 90 Personal bank 37 10 29 62 29 32 20 26 79 loan Business 36 56 50 7 71 56 56 37 -- earnings Business/com- 18 19 54 1 38 44 29 21 -- mercial bank loan Government 11 9 29 -- 19 16 -- -- 60 guaran-teed or direct loan or grant program Business line of 10 16 29 -- 19 40 9 11 -- credit Ready for Growth: 59 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Equity capital 10 14 4 -- 5 8 5 5 50 (angel, venture capital) Equipment 10 3 8 3 -- 8 10 11 44 financing or leasing Money lender 7 3 -- 11 -- -- 12 5 -- Financing from 6 15 8 3 -- 4 5 5 -- a micro-finance institution Islamic finance/ 5 -- 29 13 -- -- 1 5 -- Sharia’a compliant products Trade finance 3 3 4 -- -- 4 3 5 13 products None of the 6 11 -- 5 -- -- 9 -- -- above No answer 9 3 -- 13 -- 4 3 -- -- Have you encountered any difficulties over the past year when seeking financing for your business? 7.  Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Yes 41 68 50 45 7 20 33 16 24 No, no 23 19 22 10 36 40 32 26 33 difficulties No, did not 24 14 6 16 50 27 28 53 35 seek external financing Don’t know/NA 12 -- 22 30 7 13 6 5 9 (IF YES:) I’m going to read you some situations that businesses like yours have faced. For each one, 8.  please tell me if this was one of the situations you have encountered when seeking external financing? (CIRCLE AS MANY AS APPLY – MULTIPLE RESPONSES ALLOWED) (N=169 answering) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Interest rates 67 53 57 87 -- 16 59 33 92 were too high Denied 36 47 57 -- 67 12 28 67 79 financing because of lack of collateral or guaran-tee Found the 31 53 57 7 -- 8 31 67 32 process too compli-cated 60 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Denied 17 36 7 -- -- 8 25 -- 13 financing due to lack of busi-ness track record Felt mistreated 16 56 21 -- -- -- 3 33 -- due to being a woman Sought but 11 29 36 -- 33 4 6 -- -- could not find external equity investors No answer 13 6 7 13 -- 72 16 -- -- Number of (169) (56) (13) (58) (2) (14) (48) (3) (39) Cases 9. Do you currently have any form of bank credit, such as a loan or line of credit? Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Yes 34 24 26 13 29 47 47 26 76 No 53 55 22 84 64 40 47 63 -- DK/NA 12 22 52 3 7 13 6 10 25 (IF YES:) How much credit do you currently have available to you in your business, 10.  including all outstanding loans and lines of credit? (N=164 answering) (USD equivalent) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Under $5,000 14 -- 9 16 -- -- 13 33 30 $5,000-$9,999 18 46 -- 11 -- 7 13 -- 27 $10,000-$24,999 13 27 -- 11 -- -- 13 17 13 $25,000-$49,999 13 -- 18 63 20 -- 2 17 13 $50,000-$99,999 17 14 18 -- 20 21 29 17 7 $100,000-$499,999 16 14 27 -- -- 7 29 -- 10 $500,000-$999,999 3 -- 18 -- 20 7 2 -- -- $1,000,000 or more 2 -- 9 -- 20 7 -- 17 -- No answer 5 -- -- -- 20 50 -- -- -- Number of Cases (164) (22) (11) (19) (5) (14) (55) (6) (30) Ready for Growth: 61 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes How much additional capital do you anticipate needing over the next three years to grow your 11.  business? Just tell me when I’ve reached the right category. Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE No additional 9 1 -- 8 13 13 20 24 -- capital needed Less than $10,000 5 6 -- 1 -- 7 11 6 -- $10,000 to $24,999 14 14 13 23 -- -- 15 29 -- $25,000 to $49,999 13 24 9 4 27 7 18 12 27 $50,000 to $99,999 15 25 17 18 20 13 9 6 46 $100,000 to 18 13 26 28 20 27 15 12 27 $499,999 $500,000 to 3 4 4 2 7 7 3 -- -- $999,999 $1 million or more 2 3 13 -- 13 13 -- -- -- No answer 22 11 17 17 -- 13 9 12 -- Thinking about the financial institutions with which you have relationships, do any of them 12.  have programs or products that are specifically targeted to women business owners? Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Yes, they all do <1 -- -- 1 -- 7 -- -- -- Yes, a few of them 15 10 32 35 -- 20 4 11 -- do No, none of them 50 60 36 42 69 27 70 61 31 do Don’t have a 10 7 5 19 8 -- 12 6 -- relation-ship with any financial institutions DK/NA 25 23 27 4 23 47 14 22 69 62 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Again referring to the relationship you have with financial institutions, I’d like to read a few 13.  statements. For each one, please tell me whether you strongly agree, agree somewhat, disagree somewhat, or strongly disagree? Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Businesses like mine require flexible loan conditions and fast decision-making Agree 79 86 87 99 83 79 75 53 64 Neither agree/ 12 6 13 1 8 14 23 32 20 disagree Disagree 5 7 -- -- 8 7 2 16 16 Bank lending conditions are too restrictive and do not allow me to get the financing I need Agree 70 74 57 99 39 36 60 47 76 Neither agree/ 15 5 13 -- 31 36 31 42 11 disagree Disagree 12 22 30 1 31 29 9 11 13 Many bank staff members lack the knowledge and experience to handle small- and medium-sized business customers Agree 68 63 64 98 75 75 50 68 70 Neither agree/ 19 10 27 2 17 17 44 16 22 disagree Disagree 9 27 9 -- 8 8 6 16 9 I would like my bank to contact me or visit more often to better understand my business needs Agree 67 92 71 54 82 75 61 79 82 Neither agree/ 25 5 29 46 9 17 30 16 13 disagree Disagree 4 3 -- -- 9 8 9 5 4 I feel that my bank treats me with respect and makes me, as a woman business owner, feel welcome Agree 64 54 65 87 69 77 50 53 87 Neither agree/ 20 13 17 11 15 15 44 37 7 disagree Disagree 11 34 17 2 15 8 7 11 7 I favor banks with a relationship rather than a transaction orientation in their business approach Agree 64 51 46 98 39 72 58 16 76 Neither agree/ 12 5 36 2 15 21 27 16 7 disagree Disagree 19 44 18 -- 46 7 15 68 17 Ready for Growth: 63 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Business Growth/Accessing New Markets Next, let’s talk briefly about your business goals going forward … Please tell me which ONE of the following best describes your business goal over the next three 14.  years? (READ EACH ITEM) (Note: At the onset of interviewing, the Arabic translation allowed for multiple responses. This was quickly corrected, but numbers below add up to >100%) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Growth 49 73 39 34 67 76 62 42 3 through expansion into new markets Growth 42 53 57 42 52 44 40 58 6 through greater profitability Growth 12 30 17 1 10 4 8 -- 26 through merger or acquisition Organizational 10 26 4 5 10 12 4 11 9 change, restructur-ing the company Keeping most 7 5 4 2 10 4 8 11 17 things as they are now Survival 7 -- 30 -- 38 -- 3 32 11 Downsizing 3 -- -- -- 10 -- 4 5 11 Selling, closing, 2 -- -- -- -- -- 4 -- 11 exiting the business Other 7 4 -- 16 10 -- -- 5 12 64 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes As we know, business owners often consult a number of people when making business decisions. As 15.  I read you a list of people, please tell me how regularly you consult with each of them when making important business decisions. Do you consult with them frequently, occasionally, rarely, or never? Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Husband or other family members who ARE involved in the business Frequently 37 53 65 5 39 54 44 61 64 Occasionally 31 12 17 74 23 23 26 17 9 Rarely/Never 25 33 17 22 39 15 30 22 27 Accountant, financial advisor Frequently 36 60 52 26 20 47 26 53 53 Occasionally 37 21 26 71 47 40 32 32 20 Rarely/Never 18 18 22 4 27 7 39 16 27 Fellow business owners Frequently 35 34 23 62 20 39 28 11 22 Occasionally 26 18 46 16 40 39 34 47 29 Rarely/Never 35 48 32 21 40 23 39 42 49 Company board of directors or advisory board Frequently 31 56 27 37 46 27 8 47 47 Occasionally 28 16 18 58 9 36 21 18 29 Rarely/Never 30 29 55 5 46 27 71 35 25 Senior managers or key employees in your business Frequently 30 70 22 9 33 40 23 50 42 Occasionally 33 18 30 71 25 30 25 28 11 Rarely/Never 29 12 48 20 42 20 52 22 47 Friends or acquaintances Frequently 20 12 24 16 -- 8 27 5 47 Occasionally 38 23 33 78 25 23 29 26 16 Rarely/Never 38 65 43 5 75 62 45 68 38 Husband or other family members who are NOT involved in the business Frequently 26 21 27 20 -- 17 35 25 57 Occasionally 28 12 14 56 62 17 29 19 9 Rarely/Never 38 64 59 24 39 67 67 56 35 Mentor or advisor Frequently 19 23 17 19 9 15 10 18 55 Occasionally 34 24 26 73 9 15 26 18 21 Rarely/Never 37 53 52 8 82 62 65 65 25 Attorney Frequently 16 24 9 8 14 42 14 24 17 Occasionally 33 32 36 47 64 25 28 53 35 Rarely/Never 45 44 55 45 21 23 53 23 47 Banker or loan officer Frequently 13 35 9 4 8 8 3 11 33 Occasionally 26 31 18 44 8 23 22 11 13 Rarely/Never 54 34 73 53 33 69 75 78 53 Ready for Growth: 65 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Business owners are often interested in learning more about certain business issues. For each of 16.  the following, please tell me if you would find learning about this extremely helpful, very helpful, somewhat helpful, not very helpful, or not at all helpful? Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Business management skills as you grow your business V/E helpful 76 85 81 91 86 80 65 89 65 Somewhat 17 15 10 10 7 7 34 11 20 helpful NV/N helpful 3 -- 10 -- -- 13 1 -- 15 How to use financial products such as SME lending or equity capital to grow your business V/E helpful 69 85 73 94 47 64 53 53 56 Somewhat 21 10 23 5 40 21 41 42 24 helpful NV/N helpful 6 5 5 1 13 14 7 5 20 Expanding geographically and exporting to other countries V/E helpful 66 65 68 88 57 93 48 68 69 Somewhat 19 15 23 11 29 7 39 11 16 helpful NV/N helpful 11 20 9 1 14 -- 13 21 16 Accounting and financial management V/E helpful 63 65 82 68 86 72 54 74 78 Somewhat 26 22 9 32 7 14 45 26 11 helpful NV/N helpful 5 14 9 -- 7 14 1 -- 11 Selling your company’s goods and services to large, multi-national companies V/E helpful 60 74 68 67 62 69 50 63 64 Somewhat 20 11 14 32 8 8 23 21 18 helpful NV/N helpful 15 15 18 1 31 23 27 16 18 Finding a mentor to help you grow your business to the next level V/E helpful 55 80 72 39 72 72 49 90 73 Somewhat 27 14 19 60 15 7 25 11 9 helpful NV/N helpful 12 9 10 1 23 21 26 -- 18 The business registration process V/E helpful 52 57 41 84 54 46 22 79 62 Somewhat 23 23 27 11 23 23 45 21 20 helpful NV/N helpful 17 18 32 5 23 31 32 -- 18 Legal advice for business V/E helpful 49 56 77 32 57 77 51 89 69 Somewhat 35 18 18 68 29 8 42 11 20 helpful NV/N helpful 9 26 5 -- 14 15 7 -- 11 66 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes Is there anything else that you would find very helpful at this point in your business? (OPEN-ENDED 17.  QUESTION; WRITE VERBATIM RESPONSE) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Human resources 1 -- 5 -- 8 -- -- 11 -- mgmnt issues Growth/ strategic 1 -- 5 -- 8 -- 1 5 -- planning Other 1 -- 14 -- 22 -- -- 5 -- No answer 97 100 77 100 62 100 99 79 100 Personal/Business Background Questions Finally, I have just a few questions for background purposes. Again, none of this information identifies you or your business – it will only be used in combination with all other survey responses. How many years have you owned this business? 18.  Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Less than 3 24 13 5 48 7 7 29 16 18 years 3 to 5 years 22 17 30 38 21 21 19 11 27 6 to 10 years 19 27 25 5 36 21 30 32 27 More than 10 21 43 40 -- 36 50 22 42 18 years Don’t know/NA 13 1 -- 10 -- -- -- -- 9 Ready for Growth: 67 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes In what industry is your primary business? 19.  Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Agriculture 3 10 -- 2 -- 7 1 -- -- Natural resource <1 -- -- -- -- -- -- 5 -- dev’t (oil, gas, coal) Non-durable 17 14 25 34 7 13 4 56 16 manufac-turing (food, clothing, crafts) Durable 5 2 4 13 -- 7 -- 5 2 manufac-turing (machines, steel, tires, other) Wholesale/ retail 5 3 25 -- 7 20 4 21 -- trade Services: travel/ 11 2 4 18 14 7 19 -- 2 tourism Services: 30 53 17 -- 50 20 52 47 -- business svcs Services: 6 1 13 2 21 -- 13 11 2 personal svcs Technology/ ICT 3 2 -- 1 7 5 5 2 3 Multi-industry 1 1 -- -- -- -- 1 -- 2 conglom-erate Other (not 20 10 13 31 -- 20 3 -- 74 specified)/ No answer As businesses grow, they often provide information to government agencies about their 20.  business activity through different steps. Have you done any of the following for your business with any government agency? (CIRCLE AS MANY AS APPLY) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Registered your 67 -- 67 60 95 79 -- 84 -- business name Registered your 64 -- 5 67 76 71 -- 90 -- business with a tax registry Incorporated 23 -- 10 28 19 29 -- 5 -- your business Licensed your 20 -- 14 16 29 50 -- 16 -- business with a ministry No answer 12 -- 29 29 5 8 -- 11 -- (None) 68 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes What percent of this business do you personally own? (CHECK ONE) 21.  Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE 100% 34 62 60 22 39 21 44 21 55 51 to 99% 18 25 5 1 23 29 37 32 36 50% 21 7 20 59 8 21 11 16 -- Less than 50% 11 5 15 18 23 21 6 26 -- Don’t know/NA 15 -- -- -- 8 14 3 5 9 (IF LESS THAN 100%:) Are any of the following individuals involved in the ownership of this business? 22.  (MULTIPLE RESPONSES ALLOWED) (N=258) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Husband 31 23 71 28 39 17 29 73 22 Parent/Parents 14 27 14 4 8 17 20 27 -- Child/Children 8 10 -- 3 8 9 10 27 22 Other family 33 17 29 51 15 39 24 18 -- members Other non-related 29 30 14 36 46 22 29 18 56 individuals Don’t know/NA 1 -- -- -- 8 22 -- -- -- Number of Cases (258) (31) (6) (81) (9) (13) (61) (11) (6) What is the total number of employees (including part-time and contract workers) that your business 23.  currently employs, not including yourself? Just stop me when I reach the right category. Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE None in addition to 5 1 -- -- 7 7 13 5 7 myself 1-9 employees 40 44 57 24 36 47 61 47 11 10-49 employees 20 27 22 26 36 20 13 37 2 50-99 employees 12 7 4 28 7 13 6 11 -- 100-249 employees 4 10 4 2 7 7 -- -- 2 250 or more 2 1 -- 1 7 7 4 -- -- employees No answer 16 10 13 20 -- -- 4 -- 77 Ready for Growth: 69 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Annexes What were the approximate annual gross (total, before accounting for costs) revenues of your 24.  business in 2011? Just stop me when I reach the right category. (USD equivalents) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Under $5,000 5 1 -- 9 -- 7 4 -- 9 $5,000-$9,999 8 10 4 5 -- 7 14 -- 7 $10,000-$24,999 11 11 8 28 7 13 1 -- 2 $25,000-$49,999 22 27 8 46 7 -- 14 5 2 $50,000-$99,999 10 16 17 10 20 7 8 11 -- $100,000-$499,999 11 5 17 -- 33 27 22 21 -- $500,000-$999,999 4 5 4 -- 7 7 8 -- -- $1,000,000+ 4 -- 17 -- 20 20 3 16 -- No answer 24 23 25 1 7 -- 27 47 80 In 2011, what percentage of your sales came from each of the following customer groups? 25.  (ENTER APPROXIMATE PERCENTAGE – NUMBERS MUST ADD TO 100%) Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Individuals 44 22 58 61 39 39 37 52 58 Small or 24 40 20 5 10 21 39 14 21 medium-sized businesses Large corpora- 13 22 15 <1 20 36 15 8 12 tions Voluntary 3 1 1 5 4 1 3 6 -- associa-tions/ Non-profit organiza-tions Government 6 11 5 -- 17 3 5 20 -- agencies – local or national Other 1 1 1 <1 7 <1 1 -- 9 In which category is your current age? Just stop me when I reach the right category. 26.  Total AME BBS AWTAD BPWA LLWB AFEM BWF CNFCE Under 25 3 -- 5 8 -- -- 1 -- 2 25 to 34 13 8 5 15 7 21 22 -- 7 35 to 44 26 22 27 30 21 43 30 37 7 45 to 54 30 24 46 30 43 14 37 58 7 55 or older 13 24 5 13 29 21 6 5 2 No answer 16 22 14 4 -- -- 5 -- 76 70 Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa Ready for Growth: 71 Solutions to Increase Access to Finance for Women-Owned Businesses in the Middle East and North Africa