For Ada Osakwe, business was booming. Her Nuli Juice Company added six new stores in Lagos last year, and she had begun to use new technologies to expand her customer base even further in 2020. Then the Coronavirus arrived, and life changed in an instant.
“This is just a completely new animal,” Osakwe, the founder of Nigeria’s Agrolay Ventures and Nuli Juice, says. “Things are changing every second.”
Osakwe, whose enterprise purchased nearly 200 tons of fresh produce from local farmers last year, was forced to shut down all of her shops and send her workers home. She paid employees’ salaries for March but doesn’t know what will happen in April. Her suppliers would also feel the pain.
“At Nuli we are laser-focused on using local produce and we source from over 100 local farmers,” Osakwe said. “We support their livelihoods, but owing to government restrictions in movement, we have not been able to source produce across state lines.”
This kind of uncertainty is being felt by millions of small and medium enterprises (SMEs) across the world. How banks, governments, and development institutions react will be essential to their survival. Osakwe and Ciiru Waweru Waithaka, the founder of FunKidz in Kenya, provided a sobering view of the pandemic’s impact on two successful women entrepreneurs in Africa. Speaking at a session sponsored by IFC’s Banking on Women business in early April, they expressed concern for the viability of their companies and urged financial institutions to do much more to help struggling SMEs.
Ciiru Waweru Waithaka says financial institutions are now “as critical as doctors” to SMEs. © Dominic Chavez/IFC
“We had never been busier than in the last two years, and then COVID showed its ugly self,” Waweru Waithaka said. “We were one of the first to throw in the towel, because we needed to protect our staff and customers and social distancing cannot be practiced in our line of business,” closing within one week of Kenya’s first COVID-19 case.
The timing could not have been worse. FunKidz had signed multiple new contracts to supply sustainable furniture to schools. Now, it’s unclear if those orders will be filled. Instead, Waweru Waithaka borrowed money from her family to cover two-months’ salary for her employees, cash she knows they will need for rent, food, and medical expenses.
More Than Money
Even before COVID-19, owning an SME was challenging. Especially for women, who own or run more than a third of all SMEs in emerging markets. These businesses already faced an estimated $1.5 trillion credit gap. The pandemic is expected to widen that gap.
“Right now, financial institutions are as critical as doctors for us,” said Waweru Waithaka. “But they are so slow to react. Just talk to us…banks need to have more ‘heart’, all we’re asking for is to be communicated to and co-create solutions that will solve our immediate problems.”
The sentiment was echoed by Osakwe, who said banks have been largely silent since the crisis struck.
“Now more than ever, it’s important for banks and fintechs to specifically and intentionally include women in their COVID-19 responses.”
— Jessica Schnabel, global head of IFC’s Banking on Women
Osakwe and Waweru Waithaka agreed that there are measures they would like to see financial institutions taking urgently, including affordable overdraft facilities, emergency loans, and grace periods for repayments on existing loans for up to six months. Critically, both also called for additional support with training, legal advice, contracts, and access to markets.
“It’s not just about money,” Osakwe said, calling for more technical assistance.
Without essential liquidity, capital, and expertise, many SMEs won’t be able to weather the storm. IFC is working with entrepreneurs, financial institutions, and fintechs to help address the challenges facing people like Osakwe and Waweru Waithaka.
“Women and women-led businesses are vital drivers of economic growth and prosperity. Banks experience lower NPLs [nonperforming loans], deposit stability, increased market share, and higher customer loyalty when they provide comprehensive financial and operational solutions to women-led businesses,” said Jessica Schnabel, global head of IFC’s Banking on Women. “But too often, women are overlooked in the design of financial solutions. Now more than ever, it’s important for banks and fintechs to specifically and intentionally include women in their COVID-19 responses.”
IFC’s $8 billion COVID-19 fast-track response is already being deployed to support emerging market financial institutions and companies and their employees affected by the pandemic, as part of a $14 billion World Bank Group package. The majority of IFC’s fast track funding will be used to invest in client financial institutions to enable them to continue offering trade finance, working capital support to help companies pay their bills and their workers, and long-term financing for companies experiencing disruptions in supply chains. IFC’s Banking on Women is also ramping up efforts to provide investment, advisory expertise, and business-case data to financial institutions in emerging markets to help them respond and offer medium-term financial solutions for women business customers.
Published in April 2020