ACCESS TO FINANCE, MAIN OBSTACLES FACED BY FEMALE ENTREPRENEURS

KANWAL SALEEM, Lahore
Sep 24 - 30, 2007

The Association of Certified Chartered Accountants (ACCA) launched ACCA Pakistan's exploratory report titled "Access to Finance for Female Entrepreneurs in Pakistan" at a function held in Lahore.

The Chief Guest was Shahid Rashid, Chief Executive Officer Small and Medium Enterprises Development Authority (Smeda). Among others, Arif Masud Mirza, Head of ACCA Pakistan, Dr. Shehla Javed Akram, President Women Chambers of Commerce & Industry, Javed Iqbal Marth, Deputy Chief Manager State Bank of Pakistan and Ms. Zoya Aliem Khan, CEO Zoya Herbal Workshop.

The report highlights that female entrepreneurs need support of the government, the private sector, and most importantly finance providers, as they strive to satisfy their entrepreneurial instincts, and establish sustainable enterprises necessary for ensuring an equitable and economically successful Pakistan.

The report outlines access to finance as one of the main obstacles faced by female entrepreneurs as they try to establish a sustainable enterprise in the face of social and domestic constraints. The sources of seed capital for female entrepreneurs usually are personal savings, sale of personal jewels or loans from family and relatives. The growth potential of the enterprises is constrained by the unavailability of finance which mainly is due to reluctance of the female entrepreneurs to access bank finance. The major reasons for reluctance to access bank finance are fear of default, high interest rates, unpleasant experiences with the banks, difficulties in arranging collateral's and guarantors, lack of awareness of financing schemes, high risk awareness compared to men, social barriers and lack of an effective lobby.

The report recommends that female entrepreneurs should adopt a proactive approach to learning about financing, maintain relevant and reliable accounting records and use the services of professional accountants, should consider refreshing or enhancing their accounting and finance skills by attending professional development courses of accounting and finance and build an effective lobby.

The report recommends that the State Bank of Pakistan (SBP) will have to play a pivotal role in enabling greater access to finance for female entrepreneurs, by encouraging banks to design and advertise products customized to their needs and constraints and encourage banks to allocate amounts in the total lending portfolio for lending to female entrepreneurs. It should also encourage implementation of the State Bank of Pakistan Prudential Regulations relating to cash flow based lending. Banks should incorporate developmental objectives and focus on outreach in their vision, strategy and actions. The report concludes that public-private partnership is needed to overcome the barrier of access to finance for female entrepreneurs. It also observes that finance providers are of the opinion that specific characteristics of female-owned enterprises, for example innovative nature of the products, reluctance to hire the services of professional accountants, social and cultural constraints in establishing a working relationship with female entrepreneurs and inability to arrange a guarantor or collateral are reasons for reluctance of the finance providers to provide finance to female entrepreneurs.

Dr. Afra Sajjad, Head of Education and Policy Development of ACCA presented the essential findings and recommendations of the report.