Affirmative Finance Action for Women in Africa (AFAWA), a pan-African initiative to bridge the US$42bn financing gap facing women on the continent, is set to receive a US$251mn investment from the G7 countries.
AFAWA is a joint initiative of the African Development Bank (AfDB) and the African Guarantee Fund (AGF), a provider of financial guarantees.
The financial backing from the G7, which was announced at the 2019 G7 Summit in Biarritz by French President Emmanuel Macron, will go towards AFAWA’s aim of raising US$5bn for African women entrepreneurs.
AFAWA is based on three fundamental principles. The first is to improve women’s access to financing through innovative financial instruments, including guarantee mechanisms from AGF.
In co-operation with strategic partners, the second principle is to provide capacity-building services to women entrepreneurs, including access to mentoring and training courses in entrepreneurship. AFAWA also assists financial institutions in responding to specific needs of women-led businesses through specially adapted financial and non-financial products. It operates a rating system to evaluate financial institutions based on the share and quality of their lending to women, and their socio-economic impact. Top institutions are rewarded with preferential financing terms from the AfDB.
The third principle is improving the legal and regulatory environment, eliminating obstacles that specifically affect women by engaging in policy dialogue with governments, central banks and other institutions.
“Currently, women operate over 40% of SMEs in Africa, but there is a financing gap of US$42bn between male and female entrepreneurs. This gap must be closed, and quickly,” says AfDB president Akinwumi Adesina. “This financing effort for women is the most significant in the continent’s history.”
AGF’s group CEO Felix Bikpo applauds the G7 leadership for recognising the importance of women as the backbone of the continent’s growth, and says: “AGF’s strategy recognises women as a great pillar of the development of African economies and has always focused on increasing access to finance for women. In fact, 30% of the SMEs supported by AGF are owned or led by women. Through AFAWA, our role in financing women will be reinforced to enable even more women fully play their role as drivers of economic growth through the SMEs they own or lead.”
The need to establish a financing mechanism for women’s economic empowerment was agreed during a summit of African heads of state in 2015 and assigned to the AfDB for implementation.
Since then, support for AFAWA has been on a steady increase: in 2018, the AfDB dedicated over US$50mn in lines of credit to women through financial institutions such as Fidelity Bank, Kenya Commercial Bank and Union Trust Bank Sierra Leone. It also made an anchor investment of US$12.5mn in Alitheia IDF Managers (AIM), the first-of-its-kind private equity fund managed by experienced female fund managers that invests in high-growth women-owned and led SMEs in Africa. AIM aims to raise US$100mn and targets 10 countries in Southern and Western Africa.
Also in 2018, AFAWA provided technical assistance to various banks and partnered with the Entreprenarium Foundation to train 1,000 women entrepreneurs across Africa in business model development and financial planning.
Another AfDB initiative, the 50 Million African Women Speak (50MWS) digital networking platform, which is being developed to connect women entrepreneurs across the continent, falls within AFAWA. This US$24mn project is being implemented by three regional economic communities, namely Comesa covering East and Southern Africa, EAC covering East Africa, and Ecowas covering West Africa. 50MWS targets women entrepreneurs in Africa, who often struggle to access information on financial and non-financial services, and who also are less likely to have established business networks or mentors that can offer them much-needed advice and guidance on how to grow their businesses.