• Saihou Jeng


Updated: Sep 6, 2021

Access to finance is a contemporary issue in today’s global finance industry which

has garnered ample focus from various stakeholders, including financial institutions and markets. Global economic vibrance and potential growth remain far from reach in the face of insufficient access to quality financial services. In times without numbers, the need for improved access to finance has stimulated the design and implementation of policies and intervention strategies globally to promote accelerated, inclusive and sustainable growth, with significant focus on marginalized and minority groups, women in particular, who have been deemed less privileged in terms of access to finance for their economic and personal development activities. In definition, access to finance is a generic term which includes the ability of individuals and business entities to acquire several financial services such as deposits, bank payments, credits (bank loans), contingents, insurance, etc. However, to put a perspective to this discourse, we’ll limit its definition to “access to bank credit (commercial bank loans)”. The objective of this discussion is to analyze, from both scientific evidence and rational opinions, the trends of women’s access to bank loans in The Gambia, with specific focus on the factors affecting the access, the necessary intervention mechanisms or strategies and their impacts, and the roles of stakeholders in the implementation of the identified strategies.

In July 2018, the Youth Empowerment Project, in partnership with the National Cooperative Credit Union of The Gambia and Government of The Gambia, approved a mini-grant scheme to provide skill-building and startup capital to grassroot entrepreneurs, following a research finding which labelled the lack of finance faced by Gambia’s entrepreneurs as “chronic”. In 2019, the Government of The Gambia, through the Central Bank of The Gambia initiated the National Financial Inclusion Strategy (NFIS) which aims at enhancing general accessibility to financial services, with specific focus on improving access to finance by women entrepreneurs and SME’s, through the promotion of financial literacy, accessibility of financial institutions and products and enhancement of the soundness of the banking and finance industry. The UN Capital Development Fund, in their survey report “Women’s Economic Empowerment in The Gambia (2019)” reported that 57% of Gambian women were economically inactive and they have earned $700 (about D35,000) less than men. They applauded the NFIS initiative as a viable tool for improving access and usage of financial services amongst Gambian women.

Despite the numerous findings and interventions by relevant stakeholders, there is convincing evidence that Gambia’s businesswomen continue to be the least advantaged in terms of access to finance for their economic activities. Commercial banks in The Gambia have been unapologetically blamed for limiting women’s access to loans with inflexible credit administration processes. While we cannot completely extricate banks from the problem, we will have little to scold them for after careful consideration of the prevailing circumstances in The Gambia’s banking industry. The industry has seen an overwhelming surge in nonperforming loans (NPL) and credit losses over the years. As at the end of the second quarter of 2021, the NPL value and ratio stood at GMD1.8bn and 25%, respectively. The disruptions in global supply chain as a result of the Covid-19 pandemic contributed to this situation but the pre-pandemic realties are still not short of sufficient evidence about the industry’s consistently hiking trend in credit losses, even if the “bottom lines” and overall industry soundness remained stable. As at the end of the 2019 financial year, most banks closed with NPL ratios of over 10%, five percentage points above the regulatory threshold. Some cynical persons, though, have correlated bad loans to the ethically distorted personalities of bank officials responsible for credit administration, mainly loan promoters and decision makers, rather than borrower’s behaviours and economic conditions. We will, however, focus on the unambiguous matters – the above statistics – which, without doubt, provide compelling, but reasonable justifications for the “blamed” credit administration and risk mitigation processes of commercial banks in The Gambia.

Commercial banks implement risk mitigation strategies to manage credit risk. The commonest strategies implemented by commercial banks in The Gambia include interest rates, collateral agreements, loan tenures and restrictive covenants, and people critical of the industry’s modus operandi on credit risk management have apportioned blamed to these strategies as causes of limited access to finance. In pursuance of the objectives of this discourse, we will analyze how these strategies play as factors affecting women’s access to commercial bank loans. Two “non-transactional” factors – literacy levels and location of banks – will be discussed in addition to the strategies.

Beginning with interest rates, which is cost to the borrower, or otherwise the additional amount the borrower pays on the principal during repayment, banks generally do not set special rate bands for a specific gender. Interest rates serve as deterrents to lending when high because borrowers, from a rational and prudent investment perspective, will weigh their interest expense or cost against their expected rate of return from the planned investment of the money’s borrowed, ceteris paribus. Banks’ interest bands – minimum and maximum rates – are usually pegged against the Monetary Policy but there is no gender-specificity in setting such range. As such, interest rates, whether low or high, have no bearing or influence on the gender of the borrower, thus not a determinant or a deterrent to women’s access to loans from commercial banks. The effect of interest rates is cross-cutting in terms of gender.

Loan tenures have severally been contentious issues between commercial banks and prospective or existing borrowers, which in many cases, tend to diminish borrower’s desire to borrow or banks’ lending appetite, depending on which party feels unfavored or better-off. Banks are poised to adopt an efficient matching principle between assets and liabilities. In general, commercial banks prefer shorter loan recovery periods and longer deposits settlement periods, thereby enabling them to maintain their liquidity and maximize profitability through reinvestments. Borrowers, on the contrary, prefer prolonged repayment periods, despite the associated premium on loan tenure, which are feasible to the expected payback periods of their planned investments. In the event of a significant variance between the preferred loan durations of the parties, a loan contract most likely does not occur. In The Gambia, time and term deposits, which comprise a significant portion of the lendable funds, are usually pegged to a year’s maturity date, while the average tenure for loans is two years. Effectively, banks are constantly faced with the demanding task of accommodating the mismatch in their financial assets and financial liabilities, mainly by renegotiating with savers on extended tenures which usually expose them to additional cost. Therefore, the impact of loan tenures on access to finance is insensitive to the gender of the proprietors, managers or shareholders of the borrowing entity. The access to bank loans in terms of tenure is rather largely determined by the risk preferences and investment plans of the banks and borrowers, respectively. It is therefore correct to say that tenure is not specific to women’s access to commercial bank loans.

Restrictive covenants are terms and conditions attached to loan agreements to either bar the borrower from venturing into riskier post-lending activities which might impede his or he repayment ability, or to give banks control rights over the activities of the borrower in respect of the borrowed funds. As the name applies, the covenants restrict or limit the borrower from engaging in any activities which can negatively impact his or her commitment to loan repayment obligations – principal and interest. Banks impose these restrictions based on subjective assessments of a borrower, purpose of the facility, the loan tenure or the industry in which the borrower operates. The intensity of the restrictions may vary from one customer to the other based on the outcome of the aforesaid, and not on the gender of the borrower. Therefore, restrictive covenants are gender-insensitive, hence not explaining why Gambian women have limited access to commercial bank loans.

Literacy amongst Gambian women has also been associated to their access to finance. According to UNESCO (2015), The Gambia’s overall adult literacy level (of persons above the age of 15 years) was 50.78%, of which female literacy constitute 41.58%. Female literacy level continues to thrive behind by significant margins, at least dating back to 2000, and this effect has trickled down to the overall financial literacy of women, thus leaving women with lesser understanding of financial products and services. Most Gambian women, as a matter of fact, have chosen entrepreneurship as a means of survival after failed attempts on other career opportunities as a result of their low literacy. As such, most of them have been relegated to the informal business sectors in which they have limited capacity to access finance except through the intervention of microfinances and Village Savings and Credit Associations (VISACAs). It further justifies why most of Gambia’s female entrepreneurs have hardly grown out of corner shops, street vending and local markets even after accumulating wealth of experience in their trade. In my profession as banker, familiar with credit risk management processes, I have observed that Gambian banks have largely played by the rule which factors level and type of education attained as a determinant of credit worthiness. It is therefore convincing to say that literacy level has a correlation with access to bank loans, and the imbalance is detrimental to women’s access to finance. Notwithstanding, some critiques debunked the foregoing on the basis that banks still allocate loans to men with lower educational levels and financial awareness but this argument cannot be aptly supported because it is more subjective than general in context.

The impact of the location of commercial banks on women’s access to bank loans has been the centerpiece for many interesting debates over the years amongst stakeholders and persons of interest, both in The Gambia’s and global banking and finance industry. On one hand, those who sternly opposed with the proposition that the location of banks limits women’s access to finance argued that both men and women are subjected to similar traffic or transportation constrains, assuming they are two individuals from the same or similar geographic locations, in terms of accessing banks for their financial transactions. They further submitted that proximity of people of different genders in the same market place from the banks is affected by the same distance and demographic realities, thus discarding banks’ locations as a gender-sensitive factor to accessing bank finance. On the other hand, people who supported the proposition have advanced more critical arguments, which I am inclined to too. They debated that Gambian banks are largely centralized, usually in urban settlements while most Gambian women have their business establishments and activities in the rural or semi-urban areas where banks are either not or hardly present. This assertion is supported by the recent findings of John Cusack and Bintou Coker (2020), researchers for the Financial Crimes News, in their “The Gambia Threat Assessment Paper 2020”, who found out that most commercial banks in The Gambia are located in the Greater Banjul Area, with all the head offices, where critical decisions are passed, situated in the same area. Casual observations further showed that even those bank offices outside the greater Banjul area are located in semi-urban and urban centers which are either completely or substantively inaccessible to businesswomen in the rural communities. These facts, unambiguously, provide reasonable grounds to admit that the location of commercial banks is prohibitive to women’s access to commercial bank funds in The Gambia.

One of the most intense debates on banks’ inflexible credit administration procedures is the institution of collateral agreements, which many believed have been an overrated condition in the risk mitigation process. Collaterals, either in the form of direct cashbacks or tangible assets such as residential and other categories of landed properties, provide cuisines against loan default. The steep rise in nonperforming loans in Gambia’s banking industry over the years provides sufficient justification on why collateral management have become an essential and integral part of credit risk management and compliance frameworks, and the impact is crosscutting on access to bank loans. Casual observations and interactions with experts in credit management revealed that the implementation of collateral agreements is one of the leading causes of unsuccessful loan applications. This circumstance provoked interest into why women are mostly severed by collateral requirements. In The Gambia, religious and traditional beliefs and values have noticeably limited the property rights of women. Land ownerships and controls, which are usually under family influence, are patriarchal in nature. Firstly, in most cases, the oldest son of the family is appointed as heir and attorney in the management of the family’s assets after the demise of parents or family heads because it is believed or expected that he will assume the role of the parents in keeping the family together. Secondly, in cases of inheritance, in Islam in particular, which is the predominant religion in The Gambia, the allocation of the estate of a deceased parent to his children is in the ratio of 2:1 for male and female, respectively. A male child gets twice the size of land allocated to a female. These practices, without doubt, have considerably constrained women’s access to bank loans due to their limited ownership and control rights on landed properties.

In view of the foregoing, we can conclude, without hesitation, that all the factors highlighted above affect borrowers’ access to bank loans in The Gambia, but proximity of banks (location), literacy level and collateral agreements are specifically gender-sensitive in that they have impeding effects on women’s access to bank loans. These factors have significantly widened the gap in access to bank loans between men and women in The Gambia, and much is left to be the desired about the efficacy levels of the mechanisms and interventions put in place over the years to improve the status quo. As at the end of June 2021, data collected from six out of twelve commercial banks in The Gambia showed that the concentration of bank loans to women sits below 12% of the total commercial loan allocations. This disproportionate access to bank loans poses noticeable hindrance to the capitalization and expansion capacities of businesses run by women in The Gambia. Consequently, their economic wellbeing and overall economic significance continues to thrive on deteriorating paths.

Improving women’s access to finance will magnify inclusive socioeconomic participation and promote the recognition of the crucial role of women in the economic development of The Gambia. It will increase the resilience of women against prevalent socioeconomic issues such as financial dependency, poverty, unemployment, social injustice and their allied consequences, such as illegal migration, unwanted teenage pregnancies, to say the least. Economic productivity will be far-reaching its potentials until these issues are addressed with eminence.

In a bid to doing justice to the readership, our subsequent discussion will focus on how the status quo can be improve, and by who, to promote women’s access to quality finance, and what roles can be played by the various stakeholders in ensuring efficiency.

By Saikou Jeng

BSc. Economics | Credit Risk Analyst

September 2021.

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