Funding challenges for women entrepreneurs in Africa's green economy

In a world striving for sustainability, Michelle Lingam's aspirations for her solar installation business highlight a troubling paradox: despite the critical role of women entrepreneurs in combating climate change, they continue to be largely excluded from formal financing. When Lingam sought a loan to expand her business, she anticipated rigorous scrutiny. What she did not foresee was the same entrenched obstacle her peers have encountered for years - collateral.

“Banks often reject our applications due to insufficient collateral,” Lingam said. “As a new venture, we don’t have substantial assets yet. It feels like a door that never opens.” Her experience resonates with women across Africa, whose entrepreneurial ventures regularly outperform those of their male counterparts, yet still struggle to access the funds necessary for growth.

A new report titled Demand-Driven Capital: Powering Female Innovators in Africa’s Green Economy, released by the female-focused ecosystem enabler WomHub, underscores the urgency of addressing this funding disparity. The research reveals that while women entrepreneurs are vital to Africa's battle against climate change and while their businesses yield stronger financial returns, they receive a paltry fraction of available funding. In 2023, for example, all-female founding teams secured just 2.3% of total African startup funding.

“For too long we have misunderstood the challenges for female entrepreneurs in terms of funding, so we’ve taken a data-driven approach,” said Naadiya Moosajee, co-founder and chief innovation officer of WomHub. “This report looks at why entrepreneurs have not raised capital and promotes more capital moving to women entrepreneurs in the green economy, solving some of the toughest challenges that we face.”

This situation is all the more perplexing given that women already own approximately 40% of small and medium-sized enterprises in Africa, contributing a staggering $300 billion annually to the continent’s economy. Yet, the money hasn’t followed; male-only teams continue to garner over 80% of the available capital.

The systemic exclusion from the financial landscape means that while women run resilient and socially responsible businesses, often relying on their own personal savings, they face a stark reality: they are too large for microfinance, too risky for banks, and too small for traditional venture capital. Experts label this phenomenon the “missing middle.”

Dunbe Birsan, a green energy entrepreneur, illustrates this bias. “I had to really explain myself and my business. I was asked more questions than a man. It felt like I had to justify being in the room,” she recalled. Others report stumbling over heavy equity demands or navigating convoluted grant applications that divert attention away from the core aspects of their businesses.

The same challenges that frustrate them often foster strengths: female-led businesses tend to be lean, adaptable, and purpose-driven, better poised to weather economic storms than their heavily capitalised counterparts. “Women entrepreneurs learn to do more with less,” the report notes, describing how this quality imbues their companies with a sense of sustainability.

Not only do women-led businesses stand to thrive, but they also play a pivotal role in community upliftment. According to the report, women typically reinvest up to 90% of their earnings back into their families and communities, amplifying the impact of each dollar invested. “Funding women, in other words, funds entire ecosystems,” the report states.

As over a billion people globally remain without electricity, many of whom are women in rural Africa, the potential of female-founded ventures in renewable energy and green technology is immense. Pretty Kubyane, co-founder of the agri-tech platform eFama App, encapsulates the sentiment among her peers: “We’re not asking for favours. We’re building businesses that work. All we need is fair access.”