Women-owned and led SMEs (WSMEs) in Kenya face structural barriers that limit their ability to secure contracts with large companies for growth.
This is according to an IFC study published today that recommends ways banks and large businesses can better support female entrepreneurs.
The study was commissioned as part of IFC’s wider efforts to connect women entrepreneurs to new markets and is titled Sourcing2Equal Kenya: Barriers and Approaches to Increase Access to Markets for Women-Owned Businesses.
It found that women-owned businesses face challenges accessing finance, business networks, and market information, hence limiting their ability to take on large contracts.
The study found that there is a 9 percent gender gap in the participation of SMEs supplying directly to corporate Buyers, commonly known as tier 1 suppliers, with WSMEs receiving fewer contracts among the SME respondents in this study.
However the survey indicates that there is 13 percent more WSMEs than male or joint SMEs who are suppliers to Tier 1 SMEs.
This suggests that more WSMEs are helping Tier 1 suppliers to fulfill their orders with Buyers, and that with the right support, Tier 2 WSMEs could advance to become Tier 1 suppliers.
The sectors that have more WSMEs as Tier 1 suppliers than male or joint SME suppliers, are agro-processing and services such as hospitality, restaurants, catering and events, and office support.
Conversely, there are more male and/or Joint SMEs suppliers than WSMEs as Tier 1 suppliers in agriculture and retail/wholesale/trade.
WSMEs are also more numerous than their male counterparts as subcontractors in agriculture and agro-processing.
“For those WSMEs that already have a Tier 1 relationship with a Buyer in agro-processing, it appears that WSMEs are also subcontractors supplying other SMEs,” the study states.
Researchers interviewed 14 Kenyan corporations and found they spend just 3 percent of their total procurement budget on women-owned businesses—and that women entrepreneurs are mostly represented in low-value sectors, such as catering, printing, and cleaning.
As far as challenges are concerned, SME respondents stated that they face three main challenges in supplying goods and services to corporate Buyers. Gender differences are found within each barrier and by supplier tier.
The challenges include limited access to capital, inadequate operational capacity and limited access to information and networks among others.
The study recommends that corporate buyers partner with local financial institutions to facilitate access to working capital, implement supplier development initiatives, increase outreach to women-owned businesses, and advertise tender opportunities on digital platforms.
“For large companies, there is a business case for contracting with women-owned small and medium enterprises,” said Amena Arif, IFC’s Country Manager for Kenya. “A diversified supplier base is key to reducing the risk of supply chain disruptions and procurement costs.”
IFC also launched its Sourcing2Equal Kenya program to help advance gender-inclusive sourcing in the private sector and increase women’s access to procurement contracts.
The program will help 10 companies increase their sourcing from women-owned businesses and build the capacity of 1,300 women-led smaller businesses to make them procurement ready.
Eight firms have already joined the program: Unilever, KenGen, Safaricom, Bidco, Stanbic Bank, Absa Bank, Line Plast Group, and Tropikal Brands.
“We set targets to increase sourcing from women-owned business because we believe it’s good for business, good for economic development, and it builds a stronger equitable society,” said Luck Ochieng, Unilever Kenya’s Managing Director. “By participating in the Sourcing2Equal Kenya Program, we hope to develop a framework for tracking progress against our commitments and reporting on our procurement activities relating to sourcing from women-owned led businesses.”
“We are working with Sourcing2Equal Kenya because it aligns with the ongoing government procurement program. The program will help us access best practices on gender-inclusive sourcing and how to implement them,” said Phillip Yego, Supply Chain Director at KenGen.
In 2015, Kenya introduced a policy that stipulates that 30 percent of the value of all government procurement contracts be awarded to small businesses owned by either women, persons with disabilities, or young people between the age of 18 and 35.
The IFC study surveyed 571 SMEs (about 60 percent of them owned by women) and found that women face unique barriers that include limited access to capital, lack of access to resources to enhance operational capacity and limited access to networks and information on tenders.
The lack of procurement opportunities for women is not only a challenge in Kenya. Globally, less than 1 percent of procurement spending by corporate buyers goes to women-owned businesses, according to a 2017 WEConnect International report.