Better have long

Global Summit of Women 2004
Seoul, Korea

INNOVATIVE FINANCING FOR WOMEN ENTREPRENEURS

Siv Hellén
Senior Vice President & General Counsel
Nordic Investment Bank

1. Background

The Nordic Investment Bank is an international financial institution established in 1975 by the five Nordic countries and active today in close to 40 countries worldwide.

The Bank´s idea of establishing a separate loan facility for women entrepreneurs was born in the wake of the conference in 1999 in Reykjavik, Iceland, called ”Women & Democracy at the dawn of the new Millennium”. At the conference hosted by the Icelandic and US governments, NIB pledged one million euro for a special loan facility for female entrepreneurship in the Baltic countries. This pledge was made conditional upon a similar pledge from the US government. And indeed, the Under-Secretary of State at the time, Mr. Strobe Talbot reciprocated with a one million USD commitment for a similar purpose in Russia.

2. The 1^st Loan facility

The loan facility of one million euro was established under a special program for the Baltic countries aiming at assisting the Baltic countries in their transition to market economy by providing financing to projects carried out by small and medium-sized enterprises in the private sector.

The loan facility was divided into equal parts per country. NIB signed agreements with one financial intermediary in each country and these banks onlent the money for a total of 44 projects. The loan facility was used up in September 2000, less than nine months after its establishment.

At the same time, the Bank initiated a survey concerning obstacles female entrepreneurs face in their business, such as getting credit, having access to advice and coping with family responsibilities. The survey was based upon a similar study previously carried out in Iceland.

The purpose of the program was to support and increase women’s involvement in business and in the decision-making process. The projects financed have been carried out by SME’s or individuals in the private sector in the three countries. Priority was given to projects creating new jobs and projects located in rural areas and in regions with high unemployment. Further priority was given to projects involving transfer and exchange of know-how, goods and services between the Baltic and the Nordic countries and projects involving interaction among women with different background.

Requests for loans were considered on commercial and economic basis and in the assessment emphasis was put on the strategy of the potential borrower, on the competitiveness of the project idea and also on environmental aspects. There was flexibility on the expenditure to be financed at the same time as the availability of other financial resources was stressed.

The maximum maturity of the loans was five years and the interest rate charged by the banks was based on market terms and set by the three banks individually. The loans had to be adequately secured.

As mentioned, the facility was used for 44 projects, 20 in Estonia, 12 in Latvia and 12 in Lithuania. The biggest sector in which projects were financed in the three countries was retail, with a share of 34 per cent of all sectors. Also production and manufacturing was a big sector, with a share of 24 per cent. Services had a share of 20 per cent. Health care and education and training had both a share of 11 per cent.

3. Experience gained

The surveys carried out in the three countries and the post-evaluation of the programs produced the following conclusions.

First we can look at the results from women´s point of view.

· Women set up their companies still with their own capital

· Women feel they have the same opportunities as men to get credit, in reality they are facing more obstacles than men

· Women need more encouragement and support

· Women want role models

· Women need more information on credit possibilities

· Women are more careful and take less risks than men

· Women feel that credits for SMEs are in general too expensive

· Many women found it positive that the loans were intended only for women and thought this would support women’s entrepreneurship

· Some were disappointed with the conditions and requirements, others were positively surprised of the friendly and helpful reception and quick procedure

· Half of the women thought they will probably need more financing in the future for their business (both for continuing and for expansion)

· Government support was considered to be important

And then from the Banks point of view:

· The Banks found it difficult to combine profitability and small credits

· The Banks were not used to address women´s particular concerns

· The Banks should not give advice on how to prepare business plans

· Business plans prepared by external consultants were often not of good quality

· Women in rural areas with start-up projects were difficult to reach

· Loan applicants did not have sufficient collateral

4. Summary conclusions

· Women like to be target clients

· Women do not need generally better terms and conditions

· Women need good advice in preparing business plans (preferably from other entrepreneurs)

· Women need information about credit possibilities

· Banks need training in how to handle women entrepreneurs as clients

· Collateral support is needed especially in rural areas and for start-up projects

· Expedient loan processing is essential

5. The 2nd loan facility

The 2^nd loan facility was provided in equal parts by NIB and another international financial institution, namely the Council of Europe Development Bank, CEB.

The 2^nd facility was altogether 10 million euro. 2 million euro went to Estonia, 4 million to Lithuania and 4 million to Latvia. In Lithuania NIB got also some grant funds to assist in mitigating the obstacles and bottlenecks perceived in the 1^st facility. The 2^nd facility is still under disbursement in Latvia but so far it has produced 119 projects financed which have maintained 1 786 jobs and created 329 new working places.

6. Further initiatives

Encouraged by the success of the loan facilities in the Baltic countries NIB has now granted a similar loan facility for women entrepreneurs in Russia, more precisely in the St. Petersburg area. The loan amount of 2 million euro was granted through one financial intermediary according to very similar guidelines as the two previous programs.

7. Final remarks

The initiative carried out by the Bank has raised several questions.

· Why special loans for women entrepreneurs ?

· Is it gender equality?

· What is innovative with the Bank´s program?

Hopefully these questions will be raised here and discussed but some response can be given. First and foremost:

· The program has created a debate about women issues.

· The program has brought women as potential bank customers in focus in countries where banking is still very male dominated.

· The loans have been intentionally designed not to distort competition and carry no real subsidies. The projects financed have been assessed on their merits not on the gender of the entrepreneurs.

· The program has educated the banks in focussing on administratively simplified procedures and on serving clients with different concerns.

Ultimately, it has brought women as a neglected resource of competence on the agenda.

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Global Summit of Women 2004 Seoul, Korea

Global Summit of Women 2004
Seoul, Korea