Financing of female-owned firms in Sub-Saharan Africa

According to research by the World Bank there is a clear positive correlation between gender equality and GDP per capita, the level of competitiveness and human development. This is particularly true in Sub-Saharan Africa where female firm owners still face a variety of gender-specific obstacles. There is evidence that women’s economic empowerment has substantial positive effects on welfare. Therefore constraints to female-owned firms have important implications for social and economic development in Africa.

While firm performance is affected by many factors, including ownership structure, state vs. private ownership, the legal environment, corruption, political instability, and infrastructure, empirical evidence so far suggests that lack of access to financing is a major constraint to performance by female-owned firms in Sub-Saharan Africa.

Financing structures and constraints have been well explored for firms in developed economies but this is not the case for firms in developing economies. Largely due to lack of data availability existing literature on African firms has presented survey-based evidence on financing structures while detailed financial evidence (from balance sheets and profit/loss statements) is still lacking.

This paper aims at filling this existing research gap. We identify female-owned firms and examine the impact of ownership structure on financing structure and firm performance. We use cross-sectional balance sheet and profit/loss data of firms in Sub-Saharan Africa for the years 2006 to 2015. We relate ownership form, specifically gender, to firms’ underlying financing structure and performance. We also take other ownership characteristics such as international ownership and ownership concentration into account. Our results revel a clear gender-specific pattern.