When do women microentrepreneurs say ‘yes’ to formal credit?

Women microenterprises across Africa are often informal and resource-constrained, especially due to limited access to formal credit (World Bank). A survey in Kenya shows that more than one-third (36%) of women microenterprises required a loan but did not apply for it due to limited access to suitable credit products, high costs, low inclination to take on debt, complex application procedures, or previous negative experiences with credit (CGAP/World Bank, 2025). 

BFA Global’s Financial Diaries research shows that credit products must be tailored to women’s unique needs to close this credit gap. Women often prefer small, easily accessible, and flexible loans, enabling them to address short-term liquidity constraints while managing the uncertainties of running a business. But, does providing formal credit products to women microentrepreneurs automatically increase loan uptake? If not, which conditions make credit products work for them?

BFA Global tested three credit products designed for women microentrepreneurs under the Gates-funded Women’s Economic Empowerment (WEE) Opportunity Leads Umbrella Program, evaluating uptake and their impact on business growth and income. The pilot results show that access to credit alone is insufficient to drive formal borrowing among women micro-enterprises. Uptake depends on timing, design, and delivery of credit. Specifically, credit products work better when they are designed for different segments of women entrepreneurs, help them manage income volatility, enable them to reinvest profits in their enterprises, and offer consistent products that foster trust in service providers. 

Recognizing the heterogeneity of women micro-enterprises improves credit design and uptake

Across our pilots, women microentrepreneurs consistently identified access to capital as a major barrier, but the Victory Farms pilot showed that capital needs vary across business stages. Recognizing capital constraints as a key growth barrier,  Victory Farms partnered with Pezesha to provide short-term stock credit to all women fish sellers (Mama Samakis), offering 7-day repayment terms at 2.5% interest. In two months, 126 loans were disbursed to 116 borrowers.

Analysis of the credit design sprint found strong repayment performance during the pilot, with 92% on-time repayment and 98% overall repayment after late recoveries. However, shortly after this, Victory Farms changed its procurement process, shifting stock purchases from easy-access outlets to centralized warehouses. This increased transport costs, reduced flexibility, and put pressure on margins, especially for low-volume vendors.

When credit was offered broadly, lower-volume sellers who were more price sensitive and less embedded in the system were more likely to default and leave Victory Farms when cheaper alternatives became available. In contrast, higher-volume sellers who could absorb the price differences continued to consistently borrow and repay successfully. In response, the financial service provider, Pezesha, adopted a risk-based lending model, segmenting borrowers by risk level and temporarily limiting loans to low-risk customers.

The pilot results highlight the importance of segmenting women entrepreneurs. While all women micro-entrepreneurs need capital to grow, not all are equally ready for commercial financial products. This creates a role for enterprises to identify who to serve with which type of capital, and when. 

Offering interest-free loans to new entrants requires more than finance to boost uptake 

At Healthy Entrepreneurs, community health workers were trained as Community Health Entrepreneurs (CHEs) to deliver essential health products and services in rural Kenya while earning additional income for their families. Before the pilot, newly trained CHEs were required to purchase inventory from Healthy Entrepreneurs to launch their businesses. This often meant borrowing money from family, friends, or savings groups, or selling livestock to raise the necessary funds. 

To address the upfront capital requirement, Healthy Entrepreneurs offered inventory credit at zero percent interest through two streams: ‘Booster’ for experienced, high-performing CHEs and ‘Builder’ for newly onboarded CHEs, allowing them to receive inventory upfront and repay only after making sales. Initial results showed very high uptake of inventory credit among experienced CHEs (99%). Access to credit enabled them to replenish stock without requiring additional capital, prevent stockouts, increase order sizes, respond more flexibly to urgent community demand, and ultimately boost their profits. These CHEs were already familiar with their markets, had established business strategies, and were confident in their ability to generate sales. Over time, they had also built trust with their spouses, who were more supportive of business decisions such as taking on additional inventory.

In contrast, uptake among newly onboarded CHEs was much lower, with only 40% accepting the inventory credit. Concerns about generating sufficient sales to repay the credit made them reluctant to take on inventory, even when it carried no interest. Many of these CHEs were still learning about the health products, building their customer base, and navigating markets they did not yet fully understand. In addition, many reported that their husbands played a key role in decisions about whether to accept inventory credit. Limited confidence in the business opportunity, combined with household decision-making dynamics, led to low engagement among newly onboarded CHEs.

The pilot highlighted the importance of testing credit streams across identified segments of women microentrepreneurs to gain a better understanding of the gendered and behavioral barriers limiting women’s access to startup capital. The findings underscore that credit alone is not a guarantee of success for new market entrants. For many women microentrepreneurs, financial stability and household permissions take priority over capital. For those who want to grow, access to credit must be accompanied by skills, a business network, and knowledge that allow capital to be deployed effectively. 

Bundling service to address income volatility helps secure women’s confidence in their business and credit provider

A key challenge for women microentrepreneurs is that business income is often diverted to household expenses, limiting capital for reinvestment. To address this, Healthy Entrepreneurs introduced a simple cash management system that helped women separate earnings for business, savings, and household spending. CHEs were encouraged to pay themselves a salary while preserving capital for business growth and repayments, creating positive financial habits. As a result, default rates stayed below 3% when credit was later introduced, and nearly all CHEs reported improvement in their ability to manage finances.

Healthy Entrepreneurs recognized that income volatility and unexpected shocks, such as hospitalizations and family emergencies, could disrupt CHEs’ repayment, restocking, and business growth. To address this, the credit offering was complemented by emergency top-ups, access to third-party hospital insurance, and additional stock credit for CHEs with strong repayment records. Qualitative findings from our research show that these features acted as a safety net, helping women maintain inventory, avoid distress sales, and strengthen their borrower-buyer relationship.

At Victory Farms, a points-based loyalty program rewarded women fish sellers (Mama Samaki) with practical business assets such as umbrellas and solar lights. While the program had a limited direct impact on income, it helped reduce operating costs and ease cash-flow pressures, particularly for women balancing household and business expenses. Loyalty was driven not only by rewards but also by Victory Farms’ reliable supply, pricing, and product quality, which strengthened trust among sellers.

In both pilots, combining skills training with credit created significant value for women entrepreneurs. Under Healthy Entrepreneurs, almost half of the experienced CHEs reported increased business confidence, driven by access to inventory credit and improved customer trust. Around three-quarters felt less financial stress, and over 60% reported feeling greater respect within their communities. Similarly, under Victory Farms, Mama Samakis gained confidence and a stronger entrepreneurial identity through new skills and capabilities.

Clear communication of costs, loan terms, and payment structures is critical to prevent borrower mistrust in credit offerings 

The Powered by People pilot supported women-owned and women-staffed early-stage handicraft businesses selling online. Many women, even when they had access to buyers, lacked the working capital needed to fulfill orders. In response, the platform pre-financed purchase orders from international buyers, providing makers with the capital required to start production once an order was secured. 

Makers found the deposit highly beneficial, but several challenges emerged with the financing approach. In some cases, prefinancing emerged as a source of confusion rather than clarity. Without adequate explanation of what the mechanism involved or why it was necessary, some makers came to view it as an unwelcome imposition rather than a helpful tool. This misunderstanding was compounded when PBP continued to require prefinancing even after goods had already been delivered.

Makers had been trained on a payment structure requiring a 50% deposit upfront, with the remaining 50% due upon delivery. PBP later revised this structure, splitting the remaining balance into 25% upon delivery and a final 25% upon receipt of the goods. This deviation from what was communicated during training caused financial strain and delayed receipt of full payment, which became contingent on the buyer’s receipt of goods. In some cases, makers cited significant delays in receiving the deposit and the subsequent payment, contrasting it to their international buyers, who typically settle the remaining balance within 2-3 days of delivery confirmation. 

Makers also raised concerns about currency conversion losses, noting that bank fees and inflation during conversion ate into their profit margins. This issue was not adequately addressed in the training. Prefinancing orders added immense value in helping makers fulfill their orders, but it could be strengthened by addressing these challenges.

What have we learnt through the pilots?

The pilot findings show that understanding women entrepreneurs’ readiness for credit, testing products across different segments, and bundling non-financial support to increase women’s financial resilience are critical to increasing credit uptake and its effective use.

It can be argued that segmentation may help reduce credit risk, but it also narrows the pool of customers who qualify for the product. This results in a smaller credit portfolio, which can threaten the product’s long-term viability and squeeze the FSP’s profit margins. This is a gap that philanthropic or blended capital can help fill. Lower-income or earlier-stage entrepreneurs may require de-risked models, such as group-based lending or more flexible products, before they can transition to fully commercial offerings. Enterprises can support this by designing pathways that help women micro-entrepreneurs graduate over time and meet them where they are, rather than assuming a one-size-fits-all approach. Additionally, testing credit streams with women entrepreneurs at different stages of their business can add value to product design. 

We learned that women microentrepreneurs prioritize their financial resilience over simply accessing credit. Introducing emergency top-ups to current credit offerings and complementing them with savings and insurance products can help them better manage cash flows, withstand income shocks and business disruptions, and build a stronger financial safety net. Credit can significantly enhance the value of a business support product when it comes with minimal access barriers, is paired with capacity-building support, and has an underlying business model that generates adequate returns for participants.

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