“You cannot rely on bank loans to expand your business”: aversion to formal credit among female micro-entrepreneurs in Ghana

Charles Ackah, Gertrude Dzifa Torvikey, Faustina Obeng Adomaa and Kofi Takyi Asante

International Journal of Social Economics, 2023, vol. 51, issue 7, 870-883

Abstract: Purpose - The marginalisation of female entrepreneurs in accessing credit is well documented. Yet, how female entrepreneurs navigate through the marginalisation to gain funding is under-explored. Design/methodology/approach - The authors address this gap using qualitative data from 30 female entrepreneurs in three neighbourhoods with varying socio-economic characteristics in Ghana's capital, Accra. Findings - The authors find a marked aversion to bank loans among respondents. Consequently, they nurtured trust in their social circles in order to facilitate access to informal credit from internal (e.g. family and friends) and external (e.g. trade credit, associations and religious organisations) sources. This aversion to loans from formal financial institutions (FFIs) had a socio-cultural aspect, including cumbersome application procedures, a deep-rooted fear of the social consequences of defaulting and religious prohibition against interest payment for Islamic traders. Social implications - This paper shows that providing formal access to credit is not enough to support women's entrepreneurship if the socio-cultural factors inhibiting women's access to credit from FFIs are not addressed. Originality/value - The findings suggest that trust is an important factor that bridges the gap in female entrepreneurs' access to funding given their heavy reliance on informal sources of funding. Peer review - The peer review history for this article is available at:https://publons.com/publon/10.1108/IJSE-02-2023-0090

Keywords: Women's entrepreneurship; Credit; Micro-enterprises; Trust; Ghana (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijsepp:ijse-02-2023-0090

DOI: 10.1108/IJSE-02-2023-0090

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