USAID Tests a New Approach to help Female Entrepreneurs in St. Lucia Get Loans
This story originally appeared on Marketlinks. Read the original piece here.
By Kristin Kelly Jangraw, INVEST Director of Communications
Juliana Samuel is a seasoned entrepreneur and HR software provider in St. Lucia. Despite the potential of her business, two of her loan applications were rejected. Why? Because they had collateral requirements she could not meet and the loans required multiple guarantors. Now, through a USAID-funded pilot program with the Bank of St. Lucia, she recently received her first loan to purchase new equipment, participate in a leadership development program, and upgrade her proprietary HR software.
“When I started looking for funding to start my business, it was hard. I had to provide cash security, which limits what you can do. So, this product was a very good initiative,” she says.
Approximately half of the small and medium enterprises (SMEs) in St. Lucia are women-led, and these women often lack access to finance. The collateral requirements that accompany bank loans are a particular challenge for female entrepreneurs.
“St. Lucia does represent a lot of what happens globally with women-led businesses,” says Hillary Procter of Making Cents International. “Assets are not put in the woman’s name, so women are slower in developing collateral that can be used to put down on a loan.”
In response, USAID is working to help more women access the loans they need to grow their businesses, increase their income, and create jobs. In 2023, the USAID INVEST initiative conducted a rapid scoping mission in St. Lucia, which validated market demand for an inclusive lending product for female entrepreneurs and identified a potential partner in the space — the Eastern Caribbean Partial Credit Guarantee Corporation (ECPCGC). Later that year, INVEST and its partner Making Cents International led a collaborative process focused on financial inclusion for women. It brought together female entrepreneurs, local financial institutions, local business support organizations (BSOs), the Organization of Eastern Caribbean States (OECS), and the ECPCGC.
As a result, the stakeholders had a roadmap to move forward. The Bank of Saint Lucia launched a new product tailored to women, offering loans up to about $37,000, with minimal equity and low collateral requirements, a 10-year tenor, and a competitive interest rate. These loans included an option for a 12-month moratorium on principal payments, and it was 85 percent guaranteed by the ECPCGC, reducing risk for the Bank. The Laborie Credit Union updated their loan underwriting process to account for specific challenges encountered by female entrepreneurs, including simplifying the loan process and allowing flexible monthly repayments tied to an entrepreneur’s cash flow.
Both financial institutions allow women to take out small loans, which is what they need. According to INVEST’s Joseph Leavenworth Bakali, “There’s a lot of focus on innovative venture financing, but these businesses just need a little debt capital to purchase a piece of equipment or something. They don’t want to have crazy expectations of them. They just want to grow and flourish as businesses.”
While the new lending products cater to the needs of entrepreneurs and the specific challenges they face, they cannot fully solve the problems facing female-led SMEs. Women entrepreneurs need additional support to know what types of financing are available, get their paperwork in order, and be successful in their loan applications. INVEST and Making Cents International worked with two local business support organizations — St. Lucia’s Small Business Development Centre (SBDC) and business development and social impact consulting firm SLUDTERA — to tee up support for women entrepreneurs.
“We wanted to change the ecosystem and bring together all the partners you need — financial institutions, public and private business support organizations, and women — because they each have a part to play,” says INVEST’s Nadia Dawood. “The biggest part is having the BSOs be an extension of the banks, working with women to prepare them for the loan application process and making sure they have their paperwork ready and their accounting in order so the banks aren’t just going to reject them outright.”
“We know that both financial and non-financial support are essential for financial inclusion, especially for those coming in for the first time. Being able to access those support services is so important for financial readiness, understanding what the financial institution is looking for, what their expectations are, and what the process is,” says Lauren Littles of Making Cents International.
USAID INVEST and Making Cents International provided technical assistance across the ecosystem. They helped the financial institutions simplify their application processes, reduce barriers such as collateral requirements, and structure inclusive products. They helped BSOs hone their support to women SME owners. Further, they provided technical assistance to SMEs through SBDC and SLUDTERA to increase loan readiness, strengthen loan applications, and support women through the loan application process.
“[The consultant] was very hands on. [As a result of the loan assessment training we received,] the SME officers have been able to do more loan applications than before, even outside of these products,” says Arleta Rate-Mitchel of the Bank of St. Lucia.
“The support I received from the SBDC and SLUDTERA was extremely helpful,” says Jordann Norbert, CEO and founder of EcoFood Training and Certification Agency and a participant in the pilot program. “I received support in creating my business plan and my financial documents, establishing a good social media platform that is engaging and interactive, establishing a system for hiring and recruiting staff, perfecting my pitch for the loan interview and for other purposes, and learning how to tell my story.”
This small pilot program allowed a few women to test the new products and support services — and showcased a clear need for this type of support. Given the pilot’s success, both financial institutions have committed to engaging with more women SME owners to access loans. Making Cents International also held some “train-the-trainer” sessions so staff at the financial institutions will be prepared to train future staff on meeting the needs of female-led SMEs.
INVEST and Making Cents International have developed two toolkits that outline how this approach can be replicated in other financial institutions and other markets in the region. One toolkit is designed for business support organizations and other similar technical assistance providers. The other is designed for USAID and its implementing partners.
According to Littles, “It’s not just about the supply of financial products and services, but how you can build demand and access to that supply.” The toolkits provide a roadmap for collaboration on an ongoing basis. They will also help others in St. Lucia and the Caribbean replicate the approach, thereby strengthening lending ecosystems for female entrepreneurs.
Access the toolkits:
- Developing Inclusive Lending Strategies to Support Women-Owned Small and Medium Enterprises: A Toolkit for USAID Implementing Partners
- Improving Advisory Service Offerings: A Toolkit for Business Support Organizations
