Access to Assets
rates as a “major” or “moderate” financing constraint compared with other constraints (Kaufmann, Batra, and Stone 2003). Interest rates in Lao PDR are particularly high when compared to regional neighbors, such as Thailand. Although informal money lenders provide additional avenues for credit, the high risk involved and a lack of legal recourse mean that interest rates can be as much as 50 percent per day (World Bank 2007b). This finding is echoed in Mongolia, where the cost of finance is a severe problem and the required value of collateral to loans is higher than in any other country—as a consequence, less than one-third of firms have a bank loan (World Bank 2007c). Such costs are likely to affect the smallest businesses the most because they tend to operate close to the edge, with little room to maneuver in terms of costs. They also tend to be owned by poorer people with less access to collateral. More consistent, sex-disaggregated data on the average financing costs faced by women, compared with those faced by men, are needed to understand completely whether these costs reflect a consistent gender bias. Finally, the complexity of financing procedures appears to be a particular concern among female entrepreneurs in the East Asia and Pacific region. Indeed, in one survey of Vietnamese businesswomen, the highest proportion of respondents (29 percent) rated complicated procedures as the most significant barrier to obtaining credit (IFC 2006c). In another study in Vietnam, Han and Baumgarte (2000) also found that entrepreneurs had a negative perception of loan application procedures. And in a survey of Pacific Island SMEs, firms in Fiji, Samoa, and Tonga identified “paperwork” as the main problem in accessing finance (IFC 2003). The time-consuming nature of dealing with complex procedures may be especially constraining for women, who tend to take on the largest share of household and family responsibilities. Improving the credit supply side is a long-term process, which accompanies the general process of economic development. In the medium term, however, countries can develop and implement innovative policies to increase financial access for entrepreneurs, particularly in the medium, small, and micro sectors. Two possibilities for such innovation are leasing and franchising. The case study of a female entrepreneur in the Philippines demonstrates clearly why the franchising business model can particularly benefit women entrepreneurs. Pacita Juan’s coffee franchising business has been win-win for both her and her franchisees. For Juan, franchising offered a different way to scale up in a credit-constrained environment. For her franchisees, Figaro Coffee offers an established brand, know-how in navigating
Published on May 10, 2010
Published on May 10, 2010
The East Asia and Pacific region has made great progress, relative to other regions, with regard to both economic development and, specifica...