Accion Opportunity Fund in Conjuction with ACCION Releases Global Perspectives Report

In conjunction with Accion’s Center for Financial Inclusion, Accion Opportunity Fund (AOF) is pleased to publish Global Perspectives: A Comparative Study of Small Business Financing in Ghana, Kenya, and Black Entrepreneurship in the United States with the organization’s inaugural HBCU Research Fellow, Jaquetta Graham, PhD, leading the research.  

Under the mentorship of AOF’s Vice President of Research and Policy, Dr. Joshua L. Miller, Dr. Graham adds to a growing body of research calling attention to the ways in which the United States can look to African nations to better serve its Black entrepreneurs and expand access to capital. At the forefront of financial and mobile technology, Ghana and Kenya serve as prime examples to study.  

Dr. Graham and Dr. Miller sought to answer questions regarding capital access challenges faced by Ghanaian and Kenyan entrepreneurs, the impact of alternative and digital financing products, and potential comparison and application to the experiences of Black entrepreneurs in the United States. 

Key Findings 

• Formal financing, or financing from banks and traditional lenders, remains out of reach for many Ghanaian and Kenyan entrepreneurs with half or more entrepreneurs in the study refraining from applying for traditional financing options. Focus group participants reported being denied capital due to insufficient revenue or collateral, offered unfavorable repayment terms, or rejected due to inadequate documentation.
• Women entrepreneurs in Ghana and Kenya, who already struggle with higher rates of rejection due to owning smaller businesses in more competitive, low-margin industries than men, reported additional obstacles in balancing their home and business obligations and accessing mentors who could adapt to their schedules. 
• The plethora of alternative financing options in Ghana and Kenya, like mobile financing, factoring or merchant cash advance (MCA) products, and informal savings groups, helps to alleviate the lack of access to traditional financing. However, these options are associated with risks like obscure fees and terms, high cost of repayment, or theft. 
• Likewise, Black entrepreneurs in the United States face difficulties in accessing capital. Only 14% of Black-owned small businesses receive the entirety of the funding they requested, according to the Federal Reserve. Black female entrepreneurs in the United States also struggle with accessing mentors who could relate to their own struggles. 

Given these similarities, there is much to glean from the experiences of Ghanaian and Kenyan entrepreneurs that can be applied in the United States. As capital access remains the biggest obstacle for Black entrepreneurs in starting and growing their businesses, AOF offers the following recommendations for American policymakers, service providers, and other relevant stakeholders.  

Recommendations 

• While speed and innovation are key to expanding access to capital—particularly among mobile apps and services—new products and technologies must be fair and transparent in their terms and pricing. Policymakers and regulators should encourage the private sector to innovate new products while also requiring and enforce transparent lending standards.  
• There is a demonstrated need for women-centered products and services that reflect the specific credit and mentorship needs of female entrepreneurs in the United States. Solutions like informal savings groups, pitch competitions, and greater access to female mentorship should be fostered in the United States.
• Global Perspectives – A Comparative Study of Small Biz Financing (final)Establishing more public-private partnerships is a viable means of easing loan criteria and extending additional credit to Black entrepreneurs. For example, the already-existing State Small Business Credit Initiative provides federal dollars for use in state-led loan backstop programs. Programs like this allow lenders to take on more risk without directly involving the government or jeopardizing their portfolios.  

The full report can be viewed here