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Expanding access to credit has been the cornerstone of financial inclusion for women-owned businesses. Governments, financial institutions and development partners have worked to reduce collateral requirements, digitise lending, simplify applications and make more funds available for lending. These efforts have undoubtedly widened access to formal financial services.

Yet, despite this progress, many women-owned micro-enterprises continue to struggle to grow, suggesting that access to credit alone is not enough. In a recent article, I explored why some women choose not to borrow, even when formal credit is available to them. From my experience, this is often a rational business decision rather than a sign of limited financial literacy or access.

This raises a practical question: What business constraint is the finance intended to solve? 

Matching finance to business needs

A mistake often made is to diagnose every business constraint as a shortage of finance when the reality is often more complex. A woman may have access to credit yet struggle to grow because she lacks customers, equipment, transport, distribution support, certifications, time or timely customer payments. In such cases, additional debt does not solve the underlying problem; it simply adds another repayment obligation.

Before offering a loan, providers need to understand the purpose of the money on the business and what stands between that investment and increased revenue. Is there a demonstrated demand? Will the loan improve productivity or margins? Will she have control over the funds to invest them as planned? Is the proposed repayment period realistic?

Credit is most likely to support growth when linked to an existing order, reliable buyer, productive asset or clear sales opportunity. Where constraints lie elsewhere, solutions may include market linkages, asset finance, certification, logistics or working-capital structures that accommodate delayed payments. In some cases, business support, savings, insurance or no borrowing at all may be more appropriate.

The financial inclusion sector has understandably focused on expanding access, but loan uptake is an incomplete measure of progress. It does not show whether credit strengthened businesses, increased incomes or improved resilience, or whether repayments came from business profits, household income, another loan or asset sales. Nor does it reveal whether borrowers retained control over the funds or would choose the same product again.

What credit that works would look like

Responsible finance is not about maximising the number of loans taken. It is about ensuring that finance improves the position of the people using it.

Finance solutions designed for women micro-entrepreneurs must begin with the reality of the business and household rather than the features of the product. That requires a more deliberate understanding of income patterns, market demand, household exposure, decision-making power and the purpose for which the money is needed.

For loans, repayment terms should correspond as closely as possible to the way revenue is earned. Loan sizes should be meaningful enough to address the business need without encouraging unnecessary debt. Terms should be explained in simple language, including the full cost of borrowing and what happens when a payment is late. Borrowers need time and space to ask questions before committing.

Providers must also ensure women retain meaningful control over capital. Where household dynamics may affect how funds are used, safeguards such as staged disbursements, direct supplier payments and financial counselling can help protect the intended use of the finance without taking decision-making away from the woman.

Where businesses are exposed to frequent shocks, finance should be accompanied by mechanisms that protect rather than erode resilience such as savings, insurance, temporary repayment flexibility or clear hardship provisions. These can address psychological fear by showing borrowers that one disruption will not automatically trigger a crisis.

Most importantly, credit should not be offered as a stand-alone answer to every growth challenge. For some entrepreneurs, finance may need to be combined with market linkages, practical business support, logistics or tools that reduce the time required to manage the enterprise.

For other micro-businesses, savings or grant-based support may be more appropriate until the business is ready to take on debt. Some very small or highly vulnerable enterprises may be costly to serve through conventional lending models. Where concessional or philanthropic capital is required, it should be explicit, purposeful.

-The author is an impact strategy adviser in financial inclusion and women’s economic empowerment