Getting corporates to buy from women-owned firms
Ms Alice Kimotho, arranges various types of fruits at her stall at Top Market in Nakuru county.
When asked what portion of their procurement goes out to women-owned businesses, most corporates in Kenya estimate it at about 10 percent.
The reality is that in most cases it is one percent and on average three percent of direct purchasing volume.
Women entrepreneurs dominate the low-value procurement categories such as personal services in health clubs, gyms, and catering; and business services that provide bulk printing, marketing materials, signage, and cleaning.
World Bank’s private equity fund the International Finance Corporation (IFC) wanted to find out the reason behind the dismal performance of women-owned businesses, and they discovered that it starts with defining what women-owned businesses are and facing top corporates to show them their own numbers.
“It is not like any company wants to exclude women-owned businesses, they do but they do not necessarily know how to make that happen,” said Amena Arif, IFC country manager.
IFC launched a programme in June last year called Sourcing2Equal seeking to change this after surveying data from 571 SMEs, and interviews with 14 corporate buyers in Kenya, providing unique data on gender gaps in the participation of SMEs in corporate supply chains.
Women-owned businesses
They want to link 1,300 Kenyan businesses to top corporate and replicate the model globally with a target of 5,000 women-owned businesses in three years.
Kenya is the first country specific location where the programme is being applied after examining barriers that Kenyan SMEs face in accessing private procurement contracts, and if there are differences based on whether companies are owned by women, men, or owned jointly by both.
They have enlisted 10 firms including Stanbic, Absa, Safaricom, Kengen, Unilever, Bidco, Bamburi, and Tropical brands.
IFC has organised learning where companies work with and learn from one another. They set voluntary targets within a time-bound period.
“How can we ensure this is not a CSR activity, it is not something they are doing that is just good for their brand, but it makes economic sense, there is actually a business case. And with these companies we want to demonstrate there is a business case,” Ms Arif said.
On the demand side, IFC discovered that most corporates just can’t just find the right fit of women-owned suppliers who are reliable enough or have the experience to deliver on larger ticket procurement.
They are also unaware of some of their contracting policies that deny women opportunities including terms and conditions, which create unintentional constraints, particularly for new WSMEs, which must compete on an equal footing with large or existing suppliers.
IFC says the limited operational capacity of women-owned small business to deliver on contracts, and buyers being unable to identify capable female suppliers were the most important challenges buyers face in trying to increase their purchasing from women.
On the supply side, IFC is trying to help women-owned firms build their capacity to overcome limited access to capital, inadequate resources, skills, and a rolodex that can get them through the door before they can even try to break the glass ceiling.
“Is there enough capacity in women-owned businesses to participate and tap that opportunity? So we are also doing capacity building for women-owned businesses and are looking to train at least 1,300 businesses. Globally we are looking at 5000,” Ms Arif said.
Documented studies
Kenyan government policy to ensure that 30 percent of government procurement contracts are awarded to micro, small, and medium-sized businesses that are owned by women, persons with disabilities, and/or youth is spreading to the private sector.
They are becoming alive to documented studies that show that a diverse supplier base provides several business benefits, including lower procurement costs, lower risk of disruptions in supply chains, greater brand recognition, and increased innovation.
This business case is not well known to most buyers and does not appear to be the main driver for procuring goods and services from women-owned businesses.
IFC found that even progressive private players who adhere to sustainability standards that include gender equality are not doing enough on the procurement side.
Most buyers have not established the business case for supplier diversity, including gender-inclusive sourcing, and they do not collect sex-disaggregated data on their suppliers, which would enable them to determine how many suppliers are women-owned and led.
Nor are buyers able to set targets for achieving supplier diversity, and they do not have a budget for monitoring progress toward gender inclusion in tenders.
IFC wants to change that by partnering with local financial institutions to facilitate access to working capital and adapt contract payment terms to help them maintain their cash flow while linking with top corporate who have set targets to increase supplier tenders to women.
