By Shruthi Jayaram and Tania Beard, Dalberg Global Development Advisors
By now, we know that women – especially in the developing world – have less access to finance than men. Business has an important role in levelling the playing field through interventions aimed at easing constraints on the demand-side (awareness of financial products or business and literacy training), the supply side (designing financial products and services that address women’s needs), and in the enabling environment (regulation and socio-cultural factors). Overall, demand-side approaches have been the most widely deployed, and supply-side interventions are emerging. However, beyond supply and demand, there are too few initiatives that address the socio-cultural conditions necessary for women to thrive. Taking a holistic, integrated approach by prioritizing socio-cultural interventions alongside supply and demand will be crucial to increasing women’s access to finance. While the role of the private sector in shifting socio-cultural norms remains largely untapped, we want to see business tackling these constraints through the powerful levers – people, brand, purchasing power and partnerships – at its disposal.
The evidence is clear: women entrepreneurs are disadvantaged due to their limited access to finance. Across the world, women-owned SMEs grow at a lower rate when compared to their male counterparts, and access to finance is a critical hurdle to growth. The IFC estimates that across developing countries, around 12-14 million women-owned micro-enterprises and 6 million SMEs are either unserved or under-served financially. The financing gap for formal women-owned SMEs alone is as high as USD $260–320 billion, a figure which would be much higher if informal women-owned enterprises were included.
While the business case for any specific financial transaction is inherently specific to the institution and individual, all preliminary indications point towards a strong business case for lending to women – women have low default rates, high savings rates, and promote their preferred financial brands widely. What, then, can business do, to close the gap in access to finance?
Broadly speaking, there are three buckets of solutions that are deployed to facilitate women’s access to finance: demand-side, supply-side, and enabling environment – the latter encompassing both regulatory and socio-cultural barriers.
Efforts tend to be focused on the demand side, which seek to address factors such as women’s limited awareness of, or access to, available financing options, or unfeasible requirements for financing due to biased social, cultural, or legal norms. Dalberg recently completed a market overview of private sector companies’ commitments of over $300 million to support women’s economic empowerment worldwide, in partnership with ICRW. On the whole, the majority of programs focus on the demand side: increasing women’s access to finance by increasing their awareness of financial products, or business and literacy training.
Relatively less emphasis has been placed on the supply of financial services, although this is crucial and slowly changing. Supply-side interventions seek to address the fact that financial institutions may find it more difficult to reach women through typical sourcing efforts; may prefer to not serve women or view them as higher-risk; or may even be unaware of women’s needs and priorities when designing financial products and services. Workshops carried out by our human-centred design team for a bank in India indicated that training more female bank tellers, demarcating child-care friendly areas and installing female toilets could encourage more women to go to the bank by creating an attractive environment. The Development Finance Company of Uganda (DFCU) provides training, networking opportunities, preferential borrowing rates, and mentoring programs to women, in conjunction with innovative financial products. Sacombank in Vietnam has innovative “all-women” branches offering differentiated loan, deposit, and credit card products. Dalberg’s own Women Investment Club (WIC), a commercially-oriented investment platform where women can learn from one another, also addresses this issue. WIC is the first initiative in the WAEMU region to mobilize exclusively female investment into a broad portfolio that over time will bridge the gender finance gap by supporting women-led businesses.
Work to address constraints in the enabling environment are relatively few, and tend to be spearheaded by development organizations, mostly focused on regulatory rather than socio-cultural constraints. Legal barriers can require women to obtain permission from a male family member to open a bank account or a business, and biased inheritance practices can severely limit women’s control over collateral such as land. However, even where legal barriers have been removed, women are still subject to discrimination based on customary law or cultural practices. A recent report from Value for Women highlights that lack of family and community support – be it in the form of approval, willingness to share household tasks and responsibilities, or moral support – is a key factor to restricting women entrepreneurs’ access to finance, and more broadly, their ability to build and grow their businesses. Additional influential factors the report identifies are cultural expectations of what “an entrepreneur looks like” and the types of financial risks it is culturally appropriate for women to take.
Socio-cultural factors do not just directly hold women back (the demand side), they can also translate into unconscious bias within financial service providers (the supply side). While socio-cultural initiatives holistically improve the ecosystem around women’s access to finance, there are relatively fewer programs working in these areas today. As a result, gender trainings for women, men and communities anchored around consciousness-raising and social norm change, work to equalize property rights through best practices for land certification or innovative registration, and support to government to close loopholes on regulatory family codes should be prioritized alongside supply and demand.
Tackling socio-cultural constraints is not the sole responsibility of the traditional development community. Business also has an important role to play. As our research has found in the past, companies have powerful levers – such as people, investments, brand, customers, purchasing power, and partnerships – at their disposal, and can take an integrated approach to women’s economic empowerment. One of the most interesting developments include examples of companies that proactively acknowledge gender dynamics in their advertising. For example, Unilever in India has been utilizing the power of advertising to shift cultural norms around household responsibilities, but this space is as yet largely untapped. In complement, industry and business codes of conduct that establish standards for branding have an important role to play in encouraging companies to engage in gender-sensitive marketing and customer engagement activities, such as Diageo’s marketing code protecting against objectification or demeaning of women. We believe that harnessing the power of business to complement the work of the development community to lift these socio-cultural barriers can be truly gender transformative for women entrepreneurs, not just in accessing finance, but in establishing and growing their businesses more broadly. The space is wide open, and we call on business to rise to the challenge.
Blog Series: Challenge on Women’s Economic Empowerment Challenge
As part of the Business Fights Poverty / CARE Challenge on Women’s Economic Empowerment, we ran two online discussions during May to discuss how companies can support women’s empowerment in four specific areas: value chains; internal policies and practices; external marketing and customer and engagement; and addressing structural barriers. This blog series will deal with each of these topics, extracting key messages from the online discussion and adding observations from the writer’s own perspective and experience.
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