Karina Azar
Ejecutiva de la Dirección de Análisis y Evaluación Técnica del Sector Privado
The gender gap, measured in terms of political leadership, economic participation, health care and education, narrowed over the past year. However, World Economic Forum estimates for 153 countries show that it would take as much as a century to fully close that gap. This takes place in a context where women are getting education at increasingly higher levels, there are more women-led businesses, and they control 80% of consumption decisions. These trends show a growing participation of women in economic issues, who are being considered as an opportunity and an important market segment by the financial sector. Even so, it is necessary to expedite their participation as financial sector clients in order to help close the gender gap.
Globally, there is an estimated USD 287 billion funding gap for women-owned Small and Medium-sized Enterprises (SMEs). Latin America is the region where this gap is widest: USD 86 billion, a huge business potential for financial institutions. Gender equality in the financial sector refers to men and women having equal opportunities to access and use products and services of financial institutions (banks, microfinance, cooperatives, among others), with gender biases not being an impediment to securing a loan on comparable terms.
Some financial institutions have recognized this opportunity and the impact of lending to women, not only to contribute to gender equality, but also regarding the benefits associated with having a gender diverse portfolio. There are more potential returns if we consider that women have higher repayment rates than men, lower default levels, and tend to be more loyal customers. In this segment, microfinance institutions have taken a lead in lending to women. Historically, they have been excluded or under-served by the banking sector, and this gap has been capitalized by microfinance, offering products that meet the needs of both individuals and companies (small ventures or MSMEs run by women).
In Latin America, there is a 6-percent gender gap in access to the financial system. However, the problem is exacerbated when we consider that women have been neglected by the financial sector: They are dissatisfied, they cannot find the right product, and they do not understand the products. Even though women have financial decision-making skills and tools, they often face an obstacle: Products are not tailored to their needs. One of the main obstacles curbing financial services to women is the fact that financial institutions are not familiar with women’s preferences.
Some factors applicable to most financial products developed with a gender perspective are: credits with non-traditional collaterals such as intangibles (jewelry, family members as guarantors, furniture); loans at more flexible rates (e.g. those granted to head-of-household mothers for education); consideration of grace periods; non-financial services that complement loans and serve as business model advice, among others. In any event, it is important to support this type of products with a reduction of red tape and other processes that may represent a barrier to accessing credits. An increasing number of financial institutions, including commercial banks, are targeting the women’s market. Thus, CAF—development bank of Latin America—has been supporting financial sector clients in an effort to expand the loans granted to women-owned SMEs. The above is not only subject to women’s majority ownership of businesses, but includes also aspects such as participation in boards of directors, as well as having products tailored to women, a workforce composed mostly of women, and equality policies or certifications. Some notable examples include Banco Itaú and Banco Santander in Brazil, which have directed CAF’s lines of credit to women-led ventures and SMEs. CAF’s role as a development bank involves not only maximizing the use of credit lines for specific purposes, but also providing support through non-financial services and public policy recommendations.
In this regard, the government’s role through development banking is pivotal, as a catalyst for loans to gender-focused financial institutions. If financial institutions have access to funds with differentiated characteristics from second-tier institutions, they may transfer these advantageous conditions to female beneficiaries, and thus encourage their economic empowerment and financial inclusion.
CAF has made public policy recommendations that pave the way for greater participation of women in the financial sector. The first relates to financial literacy, which is indispensable to improve financial decisions and boost women’s self-confidence when choosing financial products. There needs to be also gender-segmented indicator systems that help characterize the performance of women’s financing supply and demand. Lastly, we recommend institutions to design financial products that meet the profile and needs of women as users of the credit system.
