"Gender-Neutral" Financial Services
I recently stood in front of a group of investors and business coaches and explained the gap in investment in women-led small businesses. After the presentation, an audience member asked me whether I thought banks and investors should start biasing their services toward women. "No," I replied, "you should unbias them away from men." This is the core of gender mainstreaming: recognizing that current products and services by default cater toward men, since there have historically been far more businessmen than businesswomen.
The massive potential of small businesses to provide decent employment is limited by this gender gap, since roughly one-third of all small and medium enterprises in the world are led by women. Consensus is emerging around why it makes sense to invest in women-led business. Women invest more of their income in their families’ health and education, promoting an intergenerational development impact. For banks and other lenders, women are loyal borrowers who take on more products and services and refer other clients to banks at higher rates than men. There may also be a performance effect when women lead companies—boosting revenues and improving employee morale. In short, investing in women-led business is likely to have a big impact on both development and business bottom lines.
So how can the financial sector take advantage of the opportunities represented by women entrepreneurs and business leaders currently lacking access to finance? One way to start is by addressing the unconscious bias in financial services for small businesses. Value for Women's recent research project has discovered several ways in which financial service providers and others can address potential women clients. Three of them are explained below.
Rethink networking and outreach spaces
Traditional spaces for business interactions are generally more accessible to men. In India, deals are made as frequently in informal spaces, such as at the chai stall, as in formal settings like the boardroom. In India and other places, these informal spaces are culturally off-limits to women. Even formal spaces frequently exclude women, in large part because of social expectations that women carry out the bulk of the responsibilities related to the household care. This ties them to the home, especially at certain times of day.
Financial institutions and investors must make sure the timing of events held for entrepreneurs is convenient for women as well as men, and provide support to alleviate the double burden on women entrepreneurs, for example by supporting reliable and affordable childcare programs. More broadly, investors and financial institutions can take a good look at how they source their clients—what are the communication channels and relationships used, and are they equally good at reaching men and women?
Think outside the box for risk mitigation
Banks rely on collateral in the form of title to property or cash balances to mitigate risk, assets that are still off-limits for women in most countries. Women frequently have other types of assets, but they are not liquid enough for banks to use as collateral (such as livestock, jewelry, etc.). Bank balances therefore fail to tell the complete story of the “balance sheet” of the entrepreneur.
Alternatives to collateral-based risk mitigation for small businesses are beginning to emerge. For example, IntelleGrow in India’s viability-based loans can be unsecured. Demand dividends are a flexible new form of financing intending to match payments to cash flow. The Inter-American Development Bank is also working to support new ways of getting around lack of collateral and credit history, such as through psychographic tests offered by the Entrepreneurial Finance Lab. These alternatives will help to amplify the growth of both men and women entrepreneurs, but are especially important for women for two reasons: 1) their lack of access to title to property for use as collateral, and 2) there is a concentration of women-led enterprises in the service sector, where lending poses a greater challenges because the business’s physical assets are fewer.
Partnering with capacity developers can also help investors to lower the costs of due diligence, enabling smaller loan sizes needed by small businesses and women in particular. Agora Partnerships, an accelerator for small businesses in Latin America, has teamed up with recruiting partners such as WEConnect to reach high-quality women entrepreneurs for their program and with the McNulty Foundation to sponsor their program fees as scholarships. Agora’s rigorous application process makes due diligence faster and cheaper for investors Agora matches with its graduates. Financial institutions can also partner with capacity developers to help them tailor their skill-building services to the gaps investors commonly see among women applicants.
Make your internal processes more inclusive
Hiring more women loan officers and conducting gender-sensitivity training can make processes and practices more inclusive. Women loan officers are needed in places where men and women are forbidden from interacting without the presence of a male family member. But they are also important in other contexts, where men may be less comfortable reaching out to women, or may simply not see them as the target customers. Gender-sensitivity training can help both men and women to become attuned to unconscious gender biases and diminish informal discrimination—such as asking a woman business owner about her marital status, even when it’s not part of the bank’s official policy to consider personal status in the evaluation. This type of practice limits access for some women (especially younger women who are less likely to be married) and tends to perpetuate dependence on men.
Supporting women entrepreneurs and would-be entrepreneurs is critically important for economic development, poverty reduction, and private sector growth. Current barriers restrict women from fully utilizing their entrepreneurial talents to generate income, create jobs, and provide returns for investors. But there’s good news, too: there are tools and resources available to help financiers reach more women. Partnerships and collaborations with capacity development organizations offer powerful potential to chip away at the larger problems related to gender inequality by tailoring support and outreach to women.