By: Majidah Hashim & Maya Taylor, AFI Communications
Central banks have been instrumental in paving the path towards a more inclusive future by empowering women entrepreneurs, helping overcome the obstacles that many face daily in accessing and using financial services.
Women-owned micro, small and medium enterprises (MSMEs) make up 32 percent of the total MSME financing gap, according to the 2017 MSME Finance Gap, equivalent to approximately USD1.7 trillion. This staggering number represents the missed potential of women-owned MSMEs not only to create vital lifelines in some of the poorest regions of the world, but also to invigorate the economies of many countries.
Global trends tell us that some of the most impactful MSME finance policies and regulatory initiatives are those that not only open access to finance for women but also recognize how important it is to ensure the success of women-owned MSMEs. Central banks and financial regulators have been at the heart of realizing and implementing these policies with the Denarau Action Plan providing significant impetus in the advancement of gender inclusive policymaking decisions.
Financial exclusion disproportionately affects women. Of the 31 percent of adults (or over 1.7 billion people) who make up the global unbanked, more than half (or almost a billion) are women. In order to directly address national financial inclusion gender gaps, central banks are developing and implementing gender inclusive policies to increase access and usage of financial services by:
One of the biggest challenges faced by women-owned MSMEs in accessing credit facilities is a lack of collateral. In order to address this, the Reserve Bank of Zimbabwe (RBZ) built up the capacity of one of its subsidiaries, the Export Credit Guarantee Company, and enabled it to underwrite up to 50 percent of their collateral requirement.
Other AFI members are making similar waves. Bangko Sentral ng Pilipinas, for example, built a financial system with a thriving market for microfinance and whose beneficiary clients are mostly women. In fact, some microfinance providers deliberately target women clients. As a result, 85 percent of the country’s microfinance loans come from small businesses and microenterprises, of which 95 percent are owned by women.
Elsewhere, the Central Bank of Egypt (CBE) launched a number of regulatory and policy reforms to complement the government’s effort toward promoting and sustaining women’s financial inclusion, including unifying the definition of women-owned businesses.
CBE also incentivized banks to lend to microfinance institutions and non-governmental organizations providing microfinance. According to the Egyptian Union of Microfinance, this exponentially increased the number of microfinance beneficiaries, of which up to 70 percent are women.
Better data lies at the heart of effective policies that aim to reduce the financial inclusion gender gap.
For Bangladesh Bank , collecting sex-disaggregated data led to the modification of its MSME finance policy for women and produced a set of guidelines to ensure that banks and financial institutions provide institutional financial facilities for women entrepreneurs. In 2010, the central bank issued its first comprehensive MSME lending guidelines for banks and non-banking financial institutions. The guideline, which significantly increased access to finance for MSMEs, stipulated target-based lending practices and development strategies for women entrepreneurs. By 2016, over 350,000 new MSMEs, including over 25,000 women entrepreneurs, had gained access to credit.
After collating sex-disaggregated data, RBZ placed women’s financial inclusion as a priority area in its national financial inclusion strategy and customized financial products for women. A gender-responsive economic policy management initiative was established in 2013 that includes gender-responsive budgeting with the aim to ensure gender equality in all sectors of the economy. This policy has been embedded into all government ministries.
Central banks have spearheaded financial literacy programs for MSMEs, especially women-owned enterprises. Among them is the “NilePreneurs” initiative, which is funded by CBE and implemented by Nile University, through which the central bank aims to support entrepreneurs, start-ups and MSMEs by establishing business development centers in geographical areas with promising investment opportunities. The initiative has boosted the number of women entrepreneurs across Egypt by encouraging them to participate in MSME establishment and management.
As part of its commitment to reduce the gender gap, the Bank of Zambia (BoZ) conducts financial literacy trainings that target at least 50 percent women participation, and women’s leadership training that aims to facilitate greater gender diversity in decision-making positions.
CBE and BoZ were participants of the first cohort of AFI’s Leadership and Diversity for Regulators Program, which is run in collaboration with Women’s World Banking and the University of Oxford. The program focuses not only on developing women-focused regulations and policies, including for MSMEs, but also underscores the importance of having a strong women’s leadership pipeline and that institutions must understand the needs of the various women’s segments.
Since the launch of its national strategy for financial inclusion, Banco Central de Timor-Leste has implemented a series of financial literacy training programs. Several specifically target women, as they make up a significant portion of the MSME workforce.
Meanwhile, the Central Bank of Jordan made it a national goal to both increase financial inclusion and reduce the financial inclusion gender gap within the Kingdom. Aligning these targets with AFI’s Maya Declaration, the bank has extended access to digital financial services for refugees and non-nationals and also championed the introduction of financial education programs in school curriculums from ages 12 to 16.
According to the 2018 Global Entrepreneurship Monitor, only nine countries in the world have achieved gender parity in entrepreneurship: Angola, Ecuador, Indonesia, Kazakhstan, Madagascar, Panama, Qatar, Thailand and Vietnam. It is worth noting that these countries are at different stages of economic maturity, demonstrating that no matter the stage of a country’s development, it is possible to execute programs that successfully address the financial inclusion gender gap in the area of entrepreneurship.
Central banks championing policies that promote gender inclusive finance create a ripple effect by touching and empowering almost every aspect of the lives of women and girls. According to the 2017 Global Findex Database and UN Women Data, women are more likely to spend on health and healthcare of children and on their ability to find education and jobs. Therefore, when the earnings of women increase, the wellbeing of their entire household improves. The support that central banks extend to women is vital not only in lifting some of the poorest communities out of poverty, but also empowering them as part of the country’s essential economic pillars, growth and stability.
The Denarau Action Plan is a 10-point plan that aims to boost women’s access to quality and affordable financial services globally. It emphasizes the importance of measuring and evaluating progress and fosters strong partnerships and collaboration with financial service providers to drive private sector leadership. Among its commitments, members aim to halve the financial inclusion gender gap across their jurisdictions by 2021.
AFI’s Gender Inclusive Finance workstream is financed by the Swedish International Development Cooperation Agency (Sida) and other partners.