During my career in finance in the Middle East and North Africa (MENA), I have attended numerous workshops on financial inclusion. Many times, bank chief executive officers have been asked about the proportion of women customers in their portfolios, and invariably their reply has been: “We do not discriminate by gender at our bank. A customer is a customer”.
That might be the politically correct answer, but the numbers suggest many lenders still shy away from female borrowers. In MENA, only 35 percent of women have a bank account, compared to 52 percent of men, the widest gap of any region in the world[i]. What’s more, around 30 percent of formal small and medium-sized enterprises (SMEs) in developing economies are owned fully or partially by women[ii]. Yet, on average, only about 10 percent of women entrepreneurs have access to the capital they need to grow their businesses.
This is obviously problematic at a societal level. But it also represents a huge missed opportunity for lenders. More and more data results show that focusing on female clients not only benefits women entrepreneurs, it also provides banks with a growing—and lucrative—line of business.
A 2019 report from the Financial Alliance for Women, for example, shows that female borrowers are usually more loyal to their banks than their male counterparts, suggesting they may be more inclined to utilize one bank for their complementary financing needs[iii]. At the same time, they have at least equally good or higher pay-back rates and more diligently adhere to payment schedules.
In 2018, the IFC (International Finance Corporation), the private-sector arm of the World Bank Group, performed an annual survey of its 157 banking clients. It found that small and medium enterprises run by women had an average nonperforming loan ratio of 3 percent. The rate for all smaller businesses, meaning those run by both men and women, was 4.9 percent. It marked the fourth straight year that women-led SMEs had outperformed those run by men[iv].
If banks need more convincing, research also shows that women can provide a more diversified and stable retail deposit base, as they tend to save more than men relative to their income levels[v].
It’s clear that female borrowers can be powerful contributors to a bank’s growth and performance. So why is the gender-financing gap so large?
While there are many reasons—including social and cultural attitudes—that can persuade, or dissuade, potential users, especially women, from using traditional financial services, leveraging data and, more precisely, gender-disaggregated data from a demand-and-supply perspective becomes a powerful tool to understand these attitudes. Analysis of such data can highlight barriers to women’s financial inclusion and provide valuable insights into the needs and behaviors that drive gender dimensions. For example, financial literacy (75 percent), collateral requirements (66 percent) and the socio-cultural environment (63 percent) were the top three perceived barriers to women’s financial inclusion[vi], according to the Alliance for Financial Inclusion members who participated in its survey on Women’s Financial Inclusion[vii].
The appetite for credit among women entrepreneurs is strong. According to a recent IFC report, the unsatisfied demand for credit among women-led MSMEs (micro, small and medium-sized enterprises) is around US$10.8 billion in Egypt[viii], $3.2 billion in Morocco and $1 billion in Tunisia. When adding the demand for personal credit from women, the unmet demand roughly doubles across the three countries. Not only does the data show that these segments are severely underserved but mostly helps identify the clear opportunities for financial-services providers to reach the women’s market profitably.
That raises an important question: How can banks tap into this market? Well, the key lies in leveraging data and, more precisely, gender-disaggregated data. The first step for a bank is usually to analyze its existing portfolio and compare its composition with the national data to check if it is serving a corresponding proportion of the women’s market. Next would be to leverage its existing client base, understanding the different needs, preferences, behaviors and profitability of female borrowers, to enable it to adopt a customer-centric approach.
Gender-disaggregated, demand-side data helped Lebanon’s BLC Bank launch a pioneering—and profitable—program for female borrowers called “We Initiative” in 2012. The bank started measuring and disaggregating data by gender from day one, helping it to track its market share and gauge the program’s performance over time. Those results were very strong: BLC Bank’s internal rate of return on its women’s banking program stands at 34 percent[ix].
The collection and use of gender data are often hampered by legacy information systems, lack of common definitions, concerns over data privacy and, at times, lack of senior-management buy-in. While these impediments are real and concrete, advocacy with examples of gender-data impact, balancing between data collection and data protection and peer learning around gender data, can provide for practical solutions. Leveraging knowledge, advisory services and best practices from development institutions and other women’s market and financial-inclusion players can help drive the gender agenda.
Financial regulators and policymakers have increasingly recognized the value of gender-disaggregated data. As of 2016, the AFI reported that 79 percent of its members collected some form of demand- or supply-side gender-disaggregated data, up from 48 percent the year before[x].
Soon, collecting gender-disaggregated data may not be optional for banks. Morocco’s central bank has mandated the collection of gender-disaggregated data on account ownership and credit since 2013, and other regulators have followed suit, such as the Central Bank of Egypt mandating gender-disaggregated data reporting since September 2019. Morocco is now focusing on improving the quality of the data and plans to use it to formulate its national financial-inclusion strategy.
On the supply side, getting more cases and instances of best practices in which a financial institution collected gender data, made decisions based on the data and can show positive impacts on market share and profitability is key. Several MENA countries have recently seen at least one, often large, bank establish “banking on women” programs. As more success stories emerge, with financial data to back them up, there is hope that the regional gender gap can be bridged.
Recently, at a roundtable discussion on women empowerment, I shared some of the above data points. Immediately, a representative of the financial sector launched into a lengthy description of his bank’s corporate-social-responsibility programs targeting women. He was gently interrupted by another participant. “The lady was talking about business and the bottom line, not corporate social responsibility.”
Attitudes can take time to change. But it’s encouraging to see that a growing number of lenders are starting to realize that supporting female borrowers isn’t just an act of corporate social responsibility; it’s good for business, too.
[i] Global Findex Report – World Bank, 2017
[ii] IFC Finance Gap Enterprise Survey
[iii] Financial Alliance for Women. 2019
[iv] IFC – Banking on Women-Business Case Update #2, 2019
[v] Data 2X and WFID–Roundtable report–Data Driving Women for Action, 2019
[vi] AFI is a network including central banks and other financial regulatory institutions from more than 90 countries with the ultimate aim of making financial services more accessible to the world’s unbanked.
[vii] AFI 2016 Survey on Women Financial Inclusion
[viii] IFC – Assessing the Business Opportunity of Women Markets for Financial Institutions in Egypt, Morocco, Tunisia (3 country reports) 2020
[ix] IFC – Making Banking on Women Impactful-2016
[x] AFI 2016 Survey on Women Financial Inclusion