Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Henriette Kolb, head of Gender Secretariat at the International Finance Corporation, the private sector financing arm of the World Bank. Here she discusses how to address the gender gap in access to financing.
Financial inclusion has become a hot topic in recent years, especially with the advent of mobile banking and its potential to reduce the gender gap in access to finance. Women produce more than half of the world’s food and control about $20 trillion in consumer spending. Women also own one-third of small and medium enterprises (SMEs), which are top drivers of job creation in emerging markets, although evidence suggests that only 6 percent of the SME banking portfolio is allocated to women. Overall, women face a global credit gap of somewhere between $260 and $320 billion. And according to the World Bank Group’s Global Financial Development Report 2014: Financial Inclusion, women in developing economies are 20 percent less likely than men to have a bank account. Without financial access, women are at a disadvantage when it comes to growing their businesses, which in turn denies economies jobs and tax revenue.
The World Bank Group has made headway in addressing women’s access-to-finance needs by producing evidence-based policy advice for governments, working with regulators, engaging directly with banks to better serve women, and providing capacity-building training to women entrepreneurs. The International Finance Corporation (IFC), where I work, also manages the Women’s Finance Hub (part of G-20’s Global Partnership for Financial Inclusion), which is an online platform that disseminates research and information on women-owned businesses and the economic gender gap.
In addition, the IFC recently started the first women’s bond program, raising around $160 million to increase access to finance for women-owned businesses. The program is part of the IFC’s Banking on Women initiative, which was created in 2010 to encourage development partners and financial institutions to profitably and sustainably serve women-owned businesses. To date, the program has invested more than $600 million in women-owned businesses.
These types of programs help increase the number of women with financial power and raise awareness about the challenges women entrepreneurs face worldwide. But more is needed to address women’s global financing needs. In order to address the gender finance gap, the public sector needs to enact policies that increase women’s access to finance. Financial institutions also have a much bigger role to play and should enhance their understanding of the women’s market, offer products tailored to women’s needs, and ensure that women can access existing financial services. So far, only a relatively small number of banks, not including microfinance institutions, have focused on addressing women’s financial needs. Institutions such as the IFC, the Global Banking Alliance, and the Small Business Banking Network are trying to change that by advising financial institutions on how best to serve the entire women’s market.
In addition, financial markets can deliver more. For example, investing even one percent of the $30 trillion in assets held in pension funds globally into women-owned businesses could make a big difference in emerging market countries where women’s labor force participation is low. This would also require development organizations, multinationals, and chambers of commerce to identify a large number of women-owned SMEs that such funds could invest in. With better-resourced women-owned SMEs, the world could come closer to reaching ambitious goals of ending poverty and boosting shared prosperity.