ACCESS TO BANKING SERVICES: Global GDP could rise by 3% if gender disparity gap is closed By Onyeka Akpaida

The COVID-19 pandemic means that millions of women in Africa and other developing regions could lose years of success in contributing to household incomes. The International Finance Corporation (IFC) estimates that approximately 80% of women-owned businesses with credit needs in low-income countries are either unserved or underserved.

Onyeka Akpaida, a Female and Digital Financial Inclusion Professional and Founder, Rendra Foundation
Onyeka Akpaida, a Female and Digital Financial Inclusion Professional and Founder, Rendra Foundation

This is equivalent to a $1.7tn financing gap; the difference between funding available and funding needed. Consequently, the global economy does not materialise an annual $330bn in turnover due to this financing gap.

Example of Nigeria

In Nigeria, there is a 14% gap between the portion of men and women that own bank accounts – twice the size globally. While a bank account is a gateway to other financial services, it does not automatically translate into the actual use of or access to these financial services. However, the evidence on the broader inclusion of women into formal finance is disappointing.

All data points in the same direction: the current financial sector landscape, especially in low-income countries and marginalised communities, makes it easier for men to access financial services than women.

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Women own and lead approximately 40% of Nigeria’s 41.5 million micro, small and medium enterprises (MSMEs). MSMEs do not only represent a significant part of the world economy, but they are also one of the strongest drivers of economic development, innovation and employment in Nigeria. Yet, work for women in African countries is characterised by low-paid and less secure jobs, so that 92.1% of women make up employment in the informal sector.

Considering that the informal sector contributes about 41% of Nigeria’s economic output, there are no labour standards to protect the workers, so exploitation and discrimination are rife, with women feeling the worst brunt of it. 

Women are more intentional savers (with lower loan-to-deposit ratios than men)

More prudent borrowers (with lower nonperforming loans than men)

Calculated risk-takers

Giving women better access to credit and other financial tools and services is considered a critical enabler to achieving several Sustainable Development Goals (SDGs). To borrow from the words of the H&M Foundation: “By not giving women entrepreneurs equal access to finance, investors keep missing out on what could become the new Apple Inc or Amazon.com – every year.”

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So, this begs this question: How can the government, private sector and key developmental organisations expand financial inclusion and bring more women into the economy?

Digital technology

As we search for a solution to the inequality between men and women in accessing finance around the world, the answer could be simple: digital financial services. Expanding financial inclusion ensures that women have access to financial tools and services to save for family needs, borrow to support a business (access to credit) and build a cushion against emergency (Insurance).

Most importantly, expanding financial inclusion ensures that women have the financial knowledge to make the right decisions and improve their economic resilience.

Our world is becoming increasingly more digital and new data by the World Bank Group suggests that mobile phone ownership and internet access show unprecedented opportunities to use technology to achieve universal financial inclusion.

The proportion of Kenya’s population with access to formal financial services rose to 83%  in 2019 from 75% in 2016, primarily driven by mobile technology.

Kenya’s mobile money system, M-PESA, has been critical in Kenya’s Financial Inclusion Drive by providing a platform for even the marginalised households in Kenya to move money quickly and cheaply from one person to another.

Meet Halima

Like many women in Nigeria and other developing countries, Halima does not have an official form of identification, the minimum requirement for opening accounts in formal financial institutions.

Over the years, she has had to pass on several opportunities to get an account and access credit from the bank because she lacked the requisite requirements mandated by most financial institutions. That is until we met her and told her about Kudeena – our financial inclusion and literacy vehicle targeted at low-income and forcibly displaced women in the North.

Halima not only opened a bank account but became our spokesperson at the junction where she trades and in her community. She is now able to buy larger amounts of produce- thereby increasing her margins and has ramped up her catering equipment with the money she was able to save consistently, over a period of time, in her new bank account.

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After successfully undergoing our financial literacy training, we were able to provide Halima with a loan via our microcredit scheme.

Filling the gap

Solving the access to finance – especially for women requires community engagement – and a nuanced understanding of the women these services are being developed for. Digital financial tools and services – and the associated learning to aid adoption can help to drive adoption at scale.

Women entrepreneurs like Halima may lack the capacity to produce collateral or sufficient credit information to access loans from traditional financial institutions. Still, they continue to generate cash in their businesses.

Therefore, they can benefit substantially from an increased availability of cash-flow-based loans without collateral or formal credit history. Financial Technology (FinTech) players are pivotal in reshaping how the unserved and underserved at the bottom of the pyramid can access working capital and cash-flow finance.

Digital technology takes advantage of existing cash transactions to provide innovative methods of credit scoring, risk assessment and disbursement. After all, cash is the only factor that can repay a loan; collateral is only the second way out if money cannot be generated. A good example is India’s Capital Float, a digital financing platform that provides quick and easy working capital loans for small entrepreneurs to address immediate business requirements.

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The platform analyses borrower’s cash flow using data from e-commerce payment systems and mobile financial payment systems. The results from the analysis identify creditworthy borrowers. They then carry out electronic know-your-customer (KYC) authentication, receive the loan offer, confirm acceptance, and sign the loan agreement on a mobile app.

The Capital Float platform was launched in 2015 and has already reduced cash-flow challenges of more than 500,000 MSMEs with loan disbursements of $1.2bn as working capital for these businesses.

Governments can help by ensuring that legal and regulatory frameworks are ‘digital-ready’ to support FinTech innovation; reducing administrative obstacles and regulatory complexity, especially around multiple taxations; endorsing the adoption of efficient digitisation solutions, and introducing regulatory sandboxes that allow fintech to test solutions/products in a controlled environment.

We all benefit

Investing in women entrepreneurs is a trillion-dollar opportunity. A recent analysis by Boston Consulting Group (BCG) suggests that global GDP could rise from approximately 3% to 6%, boosting the global economy from $2.5tn to $5tn.

Investing in women goes beyond social responsibility: there is a business case for financial institutions; It improves the lives of women; and the domino effect of equality will be felt in their countries and beyond, influencing everything from its politics to its economic growth and development.

Onyeka Akpaida is a Female and Digital Financial Inclusion Professional and Founder, Rendra Foundation. This article was first published by The Africa Report.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry