To improve women’s access to finance, stop asking them for collateral

women farmers

(Paolo Nicolello, Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Caroline Kende-Robb, Secretary-General, CARE International


Using a basic bank account is beyond the reach of almost one billion women worldwide. In Jordan recently I met Sawsan, who runs her own sewing workshop with four other women. Their business is growing, and the orders are flowing in. But Sawsan has no bank account.

We know that a lack of access to finance is one of the major barriers facing women entrepreneurs in marginalised communities across the world. The women entrepreneurs we work with every day at CARE tell us, and so do the statistics: 80% of women-owned businesses with credit needs are either unserved or underserved. This is equivalent to a massive $1.7 trillion financing gap.

When a woman wants to start or grow her own business, the odds of securing a business loan are heavily stacked against her. This affects women like Yeo from Ivory Coast, who was unable to take out a loan for her farming business because, as a woman, she did not own any land that the bank required as collateral.

As we search for a solution to the inequality between men and women in accessing finance around the world, the answer could be simple: stop asking for collateral. Most financial systems have been designed by and for men. Therefore, when a person requires a business or personal loan, the lender asks for collateral, such as land or a house. In many cultures, it is men who traditionally own the land or the house, which immediately excludes women. Gender disparities reflect a mix of social, cultural and legal barriers to women’s participation in the financial system.

As my good friend Akin Adesina, President of the African Development Bank, recently stated: “While societal limitations and belief systems often kill many a woman’s dream, it is often at the bank counter that dreams come crashing down. Without collateral and without access to land or other financial resources, the bank is the end of the road for many women entrepreneurs. This is a status quo that must change – not because it’s charity or the right thing to do, although it most certainly is the right thing to do, but because it’s the smart thing to do. It’s the strategic thing to do.”

But what will reassure financial institutions that they will get their money back? First, it is knowing that women are a high-value investment. Evidence shows that women are stronger savers than men, more responsible borrowers and more calculated risk-takers. According to recent research from the Bank of New York Mellon, giving women better access to finance could unlock $330 billion in annual global revenue.

Second, financial institutions should start to think outside the box and use other methods to credit-check an individual, such as issuing loans based on cash flow, savings group history, mobile phone transaction history or a track record of enterprise performance.

Saving is a vital foundation for economic independence. Back in 1991, CARE pioneered a flagship savings programme – the Village Savings and Loans Association. Since then, these savings groups have directly supported nearly 7 million members, the majority of whom are women, across 45 countries and have created pathways for nearly one million members to open their first bank account. We train members of these savings groups to keep track of all deposits and withdrawals, which can be a vital record of a person’s ability to save and repay a more formal loan.

By working with women on ways to collectively save money and develop their business skills, in turn facilitating their access to affordable loans, we have seen an astounding uplift in success rates. In Ethiopia, CARE recently supported 5,000 women entrepreneurs in this way, resulting in a 500% increase in their income. At the start or the project 70% of the women had no savings and by the end, this had shrunk to 3.6%. Through our partnership with a microfinance provider, many of the Ethiopian women were also able to access low-interest loans, which they are now successfully repaying.

Collateral is not the only barrier that women are facing in trying to access financial services. However, I believe that changing the goalposts around collateral for women is a good place to start.

 

So why are there not more banks investing in women? There are two main reasons: First, the banks are unable to reach many of the women. Second, the banks find it difficult to understand women’s priorities and needs. That is why we at CARE want to work with more financial institutions to share our expertise, reach and practical guidance so that we can start to level the playing field of financial access.

Our Access Approved campaign puts a spotlight on this issue, calling on financial institutions to do their part by developing products and services that specifically meet the needs of marginalised women.

I am therefore calling on the banks to rise to this challenge, rethink their approach and create equal access and opportunities for women around the globe. We cannot overcome poverty until both men and women have equal rights and opportunities. This approach makes financial sense for everyone.

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

UN blue helmets in South Sudan use Sustainable Development Goals to help build peace

How can emerging economies navigate the mobility transition?

Climate change is exacerbating hunger in some of the world’s poorest countries. And those most at risk are the least to blame

Declaring commitment to ‘peace and stability’ for Libya, top UN envoy steps down as stress takes its toll

Venezuelan crisis: MEPs reaffirm their support for Juan Guaidó

The Europeans with a job diminish dangerously

China-EU Relations: Broader, Higher and Stronger

Superbugs: MEPs advocate further measures to curb use of antimicrobials

Food safety: New rules to boost consumer trust approved by MEPs

Libya ‘in race against time’, but dissolving conflict ‘a realistic prospect’, Security Council hears

EU steps up its strategy for connecting Europe and Asia

Another 170 migrants disappear in shipwrecks, UN agency reiterates call for an end to Mediterranean tragedy

Budget MEPs back €1.6 million to help 400 former workers of Carrefour Belgium

Intel @ European Business Summit 2014: Better decisions now, the new business dashboard 

Chicken soup for the digital soul: how to bring community back online

The British are the most positive in Europe on the benefits of immigration

UN and partners call for solidarity, as Venezuelans on the move reach 4.5 million

The age of influence: why digital platforms must come clean about political ads

The financial crisis always prefers the south of Eurozone

5 facts to know about Africa’s powerhouse – Nigeria

Thousands of Belgian schoolchildren have gone on strike to protest climate change

We need to rethink neuroscience. And you can help us

Poor quality is healthcare’s silent killer. Here’s what we can do about it

COVID-19: What to know about the coronavirus pandemic on 3 April

Banks worth $47 trillion adopt new UN-backed climate, sustainability principles

Why we need a new social contract for data in healthcare

Teamgum @ TheNextWeb 2014

Nuclear non-proliferation treaty an ‘essential pillar’ of international peace, says UN chief

State aid: Commission approves €400 million of public support for very high-speed networks in Spain

VAT Gap: EU countries lost €137 billion in VAT revenues in 2017

Will Turkey abandon the refugee deal and risk losing a bonanza of money?

EU and UK soon to be in a post-Brexit rush over free trade agreement with Australia

Universities need strategic leadership. Here’s what it looks like

Stronger partnerships with post-conflict countries needed to ensure ‘path towards durable peace’: UN chief

Mergers: Commission opens in-depth investigation into proposed acquisition of GrandVision by EssilorLuxottica

Getting people with disabilities into work requires data

Statelessness for terrorists’ families, never an acceptable option, urges UN rights chief

Coronavirus: How worried should we be?

Commission facilitates the activities of ‘merchants of labour’

Mergers: Commission opens in-depth investigation into proposed acquisition of DSME by HHIH

EU regional differences betray an unjust arrangement

UN chief seeking ‘renewed commitment’ to global rules and values, as world leaders head to New York

Is the ECB ready to flood Eurozone with freshly printed money?

Who really cares about the 26.2 million of EU jobless?

These 11 EU states already meet their 2020 renewable energy targets

UN chief outlines ‘intertwined challenges’ of climate change, ocean health facing Pacific nations on the ‘frontline’

On the euro but out of it?

On Brexit: the outcome of UK elections next May to be based on false promises?

AXA and Fremtind discuss how AI and analytics is changing insurance claims forever

Somalia advancing towards ‘inclusive and peaceful future’ for women, deputy UN chief

Want to shop more sustainably and recycle better? This app could help

The Philippines is reopening a ‘cesspool’ island after a six month clean up

Manipulating privacy and reaping the benefits of technology

UN chief welcomes agreement by rival leaders in South Sudan, as a step towards ‘inclusive and implementable’ peace

Afghanistan: UN envoy urges further extension of ceasefire with Taliban, as Eid ul-Fitr gets underway

Sudan military committed to ‘ensuring stability’ and ‘peaceful transition’ says senior diplomat, as UN rights chief appeals for protesters’ rights to be upheld

From fishing village to futuristic metropolis: Dubai’s remarkable transformation

Joint EU-U.S. statement following the EU-U.S. Justice and Home Affairs Ministerial Meeting

Parallel downfalls of Merkel and Deutsche Bank threaten Germany and Europe

These scientists are using sound waves to filter plastic fibres from washing machine wastewater

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s