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This requires systemic change. Many financial systems were not built with small borrowers, especially women, in mind.
And these systems are rife with bias from lenders, who can still legally discriminate against women in 96 countries. When women walk in the door with good ideas, smart business plans, and dreams of improving their future, financiers often see only risk.
And despite evidence from M-Kopa, an asset finance company serving clients across Africa, that women are 10% less likely to default on repayments than men, Women often receive much smaller loans than men.
Fortunately, there are many reforms leaders can pursue to address funding gaps.
First, governments need to remove the barriers faced by responsible lenders seeking to serve low-income customers while protecting people from predatory lenders.
That means creating a system where minimum capital requirements and compliance expectations increase depending on the size and complexity of the lender in question. Because it makes no sense to treat small microfinance lenders the same as full-service banks.
Second, the development community should make financing available to lending countries to help manage risk perceptions. Lenders are more likely to invest in more diverse entrepreneurs if they know they will be partially compensated in the event of default.
By providing such guarantees, donors can also encourage large financial institutions to lend to smaller, more nimble institutions in their own countries.
Third, governments need to invest in digital infrastructure to enable lenders to add customers more cheaply and assess creditworthiness in new ways. Although women are less likely than men to have a formal credit history, they have an informal credit history built by paying bills on time and saving or pooling money in community groups. you may have.
Digital tools allow lenders to evaluate customers based on non-traditional data and securely share that information with other lenders. Think of it as a credit bureau designed around the realities of the informal economy that exist across the Global South.
Finally, donor countries should fully fund the World Bank’s International Development Association (IDA), which should prioritize low-income countries in its efforts to reduce poverty and promote economic growth.
By providing financing on more favorable terms than the broader market, IDA helps these countries lay the foundations for building stronger financial systems, which in turn increases access to their own talent and businesses. Return your investment.
Funding women is not always the right thing to do. That is the wise thing to do. Sales across WIC Capital’s investment portfolio have increased five times over her time, and the fund has set a goal of creating 3,000 jobs over the next seven years. That’s because of just her eight companies.
A quarter of all African women are entrepreneurs. Imagine what their future would be like if their future didn’t depend solely on a few visionaries like Chiaba Sy. Imagine the progress that would be possible for their families, communities, and countries if those who hold the keys to capital opened their doors to everyone.
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