Insights and Analysis

Financial Inclusion for Women Entrepreneurs

November 1, 2017

By Syed A. Al-Muti and Amy Warren

Over the last two decades, significant progress has been made in improving access to finance for women, especially women entrepreneurs. Yet despite the fact that over 30 percent of all small and medium-sized enterprises (SMEs) in emerging markets globally are women owned and operated, they continue to have lower than average growth rates compared to SMEs run by men.

Bangladesh women entrepreneur

despite the fact that over 30 percent of all small and medium-sized enterprises (SMEs) in emerging markets globally are women owned and operated, they continue to have lower than average growth rates compared to SMEs run by men. Photo/Geoffrey Hiller

This disparity is largely driven by the difficulty women face in obtaining loans to start or grow their business, as well as lack of access to financial services such as a bank account. The gender gap is glaring: according to the Global Findex Database, women in developing countries are 17 percent less likely than men to have borrowed formally. In regions such as South Asia, the disparity is ever greater, with an 18 percent gap in bank account ownership.

The Asia Foundation in collaboration with the University of Dhaka’s Center on Budget and Policy (CBP) examined these constraints in a milestone new study on women’s access to finance in Bangladesh. The research examined the supply and demand-side barriers that affect access to credit by women entrepreneurs, including poor policy implementation and capacity constraints.

The study, which integrates qualitative and quantitative research techniques using a mixed method approach, features interviews with 300 women entrepreneurs from six districts: Barisal, Chittagong, Khulna, Rangpur, Sylhet, and Rajshahi, as well as interviews with bank managers and SME loan officers. The study analyzed the status of women’s access to credit while focusing on both the demand side, or issues related to the capacity and understanding of women entrepreneurs that may hinder their access to credit, and the supply side factors, including the impact of policies developed by the Bangladesh Bank on women’s access to credit.

The study found that key barriers included lack of overall knowledge among women entrepreneurs of the available business opportunities and credit facilities; hesitation in applying for a loan from a commercial bank; high loan interest rates; rigid policies on loan-related paperwork and collateral; and lack of knowledge and information among women regarding where to contact about services quality from banks. Moreover, the recent developments in the regulator’s positive stance on women’s financial inclusion is undermined by a negative perception among commercial banks toward women entrepreneurs. Interviews with bank managers reveal that many banks are under the impression that despite the business being licensed to a woman, it is actually being operated by a male family member. They also believe the business initiatives explored by women entrepreneurs are less diversified with a limited number of clientele, increasing the risk of default (this is not evidence-based). Because of these constraints, the study found women do not find the service delivery environment easily accessible: nearly 19 percent of women entrepreneurs surveyed have not opened a bank account, and only 48 percent have applied for a loan from a commercial bank.

At the same time, the study found that women’s business chambers can play an important role in promoting access to finance for women entrepreneurs, particularly by building their capacity and understanding of the loan application process, and by disseminating knowledge and information on policy initiatives that have been recently undertaken by the central bank. Policymakers of the central bank were appreciative of the study, particularly for it’s multiple dimensions—looking at both the demand and supply side, as well as its diagnosis of the potential role of women chambers to bridge the information gaps.

The study reveals that access to information is a key constraint for women entrepreneur’s ability to take advantage of the opportunities offered by the regulator. An appropriate treatment for this barrier is to make current information readily available by using ICT tools, including mobile platform. The Asia Foundation recently partnered with CBP and Bacbon Limited to develop a mobile app for Android phones called ROKEYA, which was launched last week at a workshop on “Access to Finance for Women Entrepreneurs in Bangladesh” at Dhaka University. The app provides information on loan eligibility criteria, interest rates, and collateral requirements to women entrepreneurs in Bangladesh. Through familiarizing them with different loan opportunities and providing an online platform to connect them with private and public banks, the app aims to build awareness, simplify the loan application process, and increase the number of women entrepreneurs applying for loans.

While recent initiatives and technological developments have made a difference in increasing financial inclusion in Asia, more still needs to be done—especially at the policy level. Actions and interventions by the central bank and national policymaking bodies are critically needed to address the most burdensome issues for SMEs, including the stringent guarantor and collateral requirements. For women-owned and operated SMEs, women’s business chambers can also play a role by analyzing current initiatives, suggesting specific policy measures, and lobbying the government agencies to initiate policy changes. At a critical juncture for women’s empowerment in Asia, the insights that this study offers into the challenges that women entrepreneurs face are an important step toward ensuring their needs and priorities are fully included in decision-making in Bangladesh and across the region.

The study, “The Shared Roles of the Central Bank, Commercial Banks and Women Chambers in Promoting Innovative Financing Models for Women-led SMEs,” was implemented in collaboration with CBP, Dhaka University, and support from the Bangladesh Bank.

Syed A. Al-Muti is The Asia Foundation’s associate director for Economic Development Programs based in Bangladesh, and Amy Warren is a program officer based in San Francisco. The views and opinions expressed here are those of the individual authors and not necessarily those of The Asia Foundation.


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