Access to Finance

Access to Finance

Barriers, Themes and Constraints: A Primer

Persistent barriers limit women’s access to financial services. Women continue to be less likely than men to have access to financial institutions or to possess a bank account. In spite of recent rapid increases in financial services between 2014 and 2017 — men’s bank account ownership in developing countries increased from 60 percent to 67 percent, while women’s ownership grew from 51 percent to 59 percent (Demirguc Kunt et al., 2018) — the gender gap has stubbornly remained at 9 percentage points in emerging markets since 2011 (Demirguc Kunt et al., 2018).

In an IFC study of developing economies, female-owned businesses accounted for 33 percent or US$1.5 trillion of the total SME finance gap, defined as the difference between the available supply and potential demand that could be met by financial institutions (International Finance Corporation 2017). Many women entrepreneurs do not even apply for loans because of low financial literacy, risk aversion, or fear of failure (Morsy 2020). Among those who do seek financing, lack of collateral is the most commonly cited impediment. The World Bank’s Enterprise Surveys reveal that 78 percent of the assets of a typical business in the developing world consists of movable property, such as equipment, inventory, and accounts receivable, while only 22 percent include real estate. Women may also be subject to unfavorable banking practices, such as being charged higher interest rates and having to meet shorter repayment periods. As a result, women lose opportunities to invest in their businesses, create jobs, reduce poverty, and strengthen economies. It is estimated that closing the credit gap by 2020 for women-owned SMEs in the BRIC (Brazil, Russia, India, and China) and the Next-11 (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, Turkey, South Korea, and Vietnam) emerging markets could result in 12 percent higher income per capita in those countries by 2030 (Stupnytska et al. 2014).

Using Technology to Increase Access to Finance

Digital financial services can help bridge the gender gap in account ownership and access to credit by decreasing the cost of access to financial services and bypassing constraints imposed by social norms and limited mobility. Digital financial services can also contribute to women’s empowerment and autonomy by increasing their control over their financial resources. Data and insights from Global Findex have shown that digital financial services, including mobile money, have contributed to a marked increase in women's access to financial services in many economies in recent years (Global Findex 2017). Digital technology can enhance women’s ability to control and access financial services, including remittances and wage payments, through the use of debit/credit cards, mobile phones, and other digital channels. Digital infrastructure, including digital IDs and biometric verification, can facilitate customer on-boarding and customer due diligence, often major barriers to access to finance.

In environments where women are less likely than men to own assets that could serve as collateral for credit, the World Bank Group has successfully piloted the use of psychometric testing. (See box below: Improving Access to Credit for Women Through the Use of Alternatives to Collateral.) Analysis of big data, including data accessed through mobile phones and utility bills, can improve understanding of entrepreneurs’ cash flow, character traits, and networks to assess credit default risk and predict the likelihood of loan repayment.

access to finance

Mobile money and e-Wallets have been game changers in a number of developing countries, by bringing formal financial services within the reach of a majority of the population for the first time. Kenya is a global leader in mobile money, with the M-Pesa products that offer a phone-based money transfer service, payments, and microfinancing services.

Access to the M-Pesa mobile money system has been adopted by at least one member in 75 percent of households and is estimated to have lifted 194,000 (2 percent) of households out of poverty, with a greater impact on women (Suri and Jack 2016). The relative impact of mobile money versus more traditional bank accounts for women’s financial services varies among countries.

Improving Access to Credit for Women through the Use of Alternatives to Collateral

Another opportunity to increase women’s access to finance is using data derived from apps, digital financial services, credit reporting and other digital sources. Information can take the form of “alternative data” such as reports from utilities, government payments, or social media. In some instances, data are collected through direct surveys and interviews with consumers to develop a psychometric profile that can help to predict the probability of repayment. In Ethiopia, the World Bank has supported a project to develop psychometric data on women entrepreneurs that has shown positive results. Both Kenya and Tanzania have improved access to credit by distributing so-called alternative data on individuals’ positive and negative payment histories with utility companies and retailers. Women and other consumers who may be underrepresented in financial markets and traditional credit bureaus particularly benefit from access to new sources of data that can be leveraged for financial analysis.

However, expanded use of both financial and nonfinancial data also increases risks to data protection and privacy. While many providers seek the customer’s consent to consult and use personal data, these consent clauses may provide little protection against data misuse. Instead, they may offer more legal protection to the financial services provider (by showing they have the customer’s agreement to use their data) than for the consumer whose data is being analyzed. The General Data Protection Regulation (GDPR) passed in the European Union in 2016 provides the most widely used legal and regulatory framework for information sharing, including in financial markets.

While mobile money holds potential, intervention designs must be sensitive to country context and consumer risks, including online abuse and fraud. Many microentrepreneurs do not have formal accounts and therefore no pathway to savings, credit, or other financial products and services provided by financial service providers that could help their businesses expand. MSMEs generally rely on multiple forms of consumer finance to meet both personal and business operating needs. For example, over six million Kenyans have taken out at least one digital loan for meeting day-to-day household needs and for working capital for small enterprises. According to a 2019 report by Financial Sector Deepening Kenya, usage of non-regulated digital credit grew from 0.6 percent in 2016 to 8.3 percent in 2019. Governments need to proactively review these new digital finance products as part of the larger discussion on how finance and credit can be made more attainable for the many microentrepreneurs and others who are unbanked and operate unregistered firms on the margins of a developing country’s economy.

Desktop Diagnostic

The automated data-generation tool in this toolkit is available online and provides comprehensive country snapshots of the context in which female entrepreneurs and workers operate and allows for country and regional comparisons. At the click of a button, the tool generates country-level information across some 125 indicators.

Access to Finance

Indicator Summary Description

Access to Finance indicators cover women ́s level of financial inclusion with an emphasis on digital financial services (DFS). Indicators cover both access to and use of DFS to better understand the day-to-day use of products beyond account opening. Global Findex data provide some of these insights. In addition to the information on digital finance, data on bank account ownership, the savings rates of women entrepreneurs, and their sources of credit are included. The data compiled here reflects the extent to which women can use both traditional financial services and digital providers and services.

Indicators and Secondary Questions Technology

Access to Finance

Bank accounts
  • Account ownership at financial institution or with a mobile-money-provider service provider, female (WBG Gender Data Portal)
  • Account ownership at financial institution or with a mobile-money-provider service provider, male (WBG Gender Data Portal)
  • Percentage of Financial Institution Account Owners by gender (Findex)
  • Saved at a financial institution, female (Findex)
  • Saved at financial institution, male (Findex)
  • What percentage of women saved to start, operate, or expand a farm or business? (Findex)
  • What percentage of men saved to start, operate, or expand a farm or business? (Findex)
  • What percentage of women have a debit card? (Findex)
  • What percentage of men have a debit card? (Findex)
  • What percentage of women have a credit card? (Findex)
  • What percentage of men have a credit card? (Findex)
  • What percentage of women borrow from a financial institution? (Findex)
  • What percentage of men borrow from a financial institution? (Findex)
  • What percentage of women borrow from family or friends? (Findex)
  • What percentage of men borrow from family or friends? (Findex)
  • What percentage of women borrow from a savings club? (Findex)
  • What percentage of men borrow from a savings club? (Findex)
  • Percentage of female agricultural landholders (FAO)
  • Percentage of male agricultural landholders (FAO)
Secondary questions
  • Does the country’s central bank require that financial institutions provide sex-disaggregated data on bank accounts and savings account ownership?
  • Is it legal for financial institutions to collect customer data by sex? Is the data reported publicly or to the government?
  • What percentage of business loans go to WSMEs in the country?
  • Does the country have online or electronic immovable collateral registry program(s)?
  • Does the country have online or electronic collateral registry programs for movable collateral (machinery, jewelry, etc.)?
  • Do women in the country have equal access to the online or electronic movable and/or immovable collateral registry program(s)?
  • Do Fintech programs exist that use big data (mobile phone or utility bills) to determine credit-worthiness?

Intervention Design Matrix

The matrix helps teams match barriers identified during analysis with potential interventions to lower them. It also suggests digital enablers for each intervention category and provides a corresponding project example.

The matrix is organized according to the toolkit’s four main constraint categories (legal and regulatory; access to finance; training, skills, and information; access to markets). For each category, barriers faced by women entrepreneurs are listed. These barriers are economic and social factors that may affect the general population, business community, or women as a group and, as such, represent obstacles causing WMSME growth to stagnate, such as encumbering processes for establishing and formalizing businesses, inhibiting access to the resources needed to fuel growth, and/or restricting information and communication flows among stakeholders. It is important for project teams to use the findings from the diagnostic to determine which barriers are most critical to address in project design.

The interventions proposed are drawn from WBG projects and from some non-WBG initiatives. Where possible the matrix categorizes interventions according to their track record for results, that is, the extent to which evidence demonstrates an intervention's impact (World Bank Group 2019b). It should be noted, however, that most of the categorized interventions were delivered without digital enablers. For the most recent and current impact evaluations and research please visit the WBG Regional Gender Innovation Labs.

Intervention Design Matrix

CLICK HERE to access the full Matrix, including features to create your own customized report by constraint, region, and level of evidence

Overview of Barriers and Potential Interventions by Constraint

The finance and credit portion of the matrix presents constraining factors and potential interventions related to women’s access to the financial products and services required to launch, operate, and grow their businesses.

Barriers to accessing finance

Barriers to accessing finance are generally associated with gender differences in income, legal rights, and lack of access to legal identification, credit histories, collateral, and technology. For women, these barriers often manifest as a lack of account ownership or a persistent focus on traditional collateral requirements (such as immovable property) for securing credit. Lack of access to financial services may also be linked to limited local presence, such as a lack of agent networks, and to limited trust and financial capability, as well as a lack of digital skills to manage digital financial services. Social barriers to personal engagement between women business owners and male credit providers or agents may also represent barriers.

Potential interventions

Potential interventions in this area focus on ways to expand access to and use of digital financial services (DFS), which tend to be more cost-effective and scalable and which create and utilize data to reduce information asymmetries and strengthen access to credit. Where women have widespread access to mobile phones, DFS can be delivered with relative ease; but even where women don’t own or control a mobile phone, digital financial services can still be delivered through cards or online or remote access services. Infrastructure related to credit information and collateral can provide other interventions, including innovative ways for women to address collateral requirements, such as partial credit guarantee schemes; movable collateral registries; and alternative scoring methods, including psychometric analysis. Ecosystem issues can also be critical to address, including access to a digital ID and remote onboarding/e-KYC, improving agent networks, and providing consumer protections geared to women’s online experiences. On an industry basis, creating financial products and services based on WSME needs and preferences and strengthening outreach and financial capability/literacy can help sustain and improve access for women entrepreneurs. Finally, developing sex-disaggregated data on women’s access to and use of financial products and services, including digital, fintech, and MNO offerings, can help policy makers monitor improvements and the gaps faced by women entrepreneurs and determine which policies have the greatest impact and can provide valuable market data for private providers seeking to reach this market. Other opportunities to increase WSMEs’ access to finance and credit include employing technology to reduce corruption in lending practices or providing online gender-sensitive training for loan officers.

Monitoring Progress

This section presents a menu of gender-related output, outcome, and impact indicators to measure project results by choosing gender indicator/s that align(s) with the gaps that the project is trying to address; track(s) expected results; and is/are specific, measurable, achievable, relevant, and time-bound (SMART). When selecting indicators, work with your M&E team, as well as with a gender specialist, to confirm and validate indicator choice; also consider sex-disaggregating indicators across the project, i.e., for those activities that may not specifically address gender gaps but that are amenable to sex-disaggregated data collection. Focus on indicators that make sense for your project and for which you will be able to collect data. The indicators can be applied to both lending and advisory World Bank projects.

Access to Finance

Access to Finance

Barriers, Interventions, and Indicators

  • Weak legal/regulatory protections for financial consumers
  • Women ́s unequal ownership, access, and administrative authority (e.g., property, inheritance, collateral)
  • Gaps in the digital financial ecosystem, including digital ID, digital signature, e-KYC, agent banking networks, etc.
  • High-risk perception of women borrowers (resulting in, e.g., higher interest rates or shorter repayment periods for women)
  • Persistent focus on traditional collateral requirements (e.g., immovable property, credit history)
  • Financial provider practices and products that do not meet women’s needs
  • Permission of male family member required to conduct financial transactions
  • Limited access to technology and related digital financial services
  • Lack of technology literacy
  • Limited financial capability
  • Limited information and data on gender gaps in finance
  • Lack of women in decision-making roles in the financial sector (public and private)
Potential Interventions
  • Strengthen legal and regulatory frameworks to eliminate gender bias related to financial services
  • Increase availability of and access to financial products/ services, including digitally enabled, digitally delivered solutions for women-owned/-led MSMEs
  • Strengthen credit reporting systems and other sources of data useful for financial decisions
  • Improve other financial infrastructure, such as collateral registries and factoring platforms
  • Seek gender diversity among bank agents and provide them with incentives to register women for digital accounts, including providing technology support for women users
  • Incentivize financial institutions to develop products and services that meet women’s needs (e.g., alternative-data-based lending, psychometric testing, payments, savings, credit, and insurance)
  • Improve quality and availability of sex-disaggregated data across the range of financial products and services, including new digital financial products and fintech offerings
  • Provide training on digital skills
  • Support the development of digital incubators, accelerators, and early-stage funding programs for WSMEs
  • Strengthen political awareness of the importance of and the commitment needed to increase financial access for women

Suggested Indicators

  • Increased availability of sex-disaggregated data
  • # of women participants in workshops, training events, seminars, conferences, networking events
  • # of women participants who benefited from digital skills programs/trainings
  • # and/or % of women and women-owned firms listed in a public credit registry and/or private credit bureau
  • # of improvements measured by governments through monitoring financial system data
  • # of improvements in access to finance measured through global data sources such as Findex, Finscope, etc.
  • # of improvements in the ecosystem for women’s financial ac-cess measured through global sources such as Women, Busi-ness, and the Law, Doing Business, and similar indices (e.g., WEF Global Gender Gap Report)
  • % of women trained who acquired new knowledge or skills, including in use of relevant technology
  • # of recommended laws/regulations/amendments/codes enacted or government policies adopted to address gender constraints
  • # of recommended procedures/firm-level policies/practices/standards that were improved or eliminated
  • to address gender constraints
  • # of women-owned/-led firms with access to finance
  • # and/or % of women reached by financial services
  • # and/or % of unserved and underserved women provided with access to financial services, including through technology-driven delivery channels
  • # and/or % of women with mobile money accounts
  • # of outstanding loans made to women-owned or -led firms
  • Volume of outstanding loans made to women-owned or -led firms by institutional type and channel
  • % of outstanding loans made to women-owned or -led firms
  • # of women-owned or -led firms that have received loans secured with movable property
  • Value of outstanding loans made to women-owned or -led firms
  • % of women who have control over their savings
  • # and/or % of women who made or received digital payments
  • # and/or % of women depositors
  • # and/or % of women borrowers
  • # and/or % of loan accounts owned by women
  • # and/or % of deposit accounts owned by women
Access to Finance
Barriers, Themes and Constraints: A Primer