3 ways to close the gender finance gap

Despite eye-opening market potential — women control a total of $20 trillion in consumer spending —  they have somehow escaped the notice of the private sector as an engine for economic growth.  Women are 20 percent less likely than men to have an account at a formal financial institution. Yet a bank account is the first step toward financial inclusion.

Why is it important for the private sector to help with this first step?

In increasingly competitive global markets, companies are searching for ways to differentiate themselves, to deepen their reach in existing markets and to expand to new markets. Greater financial access for women would yield a growing market opportunity with phenomenal profit potential for companies. The size of the women’s market, and the resulting business opportunity, is striking:

• Business credit: There is a $300 billion gap in lending capital for formal, women-owned small businesses. Of the 8 to 10 million such businesses in 140 countries, more than 70 percent receive few or no financial services.
• Insurance Products: The Female Economy, a study in the Harvard Business Review, reported that the women’s market for insurance is calculated to be worth trillions of dollars.
• Digital payments: Women’s lack of cellphone ownership and use means that millions cannot access digital-payment systems. Closing the gap in access to this technology over the next five years could open a $170 billion market to the mobile industry alone.

For the past several years at IFC, I’ve been working with the private sector, namely financial institutions, to address the supply-and-demand constraints that women face when trying to access the formal financial system. IFC tackles these constraints in three ways:

• Defining the size of the women’s market, female-owned and  -led SMEs, and as individual consumers of financial services
• Showing financial institutions how to tap into the women’s market opportunity by developing offerings that combine financial products, such as credit, savings and insurance, with non-financial services such as training in business skills
• Increasing women’s access through convenient delivery channels, such as online, mobile and branchless banking

I have drawn several lessons from IFC’s Gender work and its Banking on Women Program, which involves 29 financial institutions globally. These lessons are essential to showing companies the opportunity in unlocking funds to fuel the women’s market for all kinds of products and services. To start, here are three steps companies can take:

• Analyze company data to understand how you are already serving and employing women.  Many firms don’t even grasp the opportunity that’s right under their nose. After conducting an analysis, one bank in Latin America learned that women make up 80 percent of its sales force. The same institution found that its fastest-growing credit card was one that included breast cancer insurance for women.

• Understand the needs of female consumers and design products and delivery channels to meet those needs. Women are time-constrained with household and work responsibilities. In many markets, their time is triple-bound with caring for elders and in-laws. Innovative delivery channels, such as digital payments and using bank agents to sell existing products, can help companies reach more women.

• Start with women employees, and require an account to receive wages. This initiates financial citizenship for women while it establishes a way for institutions to reach a previously inaccessible market: female employees and their families.

Challenges in the regulatory and business environment must also be addressed to fully engage women in the formal financial system. Public-private partnerships with civil society, nonprofits and the public sector can prevail upon these issues.

One more lesson that is for sure: We can’t stop here. There are avenues to finding the hidden gender value in new markets, such as housing, insurance and so much more.

Interested in learning more? Join us at the 2015 Gender & the Economy event with private- and public-sector stakeholders to start defining the solution for closing the gender finance gap.

This post first appeared on The World Bank Private Sector Development Blog.

. Publication does not imply endorsement of views by the World Economic Forum.

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Image: A Japanese businesswoman (C) commutes to work in Tokyo’s Marunouchi district. REUTERS/Kiyoshi Ota