Have you ever tried to apply for credit but felt discouraged because of the requirements? Have you ever asked your bank for support to grow as a business owner only to receive no reply? Do you feel you lack the courage to approach a financial entity? Something is starting to change in Latin America and the Caribbean: we present Women Entrepreneurship Banking, a project that offers banks and other financial intermediaries, incentives to develop and implement innovative lending models for women-led micro, small and medium enterprises.
The initiative of the Inter-American Development Bank (IADB) and the Multilateral Investment Fund (MIF), member of the IDB Group, offers a unique combination of financing, collateral and technical assistance in order for banks to have the necessary tools to adapt their products and services to the needs of the female population.
In effect, attracting the female population, in addition to contributing to the development of communities, means good business for banks. Below we share some of the underlying features of women as clients:
- They are 54% less prone than men to discontinue paying their loans
- They are more loyal and more willing than men to take advantage of cross-sales.
- Although on average they invest 50% less capital than male entrepreneurs, they make 20% more in profit.
- They control 64% of the decisions regarding household expenses.
Under traditional lending models, women-led businesses could be rejected due to informality, the lack of credit history and collateral, not fitting bank’s marketing strategies or client profiles, low education levels or lack of participation in entrepreneurial networks. This has prevented women micro-entrepreneurs, despite strong repayment records, from accessing larger business loans to grow their businesses beyond the micro level.
Diagnostic survey at a regional level
- The credit gap in Latin America and the Caribbean for women-led small and medium-sized enterprises (SMEs) is US$ 86 billion.
- Only one out of every five women-led SMEs has working capital needs, that is, the resources required to operate, financed by banks.
- Poverty has decreased 30% between 2000 and 2010 as a result of women’s rising income.
- 60% of microenterprises are led by women, but less than 10% become market leaders and less than 20% grow to become small businesses.
The IDB and MIF will offer up to $55 million in a unique combination of capital and know-how to support financial intermediaries in Latin America and the Caribbean to implement lending models to support growth of women’s businesses. The objective is to facilitate access to credit to 100,000 women-led companies by 2019.
Don’t forget to watch this video that summarizes the power of women in the regional economy and the financing challenges that lie ahead.