In Latin America and the Caribbean, small and midsize enterprises (SMEs) represent 99.5% of all businesses, employ 70% of the total workforce, and contribute up to 40% of regional GDP (KoreFusion, 2023). Despite their economic potential, they still face challenges in obtaining financing, and these restrictions on access to credit increase for women-led SMEs.
A study conducted by the Gender Knowledge Lab (GKL), a consulting department of Pro Mujer, in collaboration with ALIVE Ventures, highlights the significant opportunity that women-led SMEs represent for the FinTech sector in Latin America. The study consisted of surveys of 94 SMEs from 16 countries in the region with a focus on those led by women, and 28 FinTech companies, plus 8 in-depth interviews with selected companies. Finally, interviews were conducted with four experts in gender-responsive financing to obtain specialized insights to support the study.
The report, titled “How the FinTech Sector Can Improve Access to Financing for Women-ledSMEs in Latin America”, was presented during a webinar on September 25 and featured leading voices in the investment ecosystem: Jodi Pederson, Business and Global Programs Consultant at Cartier Women’s Initiative; María Mercedes Agudelo from Colombia FinTech; Laure Schlesinger, Co-founder of Prestamype; and Jacinta Dillon, Global Lead for SMEs and Social Enterprises at Pro Mujer. The webinar was moderated by Alan Pierce, Impact and Knowledge Manager at ALIVE Ventures.
During the event, the main findings of the study were highlighted, including the key barriers faced by women-led SMEs in accessing financing, as traditional banking is not adapted to their specific needs. In Latin America, women-led SMEs face a financing gap of nearly $100 billion (IDB Invest, 2022). These gaps are related to the supply and demand of financial services and products.
Key Results
Out of the 94 surveyed SMEs, 77% were majority-owned or led by women. The study identified three main barriers to accessing financing: 1) Excessively high interest rates; 2) Lack of credit history; and 3) Fear of over-indebtedness. Women-led SMEs showed greater fear of over-indebtedness than men-led SMEs. They also indicated insufficient credit history and lack of information on how to access financial products as barriers to financing more than men-led SMEs did.
Another relevant finding of the study is that, of the surveyed SMEs, 58% of women-led SMEs prefer to access financing through traditional banking, compared to 71% of men-led SMEs. This difference of 13 percentage points indicates the limitations that women entrepreneurs face in trusting traditional financing methods.
The role of FinTechs in reducing barriers
Another relevant component of the study is to highlight the role of FinTech companies in reducing the gender finance gap. For example, among the surveyed companies, 59% of men-led SMEs had contracted a financial product from a FinTech company, compared to 40% of women-led SMEs. This gap of 19 percentage points represents an untapped opportunity for the FinTech sector.
During the webinar, Laure highlighted the efforts that have been made to mainstream a gender perspective into the Prestamype‘s internal operations and its product offering for SMEs in Peru. She also highlighted the enormous economic potential of investing in women-led SMEs, which tend to be better financial clients due to their greater loyalty, lower risk as they show less delinquency in repayment rates, and their responsibility for 80% of household spending.
Key Findings
The webinar addressed key recommendations for FinTech companies to leverage this underserved market:
- Understanding women-led SMEs as a business opportunity.
- Collecting gender-disaggregated data and use it to make informed decisions.
- Integrating a gender perspective in all its operations.
The research conducted by Pro Mujer’s GKL and ALIVE reveals that gender lens investing, beyond being an effective mechanism to close persistent gender gaps, is an opportunity to enhance economic productivity in the region and in companies.
Based on our 34 years of experience supporting women in Latin America, Pro Mujer launched the GKL to provide solutions that help public and private institutions and NGOs in Latin America integrate gender, diversity and inclusion policies into their operations. In 2023, the GKL reached over 18 countries in the region, worked with over 130 organizations, and impacted over 2,600 people through its workshops, trainings, mentoring, and technical assistance.
Read the full report here: https://gkl.promujer.org/2024/09/25/alive-como-el-sector-fintech-puede-mejorar-el-acceso-a-financiamiento-de-las-mipymes-lideradas-por-mujeres-en-america-latina/
