Designing financial tools with women in mind can empower them — and boost economies

March 5, 2024 | By Payal Dalal

When Peruvian entrepreneur Elizabeth Vargas Vilca wanted to launch a shoe manufacturing business, she faced one barrier after another. Initially, her husband balked at the idea of her working at all. Then, after overcoming his opposition, she struggled to obtain a bank loan. In the meantime, Vargas Vilca lacked digital skills needed to help her business grow.

Her experience is not unique. Today, millions of women entrepreneurs in low- and middle-income economies lag behind men in accessing financial services, expanding their business or even starting a business venture in the first place.

Part of the problem is that financial institutions do not account for women’s financial situations. They often deny loans to women in developing countries because they lack formal identification or traditional collateral. Or they question women applicants’ ability to repay.

While women own nearly one-quarter of the world’s micro, small and medium enterprises, they account for a disproportionate 32% of the funding gap for these businesses. In total, nearly one billion women lack access to finance, and 80% of women-owned small businesses with credit needs are either underserved or unserved. Women entrepreneurs face a total financing gap of $1.7 trillion.

It’s time to shrink this massive disparity. To do so, we need to alter age-old lending practices that prevent women from accessing capital. We also must empower them with the technological know-how to grow their business. And we should leverage digital payment tools to deliver wages directly to women workers and show them how to manage and grow their money.

Elizabeth Vargas Vilca, above and in banner photo, runs a shoe manufacturing business in Arequipa, Peru, that now employs 20. “All our staff knows that if we make a good shoe, the customer will buy, and when the customer buys, they continue to have work … I make sure to generate work.” (Photo courtesy of CARE)

Financial institutions can start by designing and deploying products and services that speak to women and their specific circumstances. This does not mean using pink logos or flowery language. It means adapting a mindset, along with women-centric design processes like focus groups and constant testing, committed to solving their financial challenges and meeting their needs where they are.

Redefining creditworthiness

A surefire way to reach women entrepreneurs is to shift our perspective on who is creditworthy. At the Mastercard Center for Inclusive Growth, we’ve partnered with the leading humanitarian organization CARE, which places special focus on working alongside women and girls, to turn the cultural norms that hold women back into opportunities to better serve them.

After the death of her husband, Saeeda Begum, right, opened a clothing business in Rawalpindi, India, to support herself and her four children, but she didn’t even have a banking account. Through bookkeeping and digitization training via CARE, most of her challenges are now solved by just one click, she says. (Photo courtesy of CARE)

Together, we worked with Pakistan’s leading microfinance bank, U Bank, to remove male guarantor requirements and allow women to serve as loan guarantors. In cultures where men hold the deeds to their homes, and other assets are likely only in their names, women can use gold jewelry, which many South Asian women acquire in preparation for marriage, as collateral against a loan. These gold-backed loans make up 40% of total borrowers, and the repayment rate is an incredible 100%.

Similarly, in Peru, CARE worked with financial institution Financiera Confianza to create Emprendiendo Mujer, a loan designed exclusively for women that does not require a credit history; rather, it assesses credit based on references, as opposed to a husband’s debt. The loan program, which distributes an average of 2,500 loans per month, outperforms others in terms of repayment. It also provides breast cancer screening insurance, which women value.

Over three years, our partnership with CARE reached more than nine million entrepreneurs through outreach campaigns, unlocking access to $154.9 million in loans. More than 150,000 entrepreneurs have been deeply supported by loans, critical support services and training. Some 81% of surveyed participants said the program helped them increase their sales, and 83% of the women are now using digital tools and services in their businesses.

Pham Phuong Thao opened her flower and ornamental plant shop in Thanh Hoa, Vietnam, in 2019 and has since doubled her staff. “The message I want to send to other women is be more confident, more brave. You need to overcome barriers to give yourself freedom to fulfill your passions.” (Photo courtesy of CARE)

Vargas Vilca benefited from a financial training app and participated in a WhatsApp community that connected her with other entrepreneurs. She now employs 20 people. “I no longer fear accessing loans,” she told us. “Now I’m looking at what I can invest in.”

Building on this success, we’ve expanded our partnership with CARE to launch Strive Women, with a focus on strengthening the financial health and resilience of small businesses and testing innovations related to the climate crisis and childcare, which both disproportionately impact women. 

Embracing the power of technology

Women-centric design also means empowering women to become more digitally savvy.

Today women in low- and middle-income countries are 19% less likely to use mobile internet than men, and their rate of adoption is slowing. This is particularly true for women in South Asia and sub-Saharan Africa, who account for almost two-thirds of the 900 million women who have yet to adapt. There, 29% of men use fintech products, as opposed to 21% of women — a difference that exceeds the gender gap in bank account ownership at traditional financial institutions.

We’ve found that part of this discrepancy stems from women’s tendency to distrust digital services. However, our partners report that most participants will quickly adapt with the right support. That means providing targeted, gender-sensitive financial training and education, particularly in countries where men and women are discouraged from socializing together.

In Cambodia, as RISE helps digitize wages for factory workers, it also provides gender-intentional training to women to trust and use their new payroll accounts, along with financial planning and guidance on how to discuss finances with their families. (Photo courtesy of RISE)

Creating single-sex groups can also help ensure women “do” rather than watch, since research has shown that men often hold the tech tools during mixed training groups, with women watching. Online mentoring and women-managed call centers are two promising approaches our partners are taking to foster digital adoption.

Expanding digital paydays

There are also ways to build digital payment products to directly benefit women.

Since 2018, we’ve worked with BSR’s HERproject to scale up digital wages for garment factories and workers in Egypt and Cambodia. Through this work, we’ve seen the long-term potential to drive financial inclusion and resilience: Digital wages have increased the ability of these workers, and particularly women, to save, plan and respond to crises.

Now we’re expanding these benefits through our partnership with Reimagining Industry to Support Equality, which BSR’s HERproject helped found. RISE, a collaborative initiative, advances gender equality in the global garment, footwear and home textile supply chains. As we digitize wages for more than 25,000 workers — the vast majority women — at 17 garment factories in Cambodia, we’ve seen a 54% increase in workers — both men and women — using mobile money accounts. Nearly 40% of women have started saving regularly.

Rooting out bias

Finally, we must avoid designing products that replicate institutional bias. If we are not careful, we will code institutional biases from the analog world into the digital economy, exacerbating preexisting inequities that exclude women entrepreneurs.

This involves taking a proactive approach to detect bias in lending algorithms, examining the datasets feeding the algorithms and expanding the pool of tech talent to ensure that the field of data science represents the diversity of their communities and countries.

The private sector has a huge role to play in transforming women’s lives through innovation — and can benefit from this kind of commercially sustainable and scalable social impact. I’m confident that when banks build more gender-intentional products and services — even hiring more women to make their women customers more comfortable — they will help themselves by opening a new pipeline of customers. Ultimately, making financial services work for women is not only good for women — it’s good business for everyone.

Photo of Payal Dalal
Payal Dalal, Senior Vice President of Social Impact, International Markets, Mastercard Center for Inclusive Growth.