Advancing Gender Inclusion in the Financial System
Matilde, the owner of a successful small business, found that she was continuously struggling to financially support herself and her five children. Like many women living below the federal poverty line in the United States, Matilde relied on high-interest payday loans to fund her entrepreneurial endeavors—even as these loans ate away a significant share of her profits. Too often, women in Matilde’s situation have little choice but to rely on these expensive loans. In the U.S., women receive only 4 percent of small-business loan dollars from mainstream financial institutions. Women living in poverty face even steeper odds: because of systemic exclusions, many in poverty don’t have access to the bank accounts and credit scores required to unlock this capital.
Women in poverty are not the only ones burdened by the gender-unequal way in which financial products and capital are apportioned. Women entrepreneurs seeking larger-scale venture capital investment are hampered by this pattern too (only 2% of all VC investment flowing to women-led enterprises).
Across the financial spectrum, women struggle disproportionately to access the financial tools they need—which is why ensuring better access to these tools and services is critical in moving the needle toward gender equality.
The Might of Micro-Loans
When a friend told Matilde about Grameen America, Inc. (GAI), which makes micro-business loans to U.S. women living below the poverty line, she saw an opportunity to improve her family’s financial situation, and jumped on it. Matilde used a $1,500 loan from Grameen America to open a small restaurant, whose profits flowed to her family, rather than to payday lenders.
As a microfinance organization, GAI’s mission is to help the women typically excluded by the U.S. financial system. With initial loans sizes of $2,500 or less, GAI’s micro-loan fund supports women as they establish and run hair salons, cleaning businesses, and other types of small enterprises. Because GAI reports loan repayments to credit agencies, it also helps its borrowers establish credit histories.
Other microfinance institutions apply a similar mission elsewhere in the world, with a focus on women and families who may lack access to even more basic necessities.
More than two billion people around the world lack access to safe drinking water. Women and girls disproportionately shoulder the burden of collecting water for their households, a task that prevents them from going to school or working income-earning jobs.
WaterEquity provides loans to creditworthy financial institutions to support affordable water and sanitation financing to individuals and businesses. Their financing enables the installation of bathrooms, septic tanks, and piped water connections. Across four funds, WaterEquity has made more than 90 investments spanning 19 countries of impact, connecting 5.3 million people with access to safe water and sanitation. What’s more, roughly 93 percent of microloan end-clients are women.
Responsible and Transparent Lending
Responsible, transparent financial services can better target the individuals, businesses, and communities who need them most. Community Investment Management (CIM), for example, partners with technology-enabled lenders to demonstrate and scale responsible innovation in lending to underserved communities.
Among the recipients of CIM’s loan products are small businesses, low-income households, students, and community development financial institutions (CDFIs). Camino Financial is a CDFI that offers affordable loans to underserved Hispanic and Latino small businesses in the U.S. Through its partnership with Camino and CDFIs like it, CIM provides capital for innovative debt financing, with an eye toward creating scalable impact among populations historically excluded from our financial system. As a percentage of its portfolio, CIM funds two to three times more women-, minority-, and veteran-owned businesses than banks do.
True gender equality calls for better financial inclusion, which is why a core pillar of ImpactAssets’ gender equality strategy is to improve access to capital for women around the world. Because for women like Matilde, intentional awareness and action will be required on the part of investors—among many others—before financial opportunity is truly available to all.
Disclaimer: ImpactAssets is an investor in Grameen America, WaterEquity, and Community Investment Management through its donor advised fund investment platform.
Photo courtesy of Grameen America.
