Microcredit Banks Will Not Reduce the Gender Gap In Banking

In Latin America, women continue to be financially disadvantaged. Despite the efforts that have been made, it has not been possible to reduce the gender gap, neither in the labor sector nor in the financial sector. Access to credit and financing continues to be very restricted. The microcredit programs implemented by different organizations, both public and private, are not enough to achieve real development.

According to the Global Findex database, in Latin America only 49% of women have access to a bank account. And of these, only 11% have access to credit. This means that many women are limited in their capacities as entrepreneurs, professionals and family heads. 

IDB Study on Access to Credit

A study carried out by the Inter-American Development Bank (IDB) in Chile, produced results that demonstrate the existing inequality between the genders in terms of credit. Although these data are based on a local study, they can be extrapolated to the entire Latin American and Caribbean region, given the social and economic similarities.

Nicole Pinaud, who is from the FEN Administration Department of the University of Chile, revealed, based on this report, what are the main causes of this inequality. Especially since women tend to receive less credit approval than men, and receive much lower amounts.

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Job instability is the main cause for not approving the credits granted to women. Women are 18% less likely to be approved for a loan than men.  In many cases, women are asked for a series of additional requirements to be granted a loan.

For many bank officials who participated in this study, this is because women have a higher perception of risk. At the same time, women generally have lower incomes than men. 

The gender gap increases

In the last Latin American edition of the Women Economic Forum (WEF), Nadia Sánchez warned that in the first half of last year 62.9% of companies led by women in the region entered a labor recession. This is a non-profit foundation oriented to the empowerment of low-income women in Colombia.

The main obstacle that women have to face to achieve economic independence and achieve successful ventures is scarce access to credit. However, women comply more with financial obligations, paying 95% of the credits granted to them, against 70% of payments received by men, as established by different international organizations.

Among these organizations are the IDB and the Development Bank of Latin America (CAF), which have participated in studies of the region, which demonstrate the inequality that exists in countries such as Chile, in the approval of credits. Eric Parrado, who is the General Manager of Research at the IDB, affirms that economic recovery is found in enterprises led by women, with the new economic scenario having a woman's face. For him, the economic recovery of Latin America involves the full insertion of women in productive activity, with equal conditions.

Microcredits to reduce inequality

In Latin America, several successful cases of microcredit programs have been developed. In an article by Tomas Miller-Sanabria, for Asofin, it can be seen how these programs seek the inclusion of women in the productive and financial system. One of them is Women's World Banking, which is an international network that provides support to institutions in different countries in the region.

In countries such as Colombia, the Dominican Republic, Bolivia and Brazil, interesting proposals have also been presented over the years to reduce the gender gap in the financial area. Institutions in the region, such as Caja Los Andes, Fie and Banco Sol in Bolivia, Compartamos in Mexico, Mibanco in Peru, Financiera Calpiá in El Salvador, and Banco Solidario in Ecuador, have developed successful microcredit proposals.

The role of banking

The regional director of UN Women, María Noel Vaeza, affirms that it is necessary for financial institutions to go beyond the provision of microcredits, which are generally given to women. Investment companies, pension funds, and insurance companies must begin to see investing in gender as a worthwhile business.

One of the initiatives to be highlighted is the Banking for Entrepreneurs (Women Entrepreneurship Banking), of the Inter-American Development Bank (IDB) and the Multilateral Investment Fund (MIF). This project offers incentives to banks and other financial intermediaries, with the aim that they develop and offer financing for entrepreneurs of different categories. This includes loans, guarantees and technical assistance for banks, so that they have the appropriate tools necessary to offer products and services tailored to the needs of women.

Undoubtedly, there is still a long way to go to reduce the gender gap in the financial area. Microcredits have proven not to be enough to achieve this purpose. Despite the fact that successful proposals for small-scale financing have been developed in the region, it is necessary to develop systems that are more adjusted to the real development needs of women.