Fintech’s Potential to Help Close the Gender Gap
International Women's Day 2017 Stories
On March 8th this week, the world observed International Women’s Day, a day which brings attention to the inequalities that still exist between men and women, but also highlights individuals and organizations committed to eliminating these inequalities and achieving parity.
International Women’s Day presents us with an opportunity to spark a broader conversation about how digital financial services can play a role in closing the gender gap in financial inclusion and empowering women around the world. Ensuring that women are financially included is not just critical for improving their lives, but also ensures that the global economy is able to achieve sustainable economic growth.
Earlier this week, experts and thought leaders gathered at FINCA’s International Women’s Day panel discussed how fintech can further efforts toward greater global gender parity – and why striving to connect the world’s unbanked women with formal financial products and services is critical to economic growth and sustainability.
- Data can help financial service providers assess clients in lieu of traditional credit assessments. Many women remain unbanked because they lack the documents necessary to open an account. Without collateral like land ownership or a traditional credit history, they are denied accounts and prevented from accessing loans, savings accounts, and other financial services. Fintech provides a way to work around this common issue by utilizing other forms of data to approve someone for a loan, such as social media data. Using unconventional data points, like an individual’s phone usage or how often they open a mobile wallet application, can allow companies to determine someone’s creditworthiness without a traditional credit score.
- Fintech solutions are often more flexible than traditional banking services and are therefore better able to account for and meet clients’ individual needs. Throughout Africa, many women organize themselves in savings groups in order to informally gain access to financial services like loans. Fintech presents an opportunity to build on these existing practices and enhance them with technologies that will allow access to credit, savings accounts, and other financial products. Client-centric products and services – those that have client needs baked into their design – will have greater uptake and overall success.
- Women are good investors and smart money managers. Research has shown that women are likely to invest more of their income back into their families as compared to men, doing so through school fees or medical expenses. These investments have a ripple effect of positive impact, creating opportunities for the youngest generations.
- Growth opportunities are completely missed without parity between women and men in Africa. According to McKinsey Global Institute’s 2015 report on the global economic impact of parity, Sub-Saharan Africa could see a 12% increase in GDP if all countries in the region committed to increasing gender parity as much as their best-performing neighbor.
Of course, any conversation about the positive potential impact of fintech must be accompanied by a consideration of its risks. Products or services that rely on mobile applications present the potential for vulnerabilities related to data security and privacy. Companies developing these technologies must take measures to ensure that clients’ personal information is protected.
Similarly, when introducing fintech to new clients, especially those who may have no previous experience with financial services, financial education and literacy is necessary. It is essential that clients understand best practices, as well as the above-mentioned risks. As they are traditionally excluded to a greater extent than men, it is even more critical that women are offered this education. Equipping clients with financial literacy will empower them to take control over their money and make smart investments.
In Africa, women are already leading the effort to connect the unbanked with the financial tools they need to save for the future and grow their business enterprises. Consider Rita Kimani, the CEO of FarmDrive in Kenya: her startup uses mobile phones, alternative data, and machine learning to close the critical data gap that prevents financial institutions from lending to creditworthy smallholder farmers.
It is incumbent on both advocates and financial service providers to deliver responsible, sustainable financial tools to unbanked women around the world. Without them, economies will not experience the sustained growth necessary for greater global prosperity.
To learn more about Rita Kimani, visit FarmDrive’s website.