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Applying a Gender Lens in Fintech: Bridging the Gender Finance Gap in Latin America

2024-11-26

At ALIVE Ventures, we firmly believe that integrating a gender perspective across our investment processes and assisting investees in adopting gender-smart business practices is not only the morally correct approach but also holds significant business value. Our recent gender research report, which builds on our previous studies on gender dynamics in EdTech and HRTech value chains, aimed to explore this crucial connection within the fintech industry of Latin America. By collaborating with Pro Mujer’s Gender Knowledge Lab, we conducted extensive surveys involving over 90 small businesses and nearly 30 fintech companies across the region. The recently published report, “How fintechs can improve access to financing for MSMEs led by women in Latin America,” presents gender-smart and practical strategies based on this research, enabling fintechs to directly contribute to gender equality through their business operations. In this article, we will share some of these transformative strategies.

Call to Action for Fintechs

The release of this report serves as a powerful call to action for fintechs across Latin America. It emphasizes the need to implement gender-smart strategies and unlock the untapped potential within women-led small businesses. As Carmen Correo of Pro Mujer aptly stated, “This report highlights a reality that we cannot ignore: women entrepreneurs lead with determination and responsibility, but face disproportionate barriers in accessing financing. This report is a call to the fintech sector to integrate a gender perspective, because supporting women not only boosts their development, but strengthens the entire regional economy.”

Bridging the Gender Finance Gap

In Latin America, a significant three out of four women-led small businesses lack adequate financing, highlighting the urgent need for tailored financial solutions. The strategies outlined below, derived from the research study findings, are designed to help fintechs narrow this gender-based financing gap and seize new business opportunities. 1: Traditional credit histories frequently fall short or are incomplete for women-led small businesses, particularly those operating in the informal sector. To overcome this challenge and better serve these clients, fintechs can incorporate alternative data sources into their processes. By leveraging digital payment histories, supplier interactions, or mobile payment records, fintechs can more accurately assess creditworthiness and make financing more accessible to women who may lack formal credit records. This approach opens up new avenues for these businesses to secure the funds they need to grow. 2: Women-led small businesses often have distinct financing needs and face unique constraints compared to their male counterparts. One effective way to address this is by developing customized loan products. Fintechs can offer flexible terms and lower interest rates specifically tailored to women-led businesses, taking into account their generally higher repayment reliability. For instance, Colombian fintech and ALIVE investee, Finaktiva, created a line of credit with flexible terms exclusively for women-led small businesses. This initiative has enabled them to significantly increase the percentage of women-led company clients, demonstrating the positive impact of such tailored solutions.

Tailored Financial Products

Women-led small businesses require specialized financial products that meet their specific needs. These products should be designed to address the unique challenges faced by women entrepreneurs. For example, some fintechs are offering microloans with shorter repayment periods and more flexible repayment schedules to accommodate the cash flow patterns of women-led businesses. By doing so, they provide greater financial stability and support for these enterprises. Additionally, some fintechs are also providing access to working capital loans that can help women-led businesses meet their immediate operational needs and expand their operations. 1: Another aspect of tailored financial products is the provision of financial education and coaching. Many women-led small businesses may lack the necessary financial knowledge and skills to manage their finances effectively. Fintechs can play a crucial role in providing training and guidance to help these entrepreneurs make informed financial decisions. This can include workshops on budgeting, cash flow management, and business planning. By empowering women with financial knowledge, fintechs can help them build stronger businesses and increase their chances of success. 2: Furthermore, fintechs can collaborate with other organizations and institutions to offer bundled financial services. For instance, they can partner with insurance companies to provide comprehensive insurance packages that cover the specific risks faced by women-led businesses. This not only provides added protection for these enterprises but also enhances their overall financial security.

Gender-disaggregated Data

To effectively understand and meet the needs of women-led small businesses, fintechs must collect gender-specific data and use it to continuously monitor and refine their offerings. This data can reveal unique pain points and challenges faced by women entrepreneurs and enable fintechs to better serve their customers. 1: By analyzing gender-disaggregated data, fintechs can identify patterns and trends that may not be apparent when looking at data at a broader level. For example, they may discover that women-led businesses in certain sectors face higher interest rates or more stringent lending criteria. Armed with this information, fintechs can take targeted actions to address these issues and provide more equitable financing options. 2: Moreover, gender-disaggregated data can also help fintechs in customer segmentation. By dividing their customer base into gender-specific segments, fintechs can tailor their marketing and product offerings to better meet the needs of women-led businesses. This targeted approach can lead to higher customer satisfaction and increased business opportunities.

Streamlined Administrative Processes

Administrative complexity is a significant barrier for women-led small businesses when it comes to seeking financing. Simplifying application processes and making them accessible via digital platforms can make a world of difference in increasing access for these entrepreneurs. 1: Fintech companies that minimize documentation requirements and integrate mobile-friendly platforms have seen a notable increase in the adoption rate among women-led small businesses. These businesses often face time constraints and find it difficult to navigate complex administrative processes. By providing a streamlined and user-friendly experience, fintechs can remove these barriers and make it easier for women to apply for financing. 2: In addition to digital platforms, fintechs can also leverage automation and artificial intelligence to streamline administrative processes. For example, automated credit assessment tools can quickly analyze alternative data sources and provide instant credit decisions, saving time and reducing the administrative burden on both the fintech and the business owner.

Marketing Strategies that Resonate with Women

To effectively reach women-led small businesses, fintechs need to adopt marketing strategies that appeal to their preferences. Peer-based referrals, community-based advertising, and partnerships with women’s business groups are all effective ways to connect with this target audience. 1: Peer-based referrals are particularly powerful as they rely on the trust and recommendations of other women entrepreneurs. Fintechs can encourage their existing female clients to refer other women-led businesses to their services. This word-of-mouth marketing can be highly effective in building a community of women entrepreneurs and expanding the customer base. 2: Community-based advertising, such as local events and workshops, can also be a great way to reach women-led small businesses. By participating in these events and providing valuable information and resources, fintechs can establish themselves as trusted partners in the community and attract new customers. Additionally, partnerships with women’s business groups can provide access to a wider network of potential clients and offer opportunities for collaboration and knowledge sharing.For more details and to access the full report, please download the report in English or Spanish. At that link, additional toolkits summarizing key findings and recommendations are also available, providing a valuable resource for fintechs and small businesses alike.Alan Pierce is the impact and knowledge sharing manager at Alive Ventures.