Women-owned Very Small Enterprises (WVSEs) fall between the upper end of micro and the lower end of SME lending and are often informal (not registered).  The gap is roughly $1 trillion when informal women-owned businesses are included. These businesses are vital sources of income for millions of households. Yet they face compounded financing challenges because of incomplete financial statements and paper trails, lack of formal registration, limited business experience, being located in the home, and making sales based on community credit rather than cash.
To cater to these firms, some banks have introduced 'cash-flow'-based lending and or began accepting co-guarantors in place of property titles (which are often a barrier for women seeking loans); however, these approaches can be expensive and adoption by banks is not widespread. Supplier credit offers some respite; but that too has limitations and is irrelevant for many businesses. Supply chain finance has promise; yet it has not been achieved scale.
Banks need faster and more efficient ways of underwriting loans to women-owned VSEs and SMEs, availing of the latest alternative information sources to create credit scoring models and assess multiple income sources, psychometric testing for likely repayment behavior, blockchain to establish collateral ownership, social networks to create co-guarantor mechanisms, and customer data to establish financing demand. Those who design these systems must be careful to safeguard against potential gender bias within data sources, algorithms, and human-made lending decisions. Many core banking systems cannot work with alternative data sources. Banks also need support in acquiring these customers. This includes current customers, because their MIS cannot identify women owned/led businesses easily and many remain unknown in the consumer portfolio; as well as prospect customers—identifying them and reaching out to them in the marketplace. In some cultural contexts, loan collection processes must also be adapted because the traditional recovery agent model does not work.
While some fintechs have solved pieces of the equation, the market is vastly underserved. This presents a huge B2B partnership opportunity for fintech’s and banks, as well as a B2C opportunity for fintechs.

Women-owned SMEs face a number of constraints to growth, including access to finance. While financing is almost always a challenge for SMEs, the difficulties are often intensified by gender-related factors, including women’s lack of collateral, weak property rights, tendency to have been in business for a shorter amount of time and be subjected to discriminatory regulations, laws and customs. On average women self-report report less financial literacy and seek out smaller loans or prefer to use credit cards rather than apply for business finance from banks.  With both supply and demand side barriers, the International Finance Corporation (IFC) estimates that as many as 70% of women-owned SMEs in the formal sector in developing countries are unserved or underserved by financial institutions, amounting to a financing gap – and opportunity – of around $285 billion (Source: Credit where it is due, Goldman Sachs Global Investment Research, 2014).
Moving up in business size, women owned/led formal SMEs are registered as businesses, have bank accounts where transaction history can be assessed, pay taxes, borrow from multiple sources—often using their credit card. Banks requirements are perceived to be and are onerous. The banks themselves find it difficult to identify these women whether they are their own customers (often availing of consumer credit and in the retail rather than corporate portfolio, and also often using credit cards) or are prospect customers; find them costly to acquire them once identified and costly to serve. .  This segment is growth-oriented and tremendously loyal when served well but still face many of the same constraints as WVSEs when accessing finance.

To support women, including women from minority groups, grow their small businesses, access to finance must  be complemented with  business and financial education (40% + of women going to a bank for a loan do not have a projected cashflow), access to networks and markets (women have smaller networks than men and yet size of network is correlated with business success), relevant information (timely and efficient--women are avid consumers of information) and some form of recognition (too few role models, require increased visibility). This holistic value proposition is what women need to succeed.
Traditional approaches (classroom training, mentoring, trade fairs etc.) are being supplanted by digital platforms (PFM platforms, upskilling on eCommerce platforms, networking on social media platforms etc.) and women customers are looking for one-stop shops that improve their skills, build their networks (including exports), enable access to financing (at whatever stage of business lifecycle). Banks in the Financial Alliance for Women network offer this holistic value proposition but need to do so more cost effectively and at scale through use of innovative technology—fintech, edtech, healthtech—availing of real and financial sector stakeholders, to solve for business growth needs.

Women own only a fifth of exporting companies, accounting for less than 1% of total global procurement spend (IFC). While there are a number of scalable gender-smart businesses already participating in corporate and public sector supply chains, more needs to be done to enable more women owned businesses access trade and supply chain finance. These businesses have non-financial needs ranging from access to technology and better market linkages, to improved internal systems and operations, they also have very specific and largely unmet financing requirements. In spite of local nuances and additional barriers in emerging markets, this is a universal challenge - making it a particularly powerful lever for gender finance .  A soon to be published report by IFC on trade finance for women owned businesses indicate that a large majority of women entrepreneurs surveyed do not receive adequate trade finance. IFC’s Sourcing to Equal report on Kenya suggest that women have less access to contract opportunities with corporate buyers. Buyers estimate roughly 3 percent of procurement purchases go to women-owned SMEs. In the research sample, women are more represented as sub-contractors supporting other business fulfill their orders—instead of directly supplying to buyers.
There are a number of obstacles. In complex supply chains with multiple tiers, it’s particularly difficult to gather data beyond tier 2 on gender or race/ethnicity. However, emerging tech solutions have the potential to fill in the gaps. There are also other investable critical technologies that enable effective supply chains. IFC’s Sourcing to Equal pilot in Kenya identified several needs faced by women-owned businesses, all potential areas of investment focus. Among them, the inability to meet certain procurement requirements designed for large suppliers, inadequate skills and capacity to meet industry, social, or environmental certifications, or limited access to affordable finance to bid on larger procurement contracts. Similar challenges exist for women SMEs accessing trade finance and include lack of training, collateral, informality and small size of business. Digital solutions that help women entrepreneurs access trade and supply chain finance, will enable businesses to grow and thrive.

Although women hold approximately 40% of global wealth, as per Credit Suisse’ 2018 Global Wealth Report, they are underserved by financial services providers and tend to have low satisfaction ratings. Women’s wealth is expected to increase, as they are inheriting at greater rates than men and getting closer to parity in education and entrepreneurship. Yet asset management companies have thus far failed to take a tailored approach to the women’s market. That many relationship managers struggle to communicate with women is evident in consumer behavior patterns; for example, 70% of widows leaving their financial advisor within 12 months of becoming a widow.
On the other hand, women tend to face multiple demands on their resources (paying for children, health, housing, etc.) and constraints on their time. They often deal with wealth management through informal channels--according to a 2016 report by Boston Consulting Group, 30% of HNW women list friends and family as their primary source of investment advice, compared to 11% of overall respondents)--or may not focus on their own financial security until they reach old age. This can lead to financial insecurity in retirement, a problem compounded by the pension gender gap, lower lifetime earnings, and longer life expectancies than their male counterparts.
While Wealth Tech is taking off, the mass market for women’s wealth and investment management is largely untapped. Successful solutions should earn the trust of clients and the public, provide relevant and timely information, build financial confidence & expertise, and offer a range of products that are good value and have strong values that speak to women’s widespread interest in ESG investing.
The Financial Alliance for Women's report, “The Growing Opportunity of Women of Wealth,” revealed that high net worth women have financial needs distinct from their male counterparts. At the same time, women are often under-informed about investment opportunities and lack confidence in their own financial planning abilities. 55% of high-net-worth (HNW) women “strongly believe” that they know less than the average investor. 82% of affluent and HNW women globally and across age groups believe that men know more about investing. This does not necessarily mean women are not interested or active in dealing with money; women are highly involved in managing expenses (85%) and paying bills (80%). However, 58% opt out of long-term financial planning – instead, they prioritize savings and short-term investments.
To build confidence in their own long-term financial planning abilities and drive financial security, women need trusted financial advisors that work closely with them to provide timely and relevant information through a range of consultative practices, including risk/reward trade-offs, gamification, and peer learning.