Women's Day Special | Fintech can transform women-owned businesses

Small businesses power the world. From providing jobs, bolstering national productivity, to giving back to the larger community, small businesses have an outsized impact on the global economy.

Across regions, 33% of businesses are owned by women. In India, over 20% of MSMEs are women-owned and run and have the potential to create 150-170 million jobs by 2030.

We are all aware that too much of our world was designed without women in mind and without women involved, even as their contributions drive commerce, communities and society as a whole. Even today, inequality and exclusion affect women owned and run small businesses as they face financial barriers such as biased credit processes and unfavourable lending policies.

Globally, women-led MSMEs receive only 5% of overall small business loans. And in 2019, venture dollars invested into women-only founded start-ups represented only 4% of total dollars invested in the U.S., 2% in India, and 1% in Latin America and Europe. Also, according to IFC estimates, that 70% of women owned small and medium businesses with credit needs are un-served or under-served.

Such exclusion is even more pronounced for women from the hinterland or from less-included backgrounds, leaving us without the power of diverse perspectives and opportunities. Ultimately, this holds us all back. That’s because women-owned small businesses have unique return on investment.

When we invest in women, women invest back in their families, communities, and the world – making their small businesses even more critical to unlocking the potential in every person across all parts of their life. In fact, businesses founded by women eventually are better investments. With just 40% of the funding of male-only founded start-ups receive, women founded/cofounded start-ups generate 10% more in cumulative revenue.

Fintech can transform the way small businesses access finance by providing innovative solutions for MSME financing and underwriting that leverage non-traditional data to establish credit worthiness. Supply chain financing provides opportunities for lenders to extend microloans and creates new opportunities for businesses.

Digitisation, which is devoid of human bias and paperwork, can play a crucial role in addressing the credit deficit faced by female entrepreneurs. Insights derived from their digital footprint – records of sales, invoices, receivables, and similar data – can serve as credit history and behaviour. By collecting and analysing alternate information not typically used in credit decisioning, fintech companies can provide more loans to women owned and run businesses that are often on the periphery of the formal banking system.

The adoption of fintech solutions by women would also have a compounding effect on product and service innovation catering to their experiences and expectations. Solutions tailored for women could drive greater financial inclusion and access, resulting in a virtuous cycle that supports more women to enter the formal economy and industry.

Technology could serve as a gateway for women to access more complex solutions and services to augment their business plans. Account and subscription-based platforms to connect women entrepreneurs to new markets and supply chains, could help millions of microenterprises to scale up without relying on traditional networks.

Greater control and choices over business finances will improve women’s decision-making and bargaining power. Increasing access to digital financial services can set a new standard and create limitless possibilities for us all.

(The writer is Chief Operating Officer – South Asia, Mastercard. Views expressed are personal)