Closing The Gender Finance Gap
Globally, micro, small, and medium enterprises (MSMEs) are facing $5 trillion in unmet financing needs. Female entrepreneurs represent over $1.5 trillion or about 32% of this, according to the World Bank’s lending arm, the International Finance Corporation (IFC).
Globally, micro, small, and medium enterprises (MSMEs) are facing $5 trillion in unmet financing needs. Female entrepreneurs represent over $1.5 trillion or about 32% of this, according to the World Bank’s lending arm, the International Finance Corporation (IFC).
Data from the World Bank reveals that MENA has the largest gap between men and women when it comes to access to financial accounts at 19% and the secondlowest rate of financial inclusion in the world for men and women at 57% and 38%, respectively. This is in stark contrast to the 1% gender finance gap seen North America, which also has the highest percentage of financial inclusion for both men and women at 94% and 93%, respectively.
To address the need for capital access, technology resources, and knowledge and networks links, the Women Entrepreneurs Finance Initiative (We-Fi) was formed in 2017 during the G20 Leaders' Summit in Germany. As of July 15, 2021, total pledges for We-Fi's women-focused projects from its 14 donors totaled $347.9 million. Germany tops the five biggest government donors with a $56.5 million commitment, followed by the U.S., Japan, Saudi Arabia, and the U.A.E., with a $50 million contribution each.
VC funding gender gap
In terms of funding received from venture capital firms, femalefounded companies have increasingly attracted more investments over the last decade. The highest yearly global VC funding of $20 billion for women-led startups was in 2018, according to Crunchbase data. That figure, however, dropped by 65% to $7 billion in 2019. The first year of the pandemic extended this downward trend among female-founded firms, recording a significant year-over-year plunge and logging just $5 billion through mid-December of 2020. Interestingly, where startups are cofounded by both the female and male genders, funds raised were four times higher,
with global VC funding surpassing $20 billion in the last four years.
Fintech gender gap
Technological advances are seen as an invaluable instrument to narrow gender disparity, particularly in financial inclusion. In a recently published working paper by the Bank for International Settlements (BIS), researchers found a large “Fintech gender gap,” where 29% of men use products and services provided by Fintech compared to 21% of women. The BIS survey of 27,000 adults in 28 major economies found that women are less willing to adopt digital apps such as mobile banking apps. They are also less willing to divulge sensitive data for cheaper offers or lower rates. Ultimately, despite the recent Fintech revolution, the report suggests that this advancement in the financial world is not the sole answer to closing the gender gap, but rather a cornerstone in aiding targeted policy initiatives.