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Access to finance is critical to help women entrepreneurs around the world improve their earnings

Sandra received a Kiva loan to grow her flower-selling business

Each International Women's Day, gender equality is a recurring theme across social media and global political dialogues. With all this focus, it can feel like we have come a long way toward reaching gender parity. And that's true — in some spaces.

In 2015, the United Nations adopted the Sustainable Development Goals, one of which was to achieve gender equality and women’s empowerment by 2030. Since then, we have seen tremendous progress in areas including women’s educational attainment and health and survival. 

But according to the World Economic Forum’s Global Gender Gap report from 2022, we’re nowhere near reaching the timeline set out by the UN. While 2020’s report predicted we’d close the gender gap in less than 100 years, the most recent update showed the situation worsening, suggesting we now have 132 years before we’ll achieve that goal. In the area of economic participation and opportunity, the forecast is even longer, with 151 years before gender parity can be achieved — meaning it's well out of reach in our lifetimes, and even the lifetimes of the next generation.

Global gender parity in labor-force participation has been slowly declining since 2009, and the trend was exacerbated in 2020, with the COVID-19 pandemic reversing prior progress. According to the World Bank, the current global labor force participation rate for women is just over 50%, compared to 80% for men.

In the last year, unemployment rates have increased and have remained consistently higher for women. And if the current cost-of-living crisis continues to grow, it’s likely to impact women more severely than men, as women continue to earn and accumulate wealth at lower levels.

Women also face the problem of insufficient access to finance, which contributes to their lack of economic opportunity. Over 740 million women remain unbanked, and there are 72 countries where women are barred from opening bank accounts or obtaining credit.

Read more: Why gender equality is so important

Solutions toward equitable financial access

Kiva and our global ecosystem of Lending Partners seek to address this gap; that’s why 80% of our loans go to women. Since 2005, we have helped 1.8 million women take out $1.4 billion in loans, with support from over 2.1 million lenders.

Loans help to address the barriers women face in accessing finance, but their impact goes beyond the amount of money lent. According to 60 Decibels’ Microfinance Index, in which 14 Kiva Lending Partners took part, 73% of microfinance borrowers report experiencing increased household income. But even more — 88% — agree that their quality of life has improved, with 34% saying that their quality of life has “very much improved.”

But women continue to face systemic financial challenges. Here are a few of them and what Kiva and our Lending Partners are doing to address them.

Microfinance fills gaps in funding for women-owned businesses

Almost everywhere, including in many wealthier countries, women are less likely to borrow capital to start, operate, or expand a farm or business. 

This is because traditional methods of lending, which often require collateral or credit histories, are failing many women. 80% of women-owned businesses with credit needs are either unserved or underserved — equivalent to a $1.7 trillion financing gap. And the impact on women is disproportionate, with women-owned businesses making up 23% of micro, small and medium enterprises but accounting for 32% of the finance gap for these businesses.

Many financial service providers are wary of issuing loans to small businesses that they perceive as “risky,” leaving women-run businesses, which tend to be smaller than those owned by men, with few options.

Microfinance institutions (MFIs), which make up the majority of Kiva’s Lending Partners, seek to address this need. The Microfinance Index found that over half of borrowers are getting access to a loan for the first time, and this is especially true for women and lower-income clients. Globally, 62% of women report that they could not easily find a good alternative to their MFI, compared to 53% of men.

Despite barriers to access, women are more likely to repay loans 

Although they find it more difficult to access capital, women are more likely to repay their loans. Kiva’s data shows that repayment rates are higher for women across all sectors. The Microfinance Index also found that more women than men describe their repayments as “not a problem” (73% vs. 67% of men).

The gender wage gap persists as women entrepreneurs are concentrated in lower-paid sectors 

All around the world, women continue to experience a large earnings gap compared to men. While education and work experience have become much less important in explaining this gap over time, occupation and industry have become more important.

Gender stereotypes and barriers steer women away from occupations that have traditionally been dominated by men and push them toward care-focused work that is often regarded as “unskilled,” or “soft-skilled”, and is lower paid.

This gendered differentiation in work sectors is particularly relevant to the gender earnings gap when it comes to entrepreneurship. Women tend to start businesses in different industries than men, and the sectors dominated by women see less profits. 

In many countries, women-owned businesses are concentrated in retail trade and services sectors (like health, education, and social services), which are characterized by lower investments and growth compared to manufacturing, construction and mining.

According to data from the World Bank, women who enter male-dominated sectors earn 66% higher profits than women who remain in women-concentrated sectors. 

  • Men in sectors predominantly composed of men earn the most;
  • Women in women-concentrated sectors earn the least; and
  • Women in sectors largely consisting of men and men in sectors largely made up of women fall into the middle tier of earnings.

Kiva’s data on loan activities generally reflect this gendered segregation. Activities where there are significantly more loans to women than men include arts and crafts, sewing and textiles, while women are much less likely to take loans for traditionally male-dominated sectors like technology, repairs, carpentry and wholesale. 

Lower earnings may be a reason why when women do take out loans, they are on average smaller than loans that men take out, across all sectors. 

Despite being lower paid, many of the industries women work in remain essential for society, like adult and child care industries, as well as food. Of loans for women, almost a quarter were in the food sector, and 6 out of the 10 top activities related to food, suggesting women are important contributors to food security in their communities and beyond. 

Lack of access to capital contributes to lower earnings due to reduced productivity 

Sectors that are heavily dominated by men are also generally more capital-intensive, meaning they require large amounts of investment and equipment to get started. Businesses that require fewer capital inputs may not produce the same return to capital, which plays a part in undermining women’s earnings. 

In agricultural entrepreneurship, gender differences in access to productive inputs, including land and credit, can lead to gaps in earnings due to lower productivity. Studies have found that when gender differences in agricultural productivity exist, they often disappear when access to these inputs are taken into account.

This is supported by Kiva data which shows that when we do provide access to capital, women tend to be successful — they are slightly more likely to repay agricultural loans than men (97.05% vs 95.87%).

Loans for ‘assets’ could help improve incomes and productivity

According to research by 60 Decibels on Kiva partner NWTF, asset-based loans — loans for capital inputs like machinery or equipment to start or grow a business — are associated with higher income change compared to loans that are used for working capital, such as buying more inventory or raw materials to sell. 21% of NWTF borrowers who took out asset-based loans report that their incomes have very much increased, compared to 15% for those that use their loan for working capital. More research is needed, but perhaps helping women to purchase large, expensive assets may be more productive in helping them to increase their income by a larger margin.

This was certainly the case for Margarida, a small-scale commercial farmer. Margarida received a loan through Kiva’s partnership with iDE Mozambique, which strives to support women farmers to start and scale their agricultural businesses. 

Margarida is fundraising for her fourth Kiva loan to scale her agricultural business

With her first Kiva loan of $2,500, Margarida bought seven greenhouses that allowed her to produce good quality vegetables by reducing the effects of climate change on her crops. In order to increase productivity, she took out another Kiva loan to acquire a tractor, which allowed her to increase her volume of horticulture production and expand her production area. Her third loan was for a tractor that she uses on her farm and rents out to other small-scale farmers in the area. Margarida has faced many difficulties due to climate changes such as heavy rains, intense heat, strong winds, and cyclones, but she has always repaid her Kiva loans, even on time. Now, she is funding her fourth Kiva loan for $25,000 — 10 times the size of her original loan — highlighting how much she has been able to grow her business since she was given an equitable opportunity to access capital for the assets she needed to grow.

Read more: 27 actionable ways to improve gender equality

30% of Kiva loans go to women in traditionally male-dominated sectors, helping them move into higher paying industries

Providing access to capital and loans can help women to cross over into more profitable sectors traditionally dominated by men. 

In developing countries, women who work in male-dominated industries are more likely to obtain group loans and loans from a bank to start a business, relative to men in the same sectors. The women who have found this type of success in male dominated industries are possibly a unique group who have been able to access loans to start and operate their business.

This highlights the importance of work Kiva and its partners are doing to reach women who are seeking loans in these industries. Of Kiva’s business loans to women entrepreneurs, 30% go to women in traditionally male-dominated sectors including agriculture, wholesale, transportation, manufacturing and construction.

Some of the highest repayment rates for business loans to women are in transportation, demonstrating that once women do have access to capital, they are able to succeed in the sector. 

Going beyond loans 

Beyond providing access to capital, many Kiva Lending Partners increase their impact by providing wraparound services that help their clients to succeed in their businesses. One example is MiCrédito, which provides small loans to help businesses in Nicaragua that otherwise cannot access affordable finance to grow and scale. MiCrédito works with businesses that are too large for microfinance institutions, but too small for traditional banks. When these businesses grow, they expand formal employment opportunities and strengthen communities. 

Eva Margarita was able to utilize a loan to start a successful business in the transportation industry

Alongside loans, MiCrédito provides financial education to assist with the prosperity and growth of their client’s businesses. One of their clients, Eva Margarita, age 62, is an agricultural accounting technician who was able to utilize a loan from MiCrédito to start a successful business in the transportation industry. Eva wanted to open transport routes to rural areas, helping people to avoid walking long distances to take their products to market. A loan of $20,000, powered by 1,035 Kiva lenders, allowed her to buy a bus and offer a valuable service in the rural area. In the near future, she wants to acquire new vehicles to open other transportation routes and generate employment. Without access to this support, Eva would not have been able to crossover to the transport industry and improve her profit margins.

Microfinance helps address gender equity and financial inclusion

MFIs around the world are helping to address the gaps left by systemic inequalities for women, by opening up access to capital where it’s not readily available and providing additional services to help women improve their earnings. Kiva is proud to work with MFI lending partners around the world to help improve the quality of life of millions of women.

Lend to a woman today to invest in gender equality

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About the author

Sophie McAulay

Sophie is Senior Content & Community Manager at Kiva, and is passionate about economic development, reducing income inequality, and equality of opportunity. She helps Kiva tell stories of the impact of microfinance on individual's lives.