Fintechs woman loan barriers as the industry of Fintech can help close the gap...
Fintechs can reduce many of the barriers women face in obtaining a loan.
The use of alternative sources of data — such as telephone and utility payments — to make credit decisions can be especially useful for women, as it allows them to prove their creditworthiness even without a credit bureau.
With access to the data on the smartphones of potential borrowers, digital lenders develop an algorithm to determine their repayment capacity and decide whether to offer a loan to customers who probably do not have a traditional credit score. Once the borrower repays the first loan, he has a credit history on which the following lending decisions can be based.
Fintechs woman loan barriers
At the moment, fintech business models are becoming a faster and less cumbersome way than traditional banks to put companies in contact with lenders. Through these platforms, people can apply for a loan by providing information about their businesses and plans to use the requested funds. The lenders on the platform make loan decisions based on the information provided and then earn money through paying the interest on your loan.
Amartha, an Indonesian fintech company, is the example of this model. It offers microloans to women entrepreneurs in rural areas using a peer-to-peer platform and its own credit scoring system based on more than 90 parameters, including demographic information and their payment history for public services or school fees.
Lenders choose an application for financing based on the client's profile. Amartha takes care of the repayment of the funds and investors and lenders receive weekly principal and interest payments, which they can check online.
Amartha establishes the borrower's creditworthiness, assigns her a credit score, approves her loan application, and then publishes the loan application on its online marketplace. Next, lenders choose a loan to finance it based on the client's profile. Amartha is responsible for disbursing the funds, and investor-lenders receive weekly payments in the form of principal and interest and can monitor the status of the loan online.
Fintechs woman loan barriers facts
... but all financial service providers need to step up
When Kenya's largest bank, KCB, decided to expand its portfolio of micro, small and medium-sized enterprises, focusing especially on those run by women, its first step was to evaluate these companies based on the amount of cash they generate instead of looking at the guarantees offered by the borrower.
He also expanded his business club for entrepreneurs, including networking opportunities and executive training by a local business school. To equalize lending opportunities, the bank trained credit agents on the differences in the financial needs and preferences of men and women.
These changes produced impressive results almost immediately: branches increased lending to women-led companies to an average of 50% of their portfolio.
Fintechs woman loan barriers impact
The impact of the program was also noticeable outside the bank: companies that had received loans from KCB increased their number of employees by an average of 113% compared to the 40% increase of non-borrowers.
Emerging market financial service providers, such as KCB, are beginning to recognize that women-owned businesses are a valuable and underserved market segment.
Financial service providers in general - from traditional providers, such as banks and insurers, to newcomers, such as fintech companies and mobile money providers - have not paid attention to women.
While these companies are facing the economic consequences of the pandemic and the recession, it's time for them to understand that a $700 billion annual revenue opportunity is too big to ignore.