Fintechs urged to serve more women entrepreneurs

MANILA, Philippines — Financial technology firms in the Philippines should serve more women micro, small and medium enterprises (WMSMEs) to expand their access to finance and promote financial inclusion, according to the Asian Development Bank (ADB).

This was the recommendation of the multilateral lender in a report that looked at challenges faced by women entrepreneurs in Indonesia, the Philippines and Vietnam.

“By serving more WMSMEs, digital lenders can not only expand their outreach and have a higher social impact but can also improve their loan portfolios by adding a segment known to have lower risk profiles and higher loyalty,” the ADB said.

While digital lenders have several products that can be useful for WMSMEs, the ADB said most fintechs do not focus specifically on women.

It said many fintech firms also need to track the number of women they serve.

Among the reasons why fintechs do not focus on WMSMEs is the preference for consumer loans, which are perceived to be a more profitable segment.

The ADB said some fintechs also believe the bankable WMSME market is small.

In the Philippines, 30 percent of the one million MSMEs are reported to be owned by women.

When only micro-enterprises are considered, the share of businesses owned by women in the country increases to 45 percent.

Citing the Bangko Sentral ng Pilipinas, the ADB said 58 percent of WMSMEs in the country have cited lack of access to funding as a challenge in doing business, higher than the 37 percent of men-owned MSMEs with the same sentiment.

“To adequately serve women, financial service providers must first understand women’s financial service needs and then make appropriate adjustments to their products and services,” the ADB said.

Based on studies, the ADB said it is important for loan products for WMSMEs to have flexibility with collateral requirements.

It said accessibility and affordability are also important as women play multiple roles, and WMSMEs tend to work predominantly in low-margin businesses such as retail trade.

The ADB said having simple documentation requirements is likewise critical to enabling women, especially those lacking financial literacy, time to apply for loans and to reduce the prospect of applications being rejected due to administrative reasons.

“With development finance institutions increasingly deploying more impact-oriented capital to support inclusive fintechs, there should be more opportunities for fintechs to verticalize their offerings and build customer-centric and tailor-made solutions specifically for the WMSME segment,” the ADB said.