Female entrepreneurs could drive a global economic recovery. All they need are the digital keys

When backpacking through northern India in her 20s, Inez Murray sat atop a bus and watched a line of women below, in bright orange saris, chiseling rocks to build a road. The village men were nowhere to be seen.

When she got into town, she found the men sitting around smoking and chatting the day away. Though they remained idle as the women endured difficult labor, Murray knew these men still controlled their families’ finances. “That was my real aha moment,” she remembers.

Now, Murray spends her days figuring out how similarly hardworking women can manage their own money — and their own destinies. Since 2012, she has served as CEO of the Financial Alliance for Women, a global nonprofit that oversees a network of financial organizations in more than 135 countries that support programs to give women access to capital, information, education and markets. 

Over her tenure, she’s noticed more women gravitating to entrepreneurial endeavors out of choice rather than necessity, but gaps remain in many markets, and COVID-19 has exacerbated challenges faced by female entrepreneurs. That is borne out by the 2021 Mastercard Index of Women Entrepreneurs, which explores their progress across 65 economies. Though there are signs of resilience, with women surpassing men in terms of entrepreneurial activity in 10 economies, entrepreneurship scores for women fell from their 2020 levels in more than half the economies surveyed.

Though female-operated businesses deliver a higher return to investors, some 80% of them receive either less funding than they need or none at all. With female entrepreneurship projected to add some $5 trillion to the global economy, these women could hold the key to the post-pandemic recovery.

The Mastercard Newsroom sat down with Murray to find out more about how financial and government institutions can empower female entrepreneurs and why it matters.

We know men and women differ in their approach to entrepreneurship. How so?

Murray: Women are in general more risk aware, because they’re managing a wide range of roles and responsibilities in the household. As a consequence, they have less time on their hands and they think differently about starting a business, as well as obtaining credit. However, when women do borrow, they pay back their loans more consistently than men do. It’s just that they’re not borrowing at the same volumes as men.

Do you think the pandemic has changed the needs of female entrepreneurs?

Murray: We saw more resilience than we’d expected there to be. In a number of countries, we saw strong government-backed loans used by entrepreneurs. And in emerging markets, we also saw some form of support systems. But at the same time, I think it made all of us aware of just how vulnerable these businesses can be, especially given their over-representation in food services, education and trading, activities hit hard by the lockdowns. And there’s still a massive funding gap. There’s also still more to be done to build women’s businesses, including increasing access to information, providing business and financial education, and helping promote networking and recognition. It’s this kind of holistic value proposition that needs to be delivered to women in order to enable them to start and grow their businesses.

In developing nations, the numbers of women with a bank account are still very low. How can banks help address this?

Murray: Digital financial services hold the most promise to bring more women into the financial system. Services like mobile-phone apps and the availability of cash-in, cash-out agents — people who can convert cash into e-money — meet women where they are, with much lower transaction costs. You’re also seeing the e-commerce platforms offering more upskilling services to entrepreneurs on their platforms, and I think that’s a very, very positive move.

Can you share some success stories from banks or other financial institutions?

Murray: Kenya Commercial Bank has introduced cash-flow-based lending. This enables you to underwrite a very small business without requiring property as collateral, which isn’t available to many women in Kenya for cultural reasons. They’ve folded in excellent nonfinancial services — training, mentoring, networking. It’s an amazing case that should be replicated across banks in sub-Saharan Africa.

What are some of the quality-of-life and societal benefits we see when women thrive financially?

Murray: Data show women tend to spend 99 cents on the dollar on household expenses, versus 60 cents on the dollar for men. Women are investing in children’s education, health and housing. By putting a large proportion of their money back into the family, women are benefiting more people and fueling intergenerational wealth.

What governmental policy changes could help further promote financial inclusion for women?

Murray: Women pay back loans at greater rates than men across all lending categories, but there’s a perception inside lending institutions, particularly in the risk departments, that women are riskier. So anything that can ameliorate that perception is helpful, such as first-loss guarantees placed on funds given to banks to on-lend to women. Another key lever, this time to get women into the formal financial system, is to lower strict know-your-customer requirements and to make it easier for women to establish their digital identity.  

What do banks need to do to better understand the market opportunity in serving female entrepreneurs? 

Murray: First, they need to understand that women are excellent customers. In our recent report “Measuring the Value of the Female Economy,” we see average loan sizes for women compared to men is at 79%, and we’re seeing deposits at 80%. They also need to remember that women are time-constrained and need access to relevant information quickly. They don’t want pinkwashing. For example, years ago we saw pink credit cards being issued, and there was even one with a mirror on the other side. Women want solutions to their problems, and they want a relationship with an entity that can provide those solutions. If you’re the bank of choice for women, you’re the bank of choice overall.