IMAGE COURTESY OF THE AFRICAN DEVELOPMENT BANK
AS A GIRL, I was taught to believe that personal agency prevails over societal biases. I was told that I could accomplish anything if I believed in myself and that sexism was not insurmountable. Later, as a woman, I found out that my parents’ advice could not have been wiser. In Africa, the gender gap in access to financial services is driven by women entrepreneurs’ own self-perception. Such perception leaves many African women on the fringes of the financial sector—unable to save, borrow, or build capital.
Worldwide, women’s access to finance is disproportionately low. Despite substantial overall progress—in 2017, the World Bank reported, 1.2 billion more people had bank accounts than in 2011—there is still a 9 percent gap between women’s and men’s access. In sub-Saharan Africa, only 37 percent of women have a bank account, compared with 48 percent of men, a gap that has only widened over the past several years. The figures are even worse in North Africa, where about two-thirds of the adult population remains unbanked and the gender gap for access to finance is 18 percent, the largest in the world.
These striking figures raise urgent questions for decision makers in Africa. What continues to fuel gender disparity in access to finance across the continent? And why, despite all efforts, is the gap even wider today than a decade ago?
The mainstream view of economists is that supply-side constraints such as high interest rates and collateral requirements play a major role in excluding women from the formal credit market. Credit rationing through high interest rates disproportionately discourages women entrepreneurs from applying for loans, while lack of collateral can mean they have less access to loans than their male counterparts (Morsy and Youssef 2017). And when they do have access, women typically face more stringent loan arrangements than men.
Overemphasis on the credit market’s supply side by academics, policymakers, and practitioners means that demand-side factors and their influence on the gender gap in access to finance have been largely overlooked, especially in Africa. But women’s decision-making behavior also plays a key role in this gender gap.
In the credit market, women entrepreneurs fail even to apply for loans because of such factors as low financial literacy, risk aversion, and fear of failure. Intuitively, one would expect women who choose to be entrepreneurs to be at least as competitive as men entrepreneurs. Why, then, are they self-selecting out of the credit market?
Demirgüç-Kunt, A., L. Klapper, D. Singer, S. Ansar, and J. Hess. 2018. The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. Washington, DC: World Bank.
Morsy, H., and H. Youssef. 2017. “Access to Finance—Mind the Gender Gap.” EBRD Working Paper 202, European Bank for Reconstruction and Development London.