Gender-biased rule deprives women entrepreneurs of access to finance
Women entrepreneurs lag behind their male counterparts in accessing finance due to a gender-discriminatory rule and a lack of financial literacy, said senior economists, bankers and corporate executives at an event on Monday.
"Women entrepreneurs do not get loan amount according to their need as the average size of loans for female borrowers is half their male counterparts," said Dr Nazneen Ahmed, country economist of the UNDP, at the roundtable discussion on "Financial Inclusion for Women's Economic Empowerment".
Eastern Bank, a private sector lender, organised the programme at its head office in the capital aiming to initiate discussion and propose recommendations on how to overcome the barriers faced by women-led enterprises to access finance.
The average size of loans for women is only Tk13 lakh when male borrowers get double the figure, said Nazneen, blaming the size difference on the discriminatory rule.
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Explaining the biased rule, she said women are not trusted by banks and lenders require one or two guarantors in case of loans for females.
The Bangladesh Bank rule also requires at least one guarantor in case of a female loan.
Though there is a rule for female loans up to Tk25 lakh without collateral, that is not implemented, she said. As a result, collateral is a big barrier for female borrowers, she added.
She said women entrepreneurs are not trusted by banks as they prevail only in small businesses and there is a small number of big female business persons.
Mentioning her statistical analysis, she said, only 6.6% of the SME (Small and Medium Enterprise) borrowers were women in FY20. Only 4% of the total small and microloans go to women entrepreneurs.
Thus, a gender gap regarding accessing finance prevails in terms of the number of borrowers, the amount of total loan and the size of the loan, she went on.
She said there are very few women entrepreneurs in the export business. There are some good products of women entrepreneurs in divisions across the country but they cannot export them or move them to cities due to a lack of other facilities.
A lack of financial literacy and communication skill is also a big barrier for women entrepreneurs to grow, she put it.
Many women entrepreneurs cannot even write an email to communicate with foreign buyers. Banks can organise training for financial literacy and to improve communication skills for women entrepreneurs, she recommended.
Nuzhat Anwar, acting country manager of IFC for Bangladesh, said a lack of financial literacy and awareness are the big barriers to women's entrepreneurship.
She said there are lots of financial products but women entrepreneurs are not aware of them.
Banks cannot lend without collateral because they have to manage credit risk. But, in this case, microfinance institutions could have helped banks by providing credit history of borrowers to get loans without collateral.
Presenting an IFC study on women entrepreneurs conducted during Covid-19, she said 76% of respondents were not aware of the financial package offered for the crisis period.
She said only 24% to 25% of women are able to come under formal channels for financing as the process seems to be difficult for them and they do not have clear financial literacy.
Responding to her speech, Abul Bashar, executive director of the Bangladesh Bank, said that they are working on the formulation of financial literacy guidelines that will benefit women entrepreneurs.
He said digital financing like mobile financial services, agent banking helped reduce the gender gap in the financial account. The central bank recently opened up mobile financial services for financial institutions and government entities which already was only bank-led. This initiative will reduce the gender gap in financial services.
He said the Bangladesh Bank has initiated many women-centric policies and women entrepreneurs have certain shares in stimulus loans. However, state-owned banks seemed reluctant in disbursing loans to female borrowers under stimulus loans which is disappointing.
Speaking as the chief guest, Habibur Rahman, chief economist of the Bangladesh Bank, said there is no problem in money supply but the problem is from the demand side. The central bank has adequate policy support. For instance, it targets to achieve 15% of the loans to go to women entrepreneurs but at the end of the year, 5% remains undisbursed.
"So, we have to look at the factors of the demand side, but not the supply side," he said.
He said the problem is there is no demand because many female entrepreneurs do not have qualifications that the central bank is setting, like collateral and other business requirements.
Many women entrepreneurs in the formal sector do not have business history to be eligible to get access to finance, he said.
However, the expansion of mobile financial services can be a way to accommodate them under financial services, he added.
Disagreeing with Habibur Rahman, Rokeya Kabir, chairperson of Bangladesh Nari Progati Sangstha, said the problem is not with demand but women entrepreneurs are being discriminated against in getting access to finance.
She said look at the total default loans, how many women and how many males are on the defaulter list.
If billions of money can be defaulted by male borrowers, what women entrepreneurs will require collateral to take a Tk10 lakh loan, she questioned.
Dr Sadiq Ahmed, economist and moderator of the event, said Bangladesh seems to be an outlier and the policy gap is huge.
He said the gender gap prevails in many countries but it is surprisingly high in Bangladesh.
Citing Findex 2017 results, he said, Bangladesh has the second-highest gender gap among 140 surveyed countries.
Rupali Chowdhury, managing director of Berger Paints BD Ltd, said banks should be incentivised by the Bangladesh Bank to reach out to SMEs across the country.
Ali Reza Iftekhar, managing director of Eastern Bank, said there are almost 8 million businesses in Bangladesh. Of which, according to a 2016 report by the International Finance Corporate (IFC), a mere 7.2% of businesses are owned by women.
Of the many deterrents, possibly the most stumbling block is the glaring gender gap in financial inclusion in Bangladesh due to socio-cultural constraints, lack of control over decision making and low digital-technology literacy.
Recent research shows there is a 13% gender gap in phone ownership, 14% gender gap in mobile financial service (MFS) account ownership, 29.2% in bank account ownership and 44.8% in labour participation.
There is also a lack of women-centric financial policies to encourage women's financial independence and economic empowerment, he said.
Access to finance and scale up a women-centric business is key to achieving the SDGs, poverty eradication, gender equality, employment generation, and economic growth, he added.
