Designing for Women: Tailoring Financial Solutions to Close the Gender Gap

March 26, 2024

In this episode of IFC Audio Stories we discuss women's economic empowerment with Jessica Schnabel, the Global Head of Banking on Women at IFC. Designing for women is a game-changing approach, says Jessica, as she shares insights on gender-focused financial instruments, services and initiatives that are reshaping the landscape of women's economic inclusion.

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Lindy Mtongana: Welcome to IFC Audio Stories – where we talk about private sector solutions to global development challenges. I’m your host, Lindy Mtongana.

Women’s Month may end in March, but the need to advance women’s economic inclusion certainly does not. So, how will the International Finance Corporation – in fact the World Bank Group - continue to prioritize gender for a more sustainable and inclusive future? Well today I am in conversation with Jessica Schnabel, IFC’s Global Head of Banking on Women – an initiative which helps financial institutions expand services and opportunities for women customers and business owners. It's all about investing in women to accelerate economic opportunities and close the gender gap.  

Lindy Mtongana: Jessica, welcome to IFC Audio Stories. According to the United Nations, the theme of this year's International Women's Day, is ‘Invest in Women: Accelerate Progress’. So, as the Global Head of Banking on Women at IFC, how do you interpret this theme? 

Jessica Schnabel: First, thank you for the invitation, I am always happy to talk about how to finance women and why to finance women and why financing women is important for economic development and growth. I think that the theme this year, the one word I focus on, is “accelerate” - accelerate progress. In order to accelerate economic development and I mean, sustainable economic development on a livable planet - we're talking GDP growth, we're talking green growth - in order to do that and in order to accelerate it to a pace that meets our goals, our expectations and our hopes for our future, we need women. We need to invest in women, not only as entrepreneurs, which is what I do in my daily work, but women as leaders, women as employers, women as employees. And in order to do this, in order to accelerate progress, the UN's call to action is for all of us. It's not only for multilateral development bank's and IFIs. It's for the private sector, it's for the public sector, all of us need to focus on accelerating progress that includes women.

Lindy: The World Bank Group is currently in a consultation process to develop a new gender strategy amidst global crises – from pandemic recovery to climate disasters, and conflict. How will these crises shape the approach to promoting women's economic inclusion?

Jessica: Including women in driving solutions for crisis response is a must, whether those challenges are economic, climate related, conflict, political or social. Closing gender gaps is a necessary component of responding to economic, social and climate challenges. They are interrelated in fact. That's why the top priority for the World Bank Group Gender Strategy is really to focus and accelerate gender equality for a sustainable, resilient and inclusive future.

Lindy: Let's turn to ‘Banking On Women’. The business falls under IFC’s Financial Institutions Group. Talk us through how gender focused financial instruments help close the gender gap.

Jessica: If there is only one thing I want you and the listeners to remember about Banking on Women and how to finance women, it is this: Design for women. The financial institutions with whom we work designed for women and as a result of designing for women, they increase their value, they increase the bank value, they increase the financial institution value. It's profitable for banks to design for women. And guess what? It has a positive impact on economic development too. So the Banking on Women business: we've known for years that women are terrific customers for banks, especially women owned small and medium sized enterprises (SMEs). Simply put, a strategy of tailoring products, services and delivery approaches to women brings bottom line value to financial institutions.

Through investing in over 180 financial institutions across 76 countries  we've learned some valuable lessons about exactly in what ways women provide value to those that invest in them. They are great customers, they have lower non-performing loan ratios, meaning they pay back their loans at a better with better outcomes, they bring important deposits to banks, they also share their banking relationships with their networks.

So far this year, IFC has committed roughly $2 billion in women and women owned SMEs through our financial institution investments. And this this portion of IFC’s businesses growing every day. Here's the thing that we have learned in doing this business: gender neutral isn't working for financial institutions - design for women. The Banking on Women Business is in essence an approach to catalyze sustainable financial services for women and women-owned SMEs. We do so in emerging markets and we provide a range of what IFC has to offer to financial institutions: debt, equity and everything in between, but importantly, through Banking on Women IFC also provides advisory services to financial institutions in areas like strategic planning, customer segmentation, customer value proposition design, and that's where the design for women part comes in - market positioning, credit application processes, product positioning, but also a gender-inclusive approach to the internal workings of the bank – understanding the value of the women employees at that bank, understanding the value of a gender-diverse board for that bank affects how the bank approaches women customers.

Lindy: I love what you’re saying about ‘designing for women’. And that brings me to the new report launched by IFC about how women are under-served by the fintech market. Tell us more about how digital financial services can empower women economically by designing specifically for them.

Jessica: Let me tell you the biggest myth that I believed about fintech. I believed that fintech, because they are born in a digital environment, that the data they had and could make use of to solve for women - things like providing alternate credit information about customers, providing and knowing the sex-disaggregated nature of their customer profiles - would enable them to immediately solve financial inclusion. This belief was shared by many in the financial industry, a lot of bankers really had very high hopes for digital financial services and fintech. And in fact, over the pandemic, the digital delivery of financial services did accelerate financial inclusion. However, not at the pace that we had hoped.

Women still make up a minority of customers for FinTech firms, less than 25% of the customers. And while two thirds of the financial technology firms are collecting sex disaggregated data - which we think is very important for a robust financial sector - less than 1/3 are actually using that data to design for women.

Now, we asked them additional questions such as: Do you believe women are valuable customers? Guess what? They do. They know, they know the NPL ratios are lower for women. They know that women are sticky customers. And so I think the good news in this story is that the business case is there, the business case is there for financial technology firms. But there is work that we can all do in the FinTech industry and in the FinTech sector, to support their ability to better design for women. And we think just like in the traditional banking sector, it will be profitable and a huge source of growth. 

Lindy: Let's talk about impact. Are there particular programs or initiatives that you've seen bring about change and development for women on the ground in the markets where you work?

Jessica:  We're trying to solve a big problem. One element, one description of that problem is a $1.5 trillion finance gap for women-owned SMEs, but that's only one component of the problem. There are legal barriers, there are business environment challenges. At the very beginning of the enterprise stage, we know that women founders aren't getting the startup capital. And for that reason, all of IFC is focusing on a gender-inclusive investment approach. And in fact, all of the World Bank Group is looking for solutions in areas such as public sector development, private sector development, from very large corporates down to very micro enterprises.

A couple of examples of things that I think are making a difference are: one - the Women, Business and Law report. It is an annual report that's produced by the World Bank that really shows the differences in legal rights between women and men. And if we understand, for example, that women have different access to property inheritance, then we can understand that as IFC, we should be developing a housing finance program for women. Another example is, I mentioned the business startup phase, and in other parts of IFC, they're really focusing on that early-stage support, development and finance of women entrepreneurs. ‘She Wins Africa’ is one such program that really is seeking to provide a catalytic set of inputs in that early stage of business development and business formation for women. What that program is doing, what She Wins Africa is doing, is really responding to the fact that Africa as a continent has a very high rate of women's entrepreneurship, and a very low rate of financing of the early stages of women's entrepreneurship. And therefore, they are supporting business incubators, business accelerators, they're supporting women through investment readiness training and skills capacity building. They are providing capacity and funding for venture capital. And they're really facilitating women's ability to pitch to potential investors. And what that will do is create a larger pipeline of eventual small and medium-sized enterprises and eventual corporate enterprises that we will then finance through traditional financial institutions. So I'm really excited about the ways in which different partners are plugging into a notion of gender-inclusive growth.

Lindy: Thank you so much, Jessica, your passion for what you do is palpable, and it's really a pleasure speaking to you. Thank you. Thank you.