For Rosa Mejía, the owner of a furniture-manufacturing firm in Ecuador, presiding over an empty showroom, as she did for many years, was frustrating. During that time, she had no furniture to display because wood, nails, paint, and other supplies to construct the samples were too expensive—especially since she was also trying to support her children and herself. She lacked the capital to build her company, even though she knew the investment in supplies would later mean more business.
So when Banco Pichincha’s loan enabled Mejía to buy raw materials and equipment, it marked a turning point. Ultimately, the business flourished, and its success allowed her to put her children through school. Now, her company, Mueblería, supports her. It also employs one of her sons as a business manager and a daughter as an interior designer.
IFC was behind Mejía, too. Our $55 million line of credit to Banco Pichincha was designated specifically for lending to women-owned small- and medium-sized enterprises (SMEs). The credit—part of the global Banking on Women program IFC established in 2010—enabled the Ecuadorian bank to help Mejía.
Across Latin America and the Caribbean, Banking on Women helps financial institutions offer women entrepreneurs financial and non-financial services. The program has committed 10 investment projects in four countries there—a total of $685 million of investment. It has also provided advisory support to banks in three countries within the region. Worldwide, IFC has invested and mobilized investments to 52 financial institutions in 27 countries through the program, with a cumulative, committed portfolio of nearly $1.7 billion in the eight years since its foundation. We have also provided advisory services in 39 projects in 26 countries.
Opportunities for Women Entrepreneurs
Latin America and the Caribbean is one of the top regions in the program’s portfolio. Through Banking on Women, IFC has supported female entrepreneurs with direct investments, mobilized investments, and advice through banks in Brazil, Chile, Costa Rica, the Dominican Republic, and Ecuador. The program will be launching later this year in Colombia and Mexico.
Most recently, Banking on Women launched in Argentina, where women face obstacles stemming from a lack of gender parity in accessing finance. Only half of the women in the country has a bank account, compared to nearly 60 percent of men with accounts. Just 30 percent of Argentine women have access to credit, compared to 35 percent of men. And although women own about 20 percent of Argentine SMEs, more than 80 percent of these female business owners have difficulties accessing the formal financial system.
Yet women make significant economic contributions in the region. According to World Bank data, 30 percent of the reduction in extreme poverty in the Latin America and Caribbean region between 2000 and 2010 is attributable to . The region also has the highest rate of women’s early-stage entrepreneurial activity. Female entrepreneurs help sustain job creation and economic growth through a high personal-savings rate and by using most of their income to pay for health care, nutrition, and education.
Inclusiveness is Good Business
That’s why, throughout Latin America and the Caribbean region, providing access to finance for women entrepreneurs is an untapped business opportunity with potential for positive social and economic impacts. The MSME Finance Gap report released in 2017 revealed a $93 billion potential market opportunity for funding women-owned businesses in the region.
Creating opportunities for women entrepreneurs in Latin America and the Caribbean is central to enabling economic growth and development. It benefits banks, too. According to the Economics of Banking on Women, the first annual Market Analytics Survey by the Global Banking Alliance for Women (GBA), since women tend to save their money at a greater rate than men, they provide banks with a reliable source of liquidity. Female customers also tend to be more risk-aware than men—meaning that they are more likely to borrow only what they can repay.
IFC clients’ experience reflects the GBA data. Within its first year, for instance, the Banking on Women program at client Banco BHD León in the Dominican Republic contributed to the bank’s overall profitability and growth. BHD reported an internal rate of return of more than 35 percent. Its credit portfolio grew by 26 percent in commercial loans, 19 percent in car loans, and 8 percent in consumer loans—all within seven months of launching the program.
In 2013, IFC supported Brazil’s Banco Itaú in developing a program that increased its women-owned SMEs portfolio from 20 to 30 percent. Bank officials noted a nine-day reduction in the bank’s portfolio arrears for women entrepreneurs participating in the program. Banco Itaú’s marketing indicators for image, reputation, and sustainability also improved. Most important, the women-owned businesses that participated in Banco Itaú’s program have seen a 130 percent increase in their profit margins. In 2017, IFC engaged again with Banco Itaú to develop an eLearning video course to strengthen women entrepreneurs’ financial skills and self-esteem.
As IFC helps financial institutions explore this nascent business opportunity in the Latin America and Caribbean region, entrepreneurs like Rosa Mejía will have even more opportunities to contribute to regional economic growth—as well as their own families’ well-being. After all, for Mejía, securing a future for the next generation was always the point of being a successful entrepreneur. “The best gift you can give your children is education,” she says.
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Published in June 2018