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At ALIVE Ventures, we believe that applying a gender lens across our investment processes and supporting investees in implementing gender-smart business practices isn’t just the right thing to do, it also makes business sense.
Our latest gender research report – following our report on gender dynamics in EdTech and HRTech value chains – sought to explore this connection in the fintech industry in Latin America. More specifically, we commissioned the report to better understand the unique financing challenges faced by women-led micro, small, and medium-sized enterprises, or small businesses, and to develop actionable, research-based recommendations for fintech companies to help close the existing financing gap and capture untapped business opportunities.
Working in partnership with Pro Mujer’s Gender Knowledge Lab, we surveyed more than 90 small businesses and nearly 30 fintech companies across the region. Our recently published report, “How fintechs can improve access to financing for MSMEs led by women in Latin America,” delivers gender-smart, practical strategies based on that research, enabling fintechs to step up and contribute to gender equality directly through their way of doing business. In this article, we share some of those strategies.
Bridging the gender finance gap
Three out of four women-led small businesses in Latin America lack adequate financing, underscoring the urgent need for tailored financial solutions. The strategies outlined below, developed from the research study findings, aim to help fintechs reduce this gender-based financing gap and, in doing so, capture new business opportunities.
Strategy 1: Alternative credit scoring
Traditional credit histories are often missing or incomplete for women-led small businesses, especially those that operate in informal sectors. To address this challenge and better serve these clients, fintechs can integrate alternative data sources into their processes, such as digital payment histories, supplier interactions, or mobile payment records, in order to more accurately assess creditworthiness and make financing more accessible to women who may lack formal credit records.
Strategy 2: Tailored financial products
Women-led small businesses often have different financing needs and face unique constraints compared to men-led businesses. One way to address this is to build customized loan products, offering flexible terms and lower interest rates for women-led businesses, based on their generally higher repayment reliability. For example, Colombia based fintech and ALIVE investee, Finaktiva, developed a line of credit with flexible terms specifically for women-led small businesses, enabling them to significantly increase the percentage of women-led company clients.
Strategy 3: Gender-disaggregated data
To understand and meet the needs of women-led small businesses effectively, fintechs should collect gender-specific data and use this to monitor and refine their offerings continuously. This data can reveal unique pain points for women-led small businesss and improve customer segmentation.
For example, Peruvian fintech and ALIVE investee, Prestamype, conducted a sex-disaggregated analysis of their customer acquisition funnel, revealing gender-based differences in behavior and experience. The findings helped them to redesign the funnel with a gender perspective, improving female entrepreneurs’ access, leading to an increase in the number of women-led clients in Prestamype’s portfolio.
Strategy 4: Streamlined administrative processes
Administrative complexity often deters women-led small businesses from seeking financing. Simplifying application processes, reducing paperwork, and making applications accessible via digital platforms can significantly increase access for women entrepreneurs. Fintech companies that minimize documentation requirements and integrate mobile-friendly platforms have noted a higher adoption rate among women-led small businesses, who often cite time poverty as a limiting factor in pursuing financing.
Strategy 5: Marketing strategies that resonate with women
To effectively reach women-led small businesses, fintechs should adopt marketing strategies that appeal to women entrepreneurs’ preferences, such as peer-based referrals, community-based advertising, and partnerships with women’s business groups. Creating referral programs with incentives can also foster community among women entrepreneurs.
Better business performance
The release of this report marks a call to action for fintechs across Latin America to implement gender-smart strategies and to explore the untapped potential amongst women-led small businesses.
“This report highlights a reality that we cannot ignore: women entrepreneurs lead with determination and responsibility, but face disproportionate barriers in accessing financing,” says Carmen Correo of Pro Mujer. “This report is a call to the fintech sector to integrate a gender perspective, because supporting women not only boosts their development, but strengthens the entire regional economy.”
With customized products and a better understanding of gender-specific needs, fintechs can play a transformative role in bridging the financing gap, contributing to gender equality in the business landscape, and ultimately boosting the economic outlook across Latin America.For more details and to access the full report, please download the report in English or Spanish. At that link, additional toolkits summarizing key findings and recommendations are also available, providing a valuable resource for fintechs and small businesses alike.
Alan Pierce is the impact and knowledge sharing manager at Alive Ventures.
