The fintech revolution is sweeping across Africa, creating wealth and opportunity from Cairo to Cape Town.
However, like the broader tech sector, the fintech industry suffers from a fundamental weakness: too few women.
Africa does have something to boast about on this front: The share of fintech companies founded by women is double the global average. Unfortunately, the figure is still just 3.2 percent. Moreover, while 30 percent of tech professionals in sub-Saharan Africa are women, the share of women in fintech remains well below the industry average.
This does not mean that fintech has not had an impact on women. On the contrary, it has rapidly accelerated financial inclusion for African women, from private individuals seeking to formalize their household finances to small businesses whose owners want to expand.
In Rwanda, for example, fintech platforms drove a 27 percent increase in women’s access to financial services from 2012 to 2016. In Kenya, mobile banking has increased overall financial inclusion from only 26 percent in 2006 to 84 percent in 2021.
However, Africa still has a long way to go. As of 2020, only 37 percent of women in sub-Saharan Africa had a bank account, compared with 48 percent of men.
The problem persists even in Rwanda — a regional leader in gender equality. In 2008, Rwanda became the first country in the world to elect a female-majority parliament, and today it boasts of being one of the countries with highest rates of female participation in politics and the labor force.
However, despite the progress on financial inclusion that fintech has enabled, more than three-quarters of the Rwandan women still lack access to a bank account.
The inability to access financial services puts business owners at a significant disadvantage. According to the World Bank, women-owned small and medium-size enterprises (SMEs) in Africa — a significant share of all SMEs — face a US$42 billion credit gap. This limits their ability to expand and create jobs.
With flexible, innovative, and targeted solutions, fintech companies can help to close this gap. One reason why women might struggle to access financing is that they lack a financial history or credit record — the basis of traditional assessment of creditworthiness.
However, fintech companies can avoid this issue by using alternative data sources, such as mobile phone usage and social media activity, which have shown to support accurate assessments of creditworthiness. These approaches must obviously be balanced with robust privacy and encryption solutions, ensuring the trust between lender and borrower.
Another common barrier to financial inclusion — particularly in rural areas — is the lack of documentation, such as government-issued IDs or proof of address, required to open traditional bank accounts and access credit.
However, fintech companies can allow women to access financial services by using their mobile phones, making use of digital identity verification technologies, such as biometric authentication.
Fintech companies can also develop financial products tailored to the needs of people who are typically excluded from the formal financial system. For example, the Ugandan company Ensibuuko, working with commercial and non-profit organizations, designed an innovative system of digital credit especially for farmers. Given that agriculture is the sector in which most African women are active, such initiatives could go a long way toward closing the gender gap.
However, if the fintech industry is to continue to expand and strengthen financial inclusion, it needs not only to serve women, but also to include them. This would benefit the women employed, the industry as a whole, and many of its clients. Female investors are twice as likely to invest in women-owned businesses than their male counterparts are, and women may be better equipped to design and deliver fintech services to female clients.
The fact is that women are more favorably served by institutions in which women hold power. This is true of any industry or service: As a recent Nature article pointed out, that women are missing from policymaking and budgeting decisions related to healthcare most likely contributes to the underfunding of health issues faced by women. Fintech is no different.
The challenge now will be to support women’s participation and leadership in the fintech industry. Whether in the boardroom or on the farm, women must help shape the future of African finance.
Nick Barigye, CEO of Rwanda Finance Ltd, is a former managing partner of Karisimbi Business Partners, an Africa-focused investment and advisory firm.
Copyright: Project Syndicate
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