Letter from Inez: May 2021

Thursday 27th May 2021

In This Issue
Spotlight on: WSMEs 

We’re proud to announce our second annual Hackathon in partnership with the Monetary Authority of Singapore and focused on financing the missing middle — businesses that fall between traditional SME lending by banks and traditional microfinance by MFIs. This is where the majority of women-owned/led businesses are, and the finance gap in this segment is estimated at US$1.7 trillion in emerging markets for formal businesses alone.

Fintechs are uniquely positioned to embrace this opportunity either by working in partnership with other financial services providers (B2B) or going straight to the consumer (B2C). 

This year we are driving to proof-of-concept stage and are therefore dividing Alliance Hack challenges by firm size and level of formality because this segmentation matters. We are also focusing on key countries in LATAM, Africa and South Asia because fintech sectors there are thriving and because solutions need to be tailored to regulatory regimes . And we are engaging bank members in these markets to work with fintechs through their learning journey. 

This month, we welcome our newest member, Impact Credit Solutions, which is, as the name suggests, focused on this sweet spot. According to CEO and Co-Founder, Reinier Musters, their goal is to make SME lending as low-cost and risk-optimized as possible for banks by offering technology and empathy-based solutions to bridge the SME financing gap.  

And this gap is stubborn, as evidenced in the aggregate performance of Alliance members in “Measuring the Value of the Female Economy”, published today. We see that while members’ percentage of female customers is growing at a higher pace than the market overall, but that there is persistent underperformance in lending to WSMEs. They capture just 22 percent of the portfolio outstanding despite consistently paying back loans better across all segments and having lower credit card loss ratios as well. We know that this is both a demand-side and a supply-side challenge: 80 percent of our members report offering at least two kinds of non-financial services for women. 

Galvanizing the sector through transparent reporting of funding to women-owned/led businesses is one aim of the UK’s Investing in Women Code, whose first annual report came out last month. The momentum created in the UK by this initiative, spearheaded by Alliance member NatWest in collaboration with UK Treasury, is one we want other members to replicate in their markets. 

To kick-start that, we’ll host a CEO Roundtable on Oct. 5 at the beginning of the 2021 Summit  to discuss how to take the Investing in Women Code global. It will also set the stage for the theme of this year’s Summit — “Investing in Women, Transforming Our World” — during which we’ll discuss the most innovative ways we’re building back better. Please mark your calendars.

Alliance Hack finalists will pitch during the Summit, and winners will be announced live on Oct. 6. The Hack is just one way we’re getting more fintechs involved in the female economy. Another is our #FintechFridays series, the first of which kicked off this month with a look at the business case for fintechs serving women. Following the incredible success of our fintech research in 2020, we’ll be publishing version 2.0 for the 2021 Summit which is a deep dive into use cases to unpack the business case for gender intelligent fintech. With investment levels in fintechs at near all-time highs, it is critical that the sector is made more aware of the opportunity that women represent. 

Last but not least, we want to give a shout out to all of our members who shared their activities in this month’s network news roundup and to NatWest Group leaders who shared their innovative employee value proposition for women with our diversity and inclusion working group. 

Building back better may not be easy, as it requires a laser-sharp focus on some intractable areas, but it will lead to more inclusive companies, sectors and economies. Thank you all.

In community,