Dr. Bridget Irene
De Montfort University
Bridging the Finance Gap for Women Entrepreneurs
Insights from Academic and Policy Research
Fintech, which refers to new technologies and innovations that aim to compete with traditional methods to deliver financial services more efficiently, is drastically altering the global landscape of financial services, products, marketing and even institutions. Despite the excitement surrounding fintech’s potential to improve financial inclusion, the gendered nature of the industry is frequently disregarded. Fintech has the potential to significantly empower women in South Africa by creating additional economic opportunities and addressing of the issues that hinder financial inclusion for women. Government policies play a pivotal role in shaping the landscape for fintech, especially when it comes to fostering opportunities and inclusion for women in South Africa. Policy makers and private/public organisations also have a crucial role in supporting women’s financial inclusion through these technologies in South Africa. These policy measures should be designed to create an enabling environment that empowers women to fully participate in and benefit from the fintech sector in South Africa, including regular assessments of how fintech services are impacting women’s financial inclusion and adjust strategies accordingly.
The finance gap for women-owned SMEs is estimated by the Open Society Initiative for Southern Africa (OSISA) to be approximately USD 20 billion. The disparity between the men and women’s financial inclusion expanded from 6% in 2011 to 9% in 2014, which suggests that men gained more from financial sector innovation than women (World Bank, 2021[1]). This has significantly increased since the COVID-19 pandemic. Consequently, 61% of men and 70% of women were excluded from financial markets. The corporate sector dominates bank lending, which usually restricts loans to those working outside of the formal sector or to micro- and small-businesses — where women-owned businesses are more prevalent. This has given rise to the introduction of agency banking, micro-insurance, mobile money and bank-insurance business collaborations, which has become a turning point for financial inclusion.
The South African Government has launched financial inclusion measures funded by fintech companies. These initiatives include the promotion of “digital tipping solutions” for low-income restaurant workers and “innovative payments technologies” for low-value cross-border trade. The National Treasury’s “2024 Budget Review”, which was released in February 2024, dedicates two pages to financial innovation for increasing competitiveness and inclusiveness while focusing most of its attention on the fiscal policy, expenditure plans, and economic forecast. In an appendix, the Treasury states (National Treasury, 2024[2]):
“Government is taking steps to promote the adoption of digital payments, which will help to improve the lives and livelihoods of marginalised groups. Public-private sector co-operation will be essential for successful implementation.”
However, it does not provide any indication that the strategy will strengthen the inclusion of women, who are also classed as minority group within marginalised communities.
Fintech is not specifically regulated in the retail investment sector in South Africa in which women predominantly operate. However, regardless of technology, any organisation that provides clients with investment management or advisory services for engaging in securities transactions would be subject to regulation. There is need to develop and implement policies that specifically address the financial needs and challenges of women entrepreneurs and ensure these policies promote fair lending practices, transparent terms, and non-discriminatory access to financial services.
Currently, cybersecurity, anti-money laundering, financial crime, and consumer protection are the primary regulatory compliance challenges that a fintech company faces in South Africa. The government could consider enforcing robust data protection laws to safeguard the personal and financial information of women entrepreneurs using fintech services. There is need for clear and transparent disclosure of all terms, conditions, fees and risks associated with fintech products aimed at women entrepreneurs.
Based on the information that is currently available, women’s lives have benefited from fintech innovation, though not significantly. Specifically, mobile financial services have improved and enabled women’s financial resilience, ability to make decisions for the home, ability to generate money, and ability to invest in the health and education of their children. Fintech solutions are generally still gender-neutral and not tailored to the unique needs of women. Women continue to encounter greater obstacles than men in order to obtain financial services. Governments and financial institutions need to adopt a more comprehensive strategy to address supply-side problems as well as societal, legal, and market infrastructure limitations.
The government can adopt “making markets work for the poor” (M4P) framework that addresses barriers as a means of establishing inclusive and sustainable markets. Women’s access to financial services is hampered by a variety of regulatory requirements. This includes legislation that restricts land tenure and “know your client” requirements since women are less likely to have a formal financial history. These conditions hinder women's access to financial resources and services and could be made more favourable by using the M4P framework to identify priority areas for women’s financial inclusion in South Africa (see Figure 30.1).
At the meso-level, the South African Government could work further to ensure that there is market infrastructure and supporting functionalities to enable the processing of financial transactions; while at the macro-level, policies and regulations are needed for all actors to ensure competitiveness.
Unclear regulatory frameworks continue to create uncertainties for fintech companies and hinder innovation and growth in the financial sector (Pierrine Consulting, 2023[3]). The South African Reserve Bank could provide guidelines for the regulation of fintech arrangements between banks and non-bank entities. Comprehensive intellectual property laws are also required to protect innovators in the financial sector.
Source: Adapted from (GSMA, 2019[4]).
References
[4] GSMA (2019), The mobile gender gap report 2019, https://www.gsma.com/solutions-and-impact/connectivity-for-good/mobile-for-development/wp-content/uploads/2019/03/GSMA-Connected-Women-The-Mobile-Gender-Gap-Report-2019.pdf (accessed on 2 October 2024).
[2] National Treasury (2024), Budget Review, https://www.treasury.gov.za/documents/national%20budget/2024/review/FullBR.pdf (accessed on 2 October 2024).
[3] Pierrine Consulting (2023), Regulatory Challenges in the African Finance Sector and its Impact on FINTECH Businesses, https://www.pierrine-consulting.com/regulatory-challenges-in-the-african-finance-sector-and-its-impact-on-fintech/ (accessed on 2 October 2024).
[1] World Bank (2021), Global Financial Inclusion, South Africa, https://datatopics.worldbank.org/financialinclusion/country/south-africa (accessed on 2 October 2024).