Access to Finance: Why Aren't Women Leaning In?
| Author | Hanan Morsy |
| Position | Director of the macroeconomic policy and research department at the African Development Bank Group. |
| Pages | 54-55 |
52 FINANCE & DEVELOPMENT | March 2020
AS A GIRL,
I was taught to believe th at personal agency
prevails over societal bia ses. I was told that I could
accomplish anyth ing if I believed in myself and that
sexism was not insurmou ntable. Later, as a woman,
I found out that my parents’ advice could not have
been wiser. In Africa , the gender gap in access to
financial ser vices is driven by women entrepre-
neurs’ own self-perception. Such perception leaves
many Africa n women on the fringes of the financial
sector—unable to save, borrow, or build capital.
Worldwide, women’s access to finance is dispropor-
tionately low. Despite substantial overall progress—in
2017, the World Bank reported, 1.2 billion more
people had bank accounts than in 2011—there is still
a 9 percent gap between women’s and men’s access. In
sub-Saharan Africa, only 37 percent of women have
a bank account, compared with 48 percent of men, a
gap that has only widened over the past several years.
e figures are even worse in North Africa, where
about two-thirds of the adult population remains
unbanked and the gender gap for access to finance
is 18 percent, the largest in the world.
ese strikin g figures raise urgent questions for
decision makers in Afr ica. What continues to fuel
gender disparity in acc ess to finance across t he
continent? And why, despite all efforts, is the gap
even wider today than a dec ade ago?
e mainstream v iew of economists is that supply-
side constraints such as high interest rates and
collateral requirements play a major role in exclud-
ing women from the formal credit market . Credit
rationing through hig h interest rates dispropor-
tionately discourages women entrepreneurs from
applying for loans, while lack of collateral can
mean they have less acc ess to loans than their male
counterparts (Morsy a nd Youssef 2017). And when
they do have access, women ty pically face more
stringent loan arra ngements than men.
Overemphasis on the credit market’s supply side
by academics, policymakers, and practitioners
means that demand-side fac tors and their influ-
ence on the gender gap in access to finance have
been largely overlooked, especially in Africa. But
women’s decision-making behavior also plays a
key role in this gender gap.
In the credit market, women entrepreneurs fail
even to apply for loans because of such factors a s low
financial literacy, risk aversion, and fear of failure.
Intuitively, one would expect women who choose to
be entrepreneurs to be at least as competitive as men
entrepreneurs. Why, then, are they self-selecting out
of the credit market?
Distorted perceptions
Fresh evidence drawn from the cred it markets of 47
African c ountries suggests that women entrepreneurs
in Africa, in general, and in North Af rica, in par-
ticular, are more likely to self-select out of the cred it
market because of low perceived creditworthine ss.
ese women did not apply for loans or lines of
credit because they were di scouraged by their own
perception that their applications would be denied .
Our study finds that women ma nagers of micro and
small firms a re more likely than men to self-select
out of the credit market.
Along with this ke y finding, we observed
three stunning phenomena that reinforce our
“demand-side” hypothesis. First, t he complex-
ity of application procedures and unfavorable
loan and credit terms did not discou rage women
entrepreneurs from applying for credit. Second,
Access to Finance: Why Aren’t
Women Leaning In?
Women are self-selecting out of the African credit market
Hanan Morsy
IMAGE COURTES Y OF THE AFRI CAN DEV ELOPMEN T BANK
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