Paul Randall, CEO, Creditinfo Group: Closing the gender pay gap and expanding women’s access to finance is not just a “nice idea” but is vital to the health of economies and social cohesion
Promoting financial inclusion and access to finance is essential to create not only a just society but also a prosperous economy. Building a truly financially inclusive economy requires taking many steps – from ensuring gender equality in education and employment to breaking down bias in the financial ecosystem. One of the most pressing issues to address in this process is the unconscious gender bias in the credit market, which disproportionately discourages women from accessing credit and financing products.
Although women make up 40% of the world’s workforce – particularly in developing countries – around 2.4 billion women worldwide do not have the same economic rights as men. Women make significant contributions to the economy, but their participation in the flow of capital in the economy is often less than we might expect. A common reason for this is ingrained prejudices – from bias in financial decisions to cultural norms and societal barriers. While the latter may be more difficult to overcome in the short term, there are other things that can be done to remove this unconscious bias from the financial ecosystem.
It is up to regulators, governments and financial institutions to work together and take positive action to address these structural issues and ensure women have equal access to finance and the opportunity to contribute to and benefit from the economy.
differences in the data
In many economies, women are still disproportionately denied access to credit. For example, women in Kenya have, on average, higher credit scores than men (628 vs. 623), but they have significantly lower credit footprints (41% vs. 59%) and utilization (82.2% vs. 93.9%). This is a significant difference and can have far-reaching adverse effects on their access to finance.
If women do not have access to finance on a personal level, their purchasing power and ultimately their contribution to the economy will be significantly reduced and their non-participation in the economy will inevitably be felt. Likewise, when women do not have access to finance at a professional level, they are prevented from starting or developing their own business. The impact is cumulative and once again economic imbalance will dampen economic growth and development.
Closing the gender pay gap
In addition to disparate data, there are other issues that place women at a significant disadvantage in financial services. For example, in certain markets around the world, the gender pay gap is particularly pronounced. A Creditinfo analysis of the Lithuanian market found that of the 81 sectors into which economic activity is divided, men earn more than women in 72, and that the average wage for men is often 30-50% higher than that for women. In industries like aviation, gaming and gambling, men’s salaries can be up to 127% higher than their female counterparts.
It is estimated that closing the gender gap in women’s access to financial products and services could unlock $330 billion in annual global revenue. Closing the gender pay gap is crucial to rebalancing the economy and creating a more financially inclusive world.
Work is being done to close gender-specific differences in remuneration and to create cross-industry wage standards. For example, ESG initiatives (environmental, social and corporate governance) ensure more wage transparency and the representation of women in senior management positions. Despite this, progress is worryingly slow. The World Economic Forum estimates that at the current pace it will take 151 years to close the economic gender gap.
It’s time for a change
In order to create a just society and an economy from which everyone can benefit, structural barriers to financing must be removed. The transition to digital lending and minimizing subjective human intervention in the lending process will go a long way towards improving overall equality. The algorithms of today’s credit score systems must also be free of outdated gender bias or they will only further perpetuate the problem. And most importantly, credit scores must be as fair as possible, reflecting the true risk of individuals based on real financial data, such as: B. a person’s ability to pay their rent or utility bills.
The best way to spot changes in this area is to use data, be it ESG information or credit scores. A clear understanding of the current situation and the issues that need to be addressed is critical to implementing the changes we need to see. Despite having good credit scores and low credit utilization, women have been consistently overlooked and underserved for decades.
There is enormous potential in improving women’s access to finance. Using real and accurate data to inform their creditworthiness and facilitate access to finance opens up a whole new area of the economy. It also presents an opportunity for lenders to be highly targeted with new products and services tailored to the needs of this emerging market and generate new revenue streams while promoting financial inclusion.
If disparities in access to finance between men and women persist, more harm will be done than good. Closing the gender pay gap and increasing women’s access to finance is not just a ‘nice idea’, it is vital for the health of economies and for social cohesion. De-risking the credit ecosystem and aligning it with the needs of today’s society is key to creating a fairer, more inclusive economy.
About Paul Randall
Paul was appointed CEO of Creditinfo Group in 2021 after over 20 years leading the executive teams and analytics department. He has e.gExperienced working in retail and bank lenders and is now supporting lenders be it fintech, retail, telecom or banking. Happy to be part of a great multicultural team that is a central part of the financial infrastructure of over 30 countries.
About credit info
Creditinfo is a leading global provider of credit information and risk management solutions. With more than 20 years of experience, the company has established more than 30 credit bureaus in mature and emerging markets on 4 continents, making a significant contribution to the growth and strengthening of economies.
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