Banking for women or banking on women?
Banking on women (or rather banking for women) has been a matter of interest and attention both in local and international financial circles. Almost all leading Sri Lankan banks offer special products/accounts dedicated to women with a multitude of offerings including additional interest, gifts, card offers and insurance packages to lure the consumeristic woman to open an account.
File picture of a garment worker. The writer says that "it is high time that policy makers focus on developing a value proposition for women at grass-root level to harness their potential in entrepreneurship".
Although most such endeavours have yielded results amongst the salaried middle income suburban and urban clientele, little or no impact has been made to truly optimise and integrate this powerful force as a vital contributor to the national economy other than harping on the contribution made by the migrant workers and the garment factory workers who are the largest contributors of GDP.
It is high time that policy makers focus on developing a value proposition for women at grass-root level to harness their potential in entrepreneurship which can be incorporated into a national policy to replace the hard-earned remittances from unskilled and low skilled female migrant workers who burn the midnight oil rubbing the floors of alien lands wailing for their loved ones in Sri Lanka.
Although much debate and discussion has been made in the subject and many international and local organisations have come forward to contribute their worth, the efforts seem scattered and differentiated in the absence of a common goal or agenda.
According to the 2014 census, 24.8 per cent of the total MSMEs in Sri Lanka are female-owned which is obviously very encouraging: however, at the same time it is disheartening to note that a majority of women SME’s are trapped either in micro or small space whilst a rare breed of women makes it to the medium 6.1 per cent and large (4.6 per cent).
Further, it has been also identified that there is a significant credit gap of around Rs. 50 billion of women owned businesses in the MSME segment recording a 22 per cent underserved and/or unserved credit needs (IFC Enterprise Finance Gap Survey 2014): which obviously justifies the existence of unscrupulous money lenders and informal funding mechanisms at grass-root level.
The above statistics raises two very significant concerns which needs the attention of the policy makers:
- What precludes the entry of females to medium and large-scale businesses?
- Despite the plethora of banks, financial institutions, micro finance institutions and non-financial service providers what are the barriers for women owned businesses to access formal financial streams in the country?
The primary constraints encountered by entrepreneurial women in growing their business could be briefly illustrated as follows:
Access to finance
Women are generally risk averse in financial matters and opt to manage within the given resources: They prefer to rely on their own resources or on the immediate family or neighbours for business financing rather than accessing formal financing channels. Obtaining financial assistance through formal banking system is often disliked due to lack of collateral, heavy loan documentation, delays in loan disbursement and communication issues.
Knowledge gaps
In most instances technical skills and competencies in business segments at the micro and SME level is either inherited or through experience and observation which precludes women entrepreneurs from learning best practices and efficient options in the given industry segment. Such incapacities not only constraints the growth of the business but also confines her to a limited scope of activity without venturing into new territories, trying out new products and services to compete in the ever-volatile consumer markets.
Balancing act
Balancing business activity with household chores and children has always been a challenge for every working woman and entrepreneurial women are not an exception. Although one may argue that running a business from home (or rare self-employment) leaves more room to tend to domestic affairs it is actually the opposite in case of micro and SME businesses driven by women. The ever-increasing fear of lagging behind or losing control of the business competes with numerous domestic issues where the female entrepreneur is pushed against the wall sacrificing her own health and free time. For this sector lifestyle events and family emergencies often take precedence over business thus directly hindering the growth of the business.
In the above backdrop, any agenda or action plan focused on promoting entrepreneurship of women at grass root-level should address the following basic phases in the business cycle:
- Firstly, prior to the commencement or initiation of the selected business activity, the target group should be equipped with basic entrepreneurial training and industry specific knowledge in addition to the technical competence in the selected business/industry. This should be supplemented with financial literacy and business management skills. While the former could be undertaken by the relevant ministries in collaboration with vocational training institutions, the latter leaves opportunity for financial service providers to inculcate the basic financial discipline amongst a potentially loyal clientele and to tread in with much desired startup capital. In this regard it should be noted that despite the existence of many providers of vocational training and skills development, there exists a serious gap in entrepreneurial training and financial management at grass-root level where it is most needed.
- Secondly, at the growth and expansion phase she needs to be supported to access new business opportunities and market linkages and funding (mostly collateral free) for expansion and working capital. While opening up new markets and linkages could be ventured through government and semi-governmental interventions, the financial sector could intervene with tailor-made financial products to cater to the needs of the segment with suitable risk mitigation. Another prime contributory factor at this stage would be the development of her business management skills, the absence of which may result in either stagnation or downfall of her business in most instances. This continues to be a lacuna in the current context which can be easily overcome through assistance from state or private universities where intern undergraduates could be placed to assist the businesses in basic business management and financial record keeping. This would not only blossom into a beautiful partnership where budding professionals would be exposed to real world scenarios while the actual beneficiaries will gain free professional expertise.
- Thirdly, securing the financial future of the business as well as the entrepreneur is of paramount importance. Since the heart of the women is generally entwined with the safety and security of her loved ones, guiding her on savings options as well as wealth management and investment products as well as insurance options for her and her loved ones would be of paramount importance. Building the much-needed capital for business expansion while ensuring future sustainability of her business and her own family should be the selling proposition for any financial product/ service at this stage of her life and business.
- Fourthly, boosting her entrepreneurial image and spirit through due appreciation and recognition would not only propel her to go that extra mile to reach the pinnacle. Often, the success stories of women in dignified attire are featured in glossy magazines while the real-life stories of ‘ real women’ who struggle against all odds to make a living for her family is disguised in the form of advertisements for financial institutions to prove to the world at large that they are with the masses. Creating a portal for entrepreneurship women to share their successes and failures and a mentoring initiative to coach them through difficult times would indeed assist them to wade through the tough times in the business cycle.
The time has come to unify the many initiatives undertaken by a plethora of players in the financial and non-final sector to a national policy which transforms the multitude of financial and non-financial products and services targeting women to a force which strengthens and propels women to the next level. In a nutshell “BANKING FOR WOMEN” should be transformed to “BANKING ON WOMEN” where her strength and indomitable spirit is directly influential in the socio-economic growth and such initiatives should be led by those who are passionate and committed to the cause.
(The writer is an Attorney at law with post graduate qualifications from the University of London and the University of Colombo, counts over 28 years of banking experience and currently serves as Head of Business and DGM of SDB Bank)