For individuals, the new year is typically the time to make resolutions and vow to practice new, better habits.  For businesses, the new year might be a good time to look for new opportunity. In the economic development space, one burgeoning opportunity is the small-to-medium enterprise (SME) segment. Over the past few years, this segment has made a significant contribution to the global economy. Women-led SMEs, in particular, are not only creating jobs for themselves but also employing others. In 2012, an estimated 126 million women were starting or running new businesses in 67 economies around the world.

Svitlana, a small business owner from TurkeyDespite the growth of women-owned businesses, there is a tremendous gap in their access to finance. It is estimated that over 70% of women-led SMEs are either unserved or underserved financially. According to “Giving Credit Where It is Due,” a recent Goldman Sachs study, “this amounts to a financing opportunity of approximately $285 billion. If the credit gap is closed by 2020 in just 15 countries including the BRIC countries, per capita incomes could on average be 12% higher by 2030.”

Women’s World Banking, commissioned by the European Bank for Reconstruction and Development (EBRD), researched global best practices in serving women-led SMEs in order to provide specific recommendations for banks to develop successful strategies for reaching this segment.

So what did we find? In order to serve the women-led SME market, be sure to:

  1. Know Your Market and Customer: Market research and segmentation is critical to successfully serving this market.
  2. View Women-Led SMEs as a Distinct Group: The women’s market should be seen as a distinct segment within a bank, with a distinct value proposition. Research showed that women don’t necessarily want differentiated financial products but they do want to be served differently and treated with respect.
  3. Build Internal Capacity: Buy-in from the Board and Executive Management is necessary to build the internal capacity to serve the women’s market.
  4. Adapt Your Credit Processes, Lending Methodologies and Delivery Models: Integration of standardized measures such as credit scoring can help assess and mitigate risk along with analysis of formal and informal data sources such as the SMEs track record and future outlook.
  5. Offer Women a Comprehensive Mix of Financial and Non-Financial Products and Services: Women place value on both personal and business products and services and are often eager to consider multiple or bundled products from a bank.
  6. Invest in Proving the Business Case through Disaggregated Data: Banks need to collect and analyze data by gender to monitor performance of their investment in women.

These six best practices should be adopted by banks if they want to be successful at serving the women-led SME market. The banks that are acting on the market opportunity are already reaping the benefits, through an increase in the share of women-led SMEs in their portfolios, a decrease in non-performing loans, and the ability to cross-sell products to women-led SMEs.

There is still a significant opportunity for banks that have not looked at this segment before, and the best practices identified here represent the path toward a more successful value proposition for women-led SMEs globally.

For more details on these best practices along with case examples from six banks* that embody many of these practices, please download the report here. Providing well-designed financial services to the women entrepreneurs leading these SMEs could be the opportunity your financial institution is looking for.

Does your institution have experience with serving the women-led SME market and have a best practice to share we haven’t identified? Share with us via email and we may add your suggestion to this list.

* The six banks, diverse in geography and size, are: Banco Nacional (Costa Rica); BLC Bank (Lebanon); Garanti Bank (Turkey); Royal Bank of Canada; UniCredit Bulbank (Bulgaria); and Westpac (Australia)., please download the report here.