Advancing Women-Led MSMEs through Digital Financial Inclusion

June 26, 2024

As we commemorate World Micro, Small, and Medium-sized Enterprises (MSME) Day, we honor the instrumental contributions of MSMEs, especially those led by women in driving economic growth and social progress. These businesses are crucial in income generation and job creation by fostering economic resilience within their communities. Women-led MSMEs, in particular, demonstrate higher profitability, stability, and innovation compared to their counterparts. Women entrepreneurs often reinvest their earnings into family education, healthcare, and nutrition driving larger social outcomes.

Despite the compounded impact, women entrepreneurs continue to face significant barriers in accessing financial resources. Digital financial inclusion is particularly pertinent in making the entrepreneurship space more accessible and equitable. A holistic approach necessitates capacity building for the utilization of digital financial services along with access to develop stronger business acumen. Policymakers must prioritize both creating a supportive environment through consumer protections and tailoring public infrastructure to meet the specific needs of women-led MSMEs.

The Women’s Digital Financial Inclusion Advocacy Hub is working to make this vision a reality.

Women’s Digital Financial Inclusion Advocacy Hub Driving Collective Global Strategies

The Women’s Digital Financial Inclusion Advocacy Hub, led by Women’s World Banking and the United Nations Capital Development Fund (UNCDF), advocates for comprehensive digital financial inclusion strategies tailored to the specific needs of women entrepreneurs. The Hub focuses on four key advocacy pillars: access to technology, digital financial capability. digital financial services and reliable data collection methodologies to track and address the unique challenges faced by women entrepreneurs in accessing and utilizing financial services.

By harnessing collective action and bringing together local, regional, and global stakeholders, the Hub is committed to bridging the gender gap in financial services and contributing to the larger development goals.

Five Enablers for Empowering Women-Led MSMEs

Below are five of the nine key strategies from the Hub’s new white paper that advance women-led MSMEs through digital financial inclusion, empowering women’s economic participation.

1. Adopt a gender-intentional approach to creating policy on MSMEs: Adopting a gender-intentional approach in financial inclusion boosts sustainability and growth for women-led businesses. The Better Than Cash Alliance, supported by the Government of Pakistan and State Bank of Pakistan, exemplifies effective policy by transitioning from cash to digital payments. This shift reduces transaction costs, improves security and transparency, and enhances access to financial services for women entrepreneurs.

2. Integrate the needs of women-led MSMEs in the strategy and execution of digital public infrastructure efforts: Key components like Digital Identity Systems, Secure Electronic Payment Systems, and Data Exchange Systems must prioritize women’s access and affordability. The AfricaNenda report highlights the demand for inclusive instant payment systems among women and MSMEs, stressing the need for accessible digital payment solutions. Implementing gender-disaggregated data (GDD) systems can help track progress and inform targeted actions.

3. Design a suite of products for women-led MSMEs to support their businesses: Addressing the $1.5 trillion credit gap with innovative women focused product design solutions like GIZ’s We-FIT toolkit and platforms like Amartha can improve credit access. Tailored insurance products can protect against income shocks, supported by initiatives from IRDAI. Secure savings options, both personal and business, mitigate risks from informal methods. These targeted products will enhance the resilience and impact of women-led MSMEs.

4. Create strong consumer protection mechanisms for women-led MSMEs: Transparent regulations ensure fair treatment by disclosing product details and pricing, as emphasized in reports like Reaching Financial Equality for Women. Oversight of digital service providers, such as India’s fintech regulations, strengthens compliance and protects against discriminatory practices.

5. Ensure women-led MSMEs have access to personal technology devices: Studies have demonstrated the profound impact of smartphone ownership on women-led MSMEs. In a pilot initiative conducted in Ghana, 67% of participating women micro-entrepreneurs reported that using a mobile phone for business increased their profits by an average of 49%. Cost remains a significant barrier to smartphone ownership. Initiatives like those led by the IFC, in partnership with fintech platform M-KOPA and others, have successfully addressed these barriers, enabling over one million M-KOPA customers to leverage smartphones for entry into the digital economy by 2021. As a result, 75% of businesses involved reported increased income.

Download the full white paper, Advancing Women-Led MSMEs through Digital Financial Inclusion, to access all nine enablers and examples of how policymakers, financial service providers, and civil society organizations can equip women entrepreneurs to leverage digital financial services to advance their businesses.