The fintech revolution is sweeping across Africa, creating wealth and opportunity from Cairo to Cape Town. But, like the broader tech sector, the fintech industry suffers from a fundamental weakness: too few women.
Africa does have something to boast about on this front: the share of fintech companies founded by women is double the global average. Unfortunately, the figure is still just 3.2 per cent. Moreover, while 30 per cent of tech professionals in Sub-Saharan Africa are women, the share of women in fintech remains well below the industry average.
This does not mean that fintech has not had an impact on women. On the contrary, it has rapidly accelerated financial inclusion for African women, from private individuals seeking to formalize their household finances to small businesses whose owners want to expand. In Rwanda, for example, fintech platforms drove a 27 per cent increase in women’s access to financial services from 2012 to 2016. In Kenya, mobile banking has increased overall financial inclusion from only 26 per cent in 2006 to 84 per cent in 2021.
But Africa still has a long way to go. As of 2020, only 37 per cent of women in Sub-Saharan Africa had a bank account, compared with 48 per cent of men.
The problem persists even in Rwanda – a regional leader in gender equality. In 2008, Rwanda became the first country in the world to elect a female-majority parliament, and today it boasts some of the world’s highest rates of female participation in politics and the labor force. But, despite the progress on financial inclusion that fintech has enabled, more than three-quarters of the Rwandan women still lack access to a bank account.
The inability to access financial services puts business owners at a significant disadvantage. According to the World Bank, women-owned small and medium-size enterprises in Africa – a significant share of all SMEs – face a $42 billion credit gap. This limits their ability to expand and create jobs.
With flexible, innovative, and targeted solutions, fintech companies can help to close this gap. One reason why women might struggle to access financing is that they lack a financial history or credit record – the basis of traditional assessments of creditworthiness. But fintech companies can avoid this issue by using alternative data sources, such as mobile-phone usage and social-media activity, which have been shown to support accurate assessments of creditworthiness. These approaches must obviously be balanced with robust privacy and encryption solutions, ensuring that trust flows between lender and borrower.
Another common barrier to financial inclusion – particularly in rural areas – is the lack of documentation, such as government-issued IDs or proof of address, required to open traditional bank accounts and access credit. But fintech companies can allow women to access financial services using their mobile phones, making use of digital identity-verification technologies, such as biometric authentication.
Fintech companies can also develop financial products tailored to the needs of people who are typically excluded from the formal financial system. For example, the Ugandan company Ensibuuko, working with commercial and nonprofit organizations, designed an innovative system of digital credit especially for farmers. Given that agriculture is the sector in which most African women are active, such initiatives could go a long way toward closing the gender gap.
But if the fintech industry is to continue to expand and strengthen financial inclusion, it needs not only to serve women, but also to include them. This would benefit the women employed, the industry as a whole, and many of its clients. Women investors are twice as likely to invest in women-owned businesses than their male counterparts are, and women may be better equipped to design and deliver fintech services to women clients.
The fact is that women are more favoruably served by institutions in which women hold power. This is true of any industry or service: as a recent Nature article pointed out, the fact that women are missing from policymaking and budgeting decisions related to health care most likely contributes to the underfunding of health issues faced by women. Fintech is no different.
The challenge now will be to support women’s participation – and leadership – in the fintech industry. Whether in the boardroom or on the farm, women must help shape the future of African finance. — Project Syndicate
(Nick Barigye, CEO of Rwanda Finance Limited, is a former managing partner of Karisimbi Business Partners, an Africa-focused investment and advisory firm)
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