Last week, the world celebrated the 106thInternational Women’s Day. This year’s theme, "Equality for Women is Progress for All," called attention to the strides that women have made toward gender equality. Yet despite important gains, women remain less likely than men to be educated, have access to healthcare, or hold political office.
No country in the world has achieved gender equality in economic terms, with women lagging behind men in income, access to resources and credit, and employment opportunities. Studies show that even without taking gender into account, access to credit is the greatest obstacle that small and medium sized enterprises (SMEs) face in growing. For women, viewed by banks and investors as “riskier” clients, the struggle for credit, capital, and financial services is even more difficult. Although SME financing exists in a number of developing economies, women--who run more than a third of formal SMEs globally—still struggle to reach capital, capacity-building, and other services their businesses need to thrive. The International Finance Corporation estimates that there is a $285 billion financing gap for women-owned SMEs functioning in the formal sector of developing economies.
In an effort to help address this problem, Goldman Sachs and the World Bank recently launched the world’s first-ever global financing fund focused on providing women-owned SMEs with access to capital. The fund, known as the Women Entrepreneurs Opportunity Facility, aims to raise $600 million to provide 100,000 women entrepreneurs with access to the financial resources and education they need.
Goldman Sachs is one in a growing group of firms that recognizes the economic gains of bringing women into the formal financial sector. At present, many women-owned businesses exist in informal economic sector where enterprises are less productive, difficult to expand, and vulnerable to natural and man-made disasters. Additionally, employees of informal businesses have little social protection or safeguards against corruption.
As a recent report by Goldman Sachs’ public policy research arm, Global Markets Institute, shows, economic equality for women represents a path to economic progress for all. The report suggests that narrowing the credit gap for female business owners in BRIC (Brazil, Russia, India, and China) and the “Next 11” countries, including Bangladesh, Egypt, Indonesia, Nigeria, and Turkey, could raise incomes per capita by 12 percent or more. Some countries, such as Vietnam, could see gains above 25 percent.
The public and private sectors both stand to benefit when women are able to fully participate in their economies and contribute to their communities. Providing financing for women-owned SMEs, offering platforms that encourage female entrepreneurship, and bringing women into the formal financial sector will not only spur growth but transform societies. And as the World Bank’s recent Gender at Work report notes, this is good for everyone who cares about creating a more stable and prosperous future.