Opinion: Following Women's Month, the financial sector needs to act on its promises to women

24 April 2023

This article, by Julia Dias and Fábio Pasin of Fair Finance Brazil member IDEC, originally appeared on 11th April in Le Monde diplomatique

During March - the month of International Women's Day - we have seen a flood of advertising by financial market companies acclaiming women. But how will that support continue after March?

In Brazil, entrepreneurship is marked by necessity. According to research conducted by the Global Entrepreneurship Monitor (GEM) 2022/2023, a study that analyzes entrepreneurial activity around the world, the main motivation for Brazilians to be entrepreneurial is "to earn a living because jobs are scarce." With increased flexibility of labor laws, which places workers in more vulnerable situations; Brazilian entrepreneurship is undeniably a result of the lack of opportunities in the formal market. 

According to the same survey, among those who are counted as entrepreneurs, there is a significant gap between women and men. When we look at the adult population (age 18 to 64), 20% of people are starting up their own businesses. However, when looking at the adult female population, while 17% are starting a new business, in the analysis of the male population, this percentage rises to 23%.

This gap grows even wider when we analyze the percentage of business already established (considered as those active for more than 42 months). In the analysis of the female population, only 6.8% of adult women run established enterprises. In contrast, 14.2% of the adult male population run established businesses. Given this shows that for every woman running an established business, there are two men doing the same, the data suggests, that over time, women have a harder time maintaining their ventures.

The comparison between the two gaps indicates not only a greater hostility to those women who seek to set up their own businesses, but also the associated loss of income from the houses headed by women where these ventures fail. This connects to issues around indebtedness and financial dependence on third parties, which, in turn, can mean another obstacle to overcoming situations of domestic violence.

During March - the month of International Women's Day - we have seen a flood of advertising by financial market companies acclaiming women. But how will that support continue after March?

One of the essential preconditions for women to be able to start and maintain a new business is access to credit, which, given this situation, cannot be provided under the same conditions for both sexes. We need specific incentives for different consumers of financial services. Commitments in this regard have already been demanded for a long time by non-profit organizations, such as the Guide of Responsible Banks (GBR), a civil society initiative built by Idec in partnership with the organizations Conectas Human Rights, World Animal Protection and the Sou da Paz Institute.

One of the elements required by the GBR is that financial institutions offer specific financial products and services to promote the financial inclusion of underrepresented groups. Every two year this initiative evaluates the socio-environmental commitments of the eight largest banks with operations in Brazil (Itaú, Banco do Brasil, Bradesco, Santander, BNDES, BTG Pactual and Safra). This is in addition to conducting case studies and campaigns on topics related to the activities of financial institutions.

As a result of these public debates, there are now some specific policies of the big banks aimed at the female audience. Recently, for example, the largest bank in Brazil in terms of assets, Itaú Unibanco, announced the raising of R$ 2 billion through the issuance of Financial Letters labeled as "social", which is intended to foster female entrepreneurship, with a focus on the North and Northeast regions. This initiative is part of the Itaú Mulher Empreendedora program, which, in addition to offering credit, offers training and means of networking.

Although the initiative is an important step to be followed by other banks, the promotion should not be limited only to facilitating access to credit and training. There is, for example, no mention of interest rates or differentiated terms for women; both essential measures to help overcome the barriers that entrepreneurs encounter in consolidating their businesses. It is also not yet clear whether the initiative will include – as it has done in past editions – microentrepreneurs who are still operate informally. Since women encounter greater barriers to maintaining their businesses – double shifts, devaluation of their professionalism, among other factors – the incentives to thrive also need to be differentiated.

In this sense, it is also worth highlighting some local initiatives that, in addition to facilitating access to credit for turnover and cash or investments, propose differentiated payment conditions for women, such as Empreenda Mulher do Banco do Povo, Banco da Mulher Paranaense, or even Empreendedoras de Minas do Banco de Desenvolvimento de Minas Gerais (BDMG). In these examples, there are interest rates, term and grace periods for payment that are more advantageous than the market average, thus illustrating the possibility of offering compensatory financial services that encourage female entrepreneurship.

On the other hand, in a more detailed analysis of the eight largest banks operating in Brazil, we have found that their policies on gender are still not very comprehensive. This analysis was carried out by the GBR project in 2022, in which the average score given for the support provided by banks for the realization of gender equality was only 3.5 on a scale from 0 to 10. Among the criteria evaluated, one of the most important is the verification of whether the financial institution has systems to prevent and mitigate gender discrimination of its clients.

It is in this sense that civil society initiatives, such as the GBR, seeks to demand more social and environmental responsibility from financial institutions, agents that can play an important role in the development of enterprises led by low-income women. As the community is affected by the absence of more ambitious policies in this regard, it is up to the whole society to demand the necessary safeguards so that inequalities are not perpetuated by the credit policies of the banks.