We are slowly transitioning into a world where most countries will see female participation in their economies. This monumental paradigm shift can not, and should not, be ignored. The United Nations had projected that by 2022, 59 per cent of all exporting countries would employ women, eclipsing the current 40 per cent.
Furthermore, the female entrepreneurial ecosystem has only diversified and expanded due to the acceleration of e-commerce and digitalisation. The World Bank reports that female-owned enterprises in the United States are growing at more than double the rate of all other companies. The Bank says women entrepreneurship is also increasing in developing countries, with eight million to 10 million formal SMEs with at least one female owner.
In theory, one can argue that there has always been a better time for women entrepreneurs to thrive – but in practice, it is significant to note that women still need to contend with many challenges compared to their male counterparts.
“While the number of women operating their own business is increasing globally, women continue to face huge obstacles that stunt the growth of their businesses, such as lack of capital, strict social constraints, and limited time and skill,” the World Bank explained in the Female Entrepreneurship Resource Point.
This causes a number disparity for women leaders, entrepreneurs and business owners. For instance, closer to home, the Mastercard Index of Women Entrepreneurs finds that although women in Singapore make up 44 per cent of the nation’s workforce, only a mere quarter of business owners are women.
Hence, it is vital to underscore and bring awareness to how embedded finance services, such as MatchMove’s, are an increasingly crucial cornerstone for the success of women’s entrepreneurship and breaking down barriers which obstruct it.
Challenges of women entrepreneurs
The most glaring obstacle that women face globally is the lack of access to funding and capital, and oftentimes – this is not because of a lack of trying. According to the Gallup World Poll, significant differences exist in access to financial services between women- and men-owned businesses in developing countries.
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According to the World Economic Forum, women comprise 55 per cent of the world’s unbanked population. As women have less access to basic banking services such as checking and saving accounts, many rely on their savings, borrowings from family and friends, or micro-loans to finance their businesses.
Credit Suisse reported that the underlying issue is that more than one billion women are excluded from the formal financial system today, with 70 per cent of women-owned small- and medium-sized enterprises lacking access to banking and credit services.
Startup founders or those familiar with the gruelling process of getting your business off the ground would understand that the first step, usually the pitching process, is the hardest. Women entrepreneurs have found it even harder to raise capital and funding.
According to Crunchbase data, only approximately 2.3 per cent of venture capital goes to women entrepreneurs. As a result, only two per cent of women-owned startups generate US$1 million, while men are 3.5 times more likely to achieve this feat.
Thus, the lack of access to financing also hinders women entrepreneurs from scaling their businesses. By relying mainly on microloans, women entrepreneurs lack the capital to make long-term business investments.
It is no wonder that women-owned businesses tend to be informal, home-based and small-scale, especially in traditional sectors like retail and services. The World Bank states that globally, at least 30 per cent of women not working in the agricultural sector are self-employed in the informal sector.
How embedded finance is breaking barriers
Clearly, if we want women to break this glass ceiling, we need to relook at their access to adequate and long-term financing. Traditional financial institutions and organisations have not been able to address the rising needs of women entrepreneurs, mainly because they are structured differently with specific and more conservative lending criteria.
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This paves the way for embedded finance, which integrates banking and payments services dispensed by non-banking entities. In short, it allows entrepreneurs to offer l financial services to their customers through their platforms, breaking down long-established barriers of financial exclusion.
Conversely, consumers get access to financial services through non-banking companies and, conveniently, at a one-stop day-to-day platform they use, such as ride-hailing apps and e-commerce sites. This not only improves their financial access but also allows them to generate better credit trustworthiness through the user data they help generate. This data goes into the decision-making of neobanks and other embedded finance providers to disburse loans, credit or instalment schemes, and to offer insurance products.
Ground-breaking in its own right, the role of embedded finance thus becomes significant in paving the way for the unbanked and underbanked, especially those who operate small businesses. It could also help women entrepreneurs close financing gaps in their processes as embedded finance streamlines intra-organisational, consumer-to-business and business-to-business processes, allowing them to spend, lend and send money effortlessly. Embedded finance will also enable female entrepreneurs to accrue cost-reduction and risk-reduction benefits, which will help them scale up more confidently.
Fintech-focused firms have also catalysed the growth of women entrepreneurs by incorporating newfangled technological solutions into non-financial services, building their confidence and business acumen.
For instance, some embedded finance enablers offer solutions in functional areas such as loyalty programmes, customer database management and scaling into e-commerce, allowing smaller entrepreneurs to focus on growing their business with these layers enabling that expansion.
By taking away the need to undergo and meet the conventional financial processes and requirements when running a business while providing them with the business tools to expand and professionalise, embedded finance effectively acknowledges and removes the barriers, women entrepreneurs face in scaling up and succeeding.
Bain & Company estimates that embedded finance will exceed US$7 trillion transactional value by 2026 in the US alone. In the Asia Pacific region, the embedded finance industry is expected to increase 39.7 per cent annually to reach US$108 billion by the end of this year. This is slated to accelerate to US$140.8 billion by 2025.
This pacy growth could help catalyse other social benefits. Women entrepreneurship, for one, can benefit from the surge of embedded finance. For that, governments, non-governmental organisations and other corporations must have a clear plan to bring embedded finance to the ground.
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