Women are self-selecting out of the African credit market
Hanan Morsy
As a girl, I was taught to believe that personal agency prevails over societal biases.
I was told that I could accomplish anything if I believed in myself and
that sexism was not insurmountable. Later, as a woman, I found out that my
parents’ advice could not have been wiser. In Africa, the gender gap in
access to financial services is driven by women entrepreneurs’ own
self-perception. Such perception leaves many African women on the fringes
of the financial sector—unable to save, borrow, or build capital.
Worldwide, women’s access to finance is disproportionately low. Despite
substantial overall progress—in 2017, the World Bank reported, 1.2 billion
more people had bank accounts than in 2011—there is still a 9 percent gap
between women’s and men’s access. In sub-Saharan Africa, only 37 percent of
women have a bank account, compared with 48 percent of men, a gap that has
only widened over the past several years. The figures are even worse in
North Africa, where about two-thirds of the adult population remains
unbanked and the gender gap for access to finance is 18 percent, the
largest in the world.
These striking figures raise urgent questions for decision makers in
Africa. What continues to fuel gender disparity in access to finance across
the continent? And why, despite all efforts, is the gap even wider today
than a decade ago?
The mainstream view of economists is that supply-side constraints such as
high interest rates and collateral requirements play a major role in
excluding women from the formal credit market. Credit rationing through
high interest rates disproportionately discourages women entrepreneurs
from applying for loans, while lack of collateral can mean they have less
access to loans than their male counterparts (Morsy and Youssef 2017). And
when they do have access, women typically face more stringent loan
arrangements than men.
Overemphasis on the credit market’s supply side by academics, policymakers,
and practitioners means that demand-side factors and their influence on
the gender gap in access to finance have been largely overlooked,
especially in Africa. But women’s decision-making behavior also plays a key
role in this gender gap.
In the credit market, women entrepreneurs fail even to apply for loans
because of such factors as low financial literacy, risk aversion, and fear
of failure. Intuitively, one would expect women who choose to be
entrepreneurs to be at least as competitive as men entrepreneurs. Why,
then, are they self-selecting out of the credit market?
