Pakistan has the lowest rate of female entrepreneurship in the world, with only 1% of female entrepreneurs compared to 21% of male entrepreneurs. Access to finance is one of the factors that has prevented women from engaging in entrepreneurial activities, with only 5% of women having access to an account at a formal financial institution. Beyond this, there are many structural, institutional and socio-cultural barriers that restrict the entrepreneurial capabilities of Pakistani women. Below are a few norms that are particularly important to understand and address so that we can bring more women into the formal financial sector.
- Limited or restricted mobility
- Low levels of literacy and capability
- Unfamiliarity with technology
- Responsibility for childcare
- Lack of need for financial services
Apart from the barriers discussed above, there are other factors like limited access to information and mentorship, small and ineffective professional networks, limited business development skills, limited effective marketing platforms to promote visibility, patriarchal perceptions on women’s role in society along with constitutional structures, policy documents and regulatory arrangements that put women at a distinct disadvantage. Majority of women operating micro and small businesses in Pakistan are low wage earners or middle-income earners, who generate products specifically for a middle man, and focus on small home-based businesses with little growth potential (relating to fashion-designing, dress-making-knotting, canning work and food retailing).
Efforts are being made to develop female entrepreneurship and support women-owned micro and small businesses in Pakistan; however, a study by the Pakistan Microfinance Network demonstrates that these efforts are often piecemeal and inadequate as they fail to ensure significantly increased female access to financial products and services and have had limited success in promoting the development of female entrepreneurs beyond the small home-based businesses that they are currently engaged in.
Women-owned SMEs are a profitable, but underserved segment of the global economy. They have the capacity to generate sustainable and profound economic and non-economic returns to countries, including Pakistan. Despite this, the constraints women face in attempting to grow their businesses are often insurmountable, especially at the individual level. Though steps are being taken to overcome these constraints, it is pertinent that policymakers and financial institutions take on concerted and vigorous efforts to create an enabling environment for women-owned SMEs to thrive and contribute to their economies.
Women-owned SMEs are promising businesses as they make significant contribution to the economy and also contribute to wider development goals. However, some of the financial barriers being faced by them are:
- Lack of collateral and documentation
- Perceived risk by financial institutions
- High cost and inaccessibility of financial services and products
Providers must recognize that women represent a viable target market with the potential to substantially grow their business. Industry leaders also have a key role to play in catalyzing change. The State Bank of Pakistan is already taking steps to convene the sector towards increased gender consciousness, driving towards the 2020 target of 25% women’s financial inclusion set by the National Financial Inclusion Strategy.
Once more private sector players understand the opportunity and decide to act, it will be upon them to design products and services with women’s needs in mind. This does not mean developing women-only products. Rather, they must cast a critical eye to how existing products could be tweaked to better serve women customers. For example, one of Pakistan’s leaders in branchless banking, JazzCash is increasing women’s uptake and usage of the JazzCash mobile account. To do so, they are designing and testing solutions to improve the onboarding process for women customers through both agents and customer referrals.
As women’s financial inclusion advances in Pakistan, financial service providers will also need to explore innovative models to serve some of the harder-to-reach segments of women, such as those in lower-income and more rural communities. Cross-sector partnerships between commercial financial institutions and organizations that already have trusted relationships with women in these communities hold strong potential to help overcome initial barriers of distrust and unfamiliarity. While there is a long way to go towards achieving full financial inclusion in Pakistan, thoughtful, market-driven solutions have huge potential to bring large numbers of unbanked women into the formal financial system.