December 15th, 2022, New Delhi: Gender-inclusive finance solutions organization Women’s World Banking (WWB) hosted their event “Unmasking Bias, Unlocking Credit for Women” on Thursday to deliberate lending to women in India’s MSME sector. Representatives from WWB, MasterCard, Small Industries Development Bank of India (SIDBI), Lendingkart, Bill & Melinda Gates Foundation, and Sa-Dhan talked about the challenges in the credit ecosystem when it comes to lending to women and the opportunities for change. Shri. Arup Kumar, Chief General Manager, Small Industries Development Bank of India (SIDBI) delivered the keynote address at the event.
In India, women-owned businesses as a share of all MSMEs have grown by 50% in the past decade. Non-performing assets are 40% lower for women-owned MSMEs, indicating women are better at repaying their loans. And yet the financing need of an estimated 70% of women-owned businesses goes unmet. The Indian missed opportunity for financing for women is 20 Billion Dollars while the global gender credit gap is $1.7 trillion dollars. Women find it challenging to receive adequate financial support to run and scale their businesses because of pre-existing biases in the credit ecosystem and being “thin file”.
Fairness is an intricate and multidimensional concept, and its definition should be dependent on both context and culture. Considering gender-based bias in lending, it becomes critical for a Financial Institution (FI) to discuss and adopt a definition (or definitions) of fairness and to examine how they balance fairness with efficiency in their credit operations. Institutions pursue fairness through credit offers (loan approval), credit scores, loan terms (loan amount, interest rate, and collateral), loan maturity, and reasons for rejection. Todays was platform to give voice
Ms. Kalpana Ajayan, Regional Head, South Asia, Women’s World Banking said, “Today’s platform facilitated players from diverse backgrounds to examine the biases that exist in lending and share their perspectives to ensure women have equitable access to credit. We believe that financial service providers can unearth new business opportunities by committing to fairness, being gender-intentional and using data & technology to assess biases across value chains.”
The Check Your Bias Scorecard developed by Women’s World Banking was also revealed at the event, which has questions related to six dimensions of fairness 1) credit score, 2) approval rate, 3) loan amount, 4) interest rate, 5) collateral size, and 6) characteristics of rejected candidates. The complete descriptions of these dimensions and how to measure them are reflected in the scorecard. To use this scorecard FSPs need individual-level data on past loan applicants including credit score, decision, loan terms, and any relevant control variables.