Non-Financial Services - The Key to Unlocking the Growth Potential of Women-led SMEs for Banks

October 6, 2020

Women-led small and medium enterprises (WSMEs) represent a great opportunity to banks: Women own 34 percent of private businesses globally, including almost 6 million formal SMEs in the developing world. In emerging markets, formal SMEs create seven out of 10 jobs and contribute up to 40 percent of economic growth in terms of GDP. In OECD countries, the contribution to growth can be up to 60 percent.

Yet WSMEs’ potential remains largely untapped because of systemic barriers facing women-led enterprises globally. Constraints range from sector choice to cultural and social norms and laws, to the reality that women entrepreneurs tend to have limited business networks.

Providing nonfinancial services (NFS) alongside finance can help financial institutions to tap into the enormous potential of women-led enterprises. This study examines the benefits to banks of integrating NFS into lending. These services can help mitigate the barriers, giving banks a women-focused market. This analysis of five SME banking models, in addition to previously published case studies and other resources, found that well-integrated NFS offers for WSMEs yield positive returns on investment (ROI) within one to two years. This is demonstrated through the following four metrics:

  • Increased interest income
  • Share of wallet, including cross-sell, deposit volume and fee income (including fees charged for NFS participation)
  • Loyalty
  • Reduced risk

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