By Tetsuro Narita, Topic Lead of the Innovative Models for Small Business Finance Team of the Access to Finance Unit at the Multilateral Investment Fund, member of the Inter-American Development Bank Group.
At a recent workshop I attended in Nicaragua, we were shown a video of a “pulpero,” or small shop owner, testifying to the benefits of a new cell phone-based financial service for entrepreneurs. When asked to list his top three factors for success in business, he responded: (1) Give thanks to God; (2) Have dreams; and (3) Know exactly what you are doing. His first item seems to be good advice for most situations, and the second two factors are relevant not only to a humble pulpero, but to any business of any size, especially one seeking to tap into a new market segment. The pulpero’s words reminded me of an event in Miami held just a week before the Nicaragua workshop, the 47th Annual Assembly of FELABAN (the Latin American Banking Federation). I was there for a panel the MIF and the Global Banking Alliance for Women (GBA) co-organized on the topic of “The Women’s Market: Are You Overlooking The World’s Largest Emerging Economy?” Leading experts in promoting women’s market programs from the United Kingdom, Australia, Brazil and Lebanon shared incredibly useful and insightful lessons. Much of what they said about how commercial banks can better serve women clients falls into the success factors listed by the Nicaraguan pulpero...
Know exactly what you are doing: Ask yourself prodding questions to help define your value proposition. For example, how many women clients do you currently have in your portfolio? In which economic sectors are these women clients concentrated? Is there any difference in risk profile and repayment performance between men and women clients? In this sense, data mining of existing clients is the very first step. However, it is surprising to find that, according to our banking survey, more than half of the banks in the region (51%) do not collect sex-disaggregated data. Thus, do data mining, research and investigation require additional investments? According to one panelist, Eduardo Ferreira of Itaú Unibanco, “getting to know your customers more does not mean spending more; it means spending better.”
Have dreams: With a clearly defined value proposition in place, visualize the goal of catering to women clients. The value proposition is not only about access to finance, but also about access to information, education, networking, markets, etc. In addition, launching a women’s market program is not about “corporate social responsibility,” but about embedding the program in the bank’s core business in a financially profitable way. It is not an easy task, but not impossible. With a well-planned roadmap, you will soon notice that your bank is building what GBA Chief Executive Officer Inez Murray referred to as a “very loyal and profitable segment” in the executive summary of our banking survey this year.
The pulpero in Nicaragua will likely never know that I think his advice is helpful for commercial banks seeking to enter the women’s market. I hope he would agree!
There are, of course, more concrete key factors in successfully exploring new areas of business opportunities. For example, if you want to differentiate your bank’s positioning and branding from your competitors’, especially in terms of understanding the value proposition for women clients, consider becoming a member of the GBA to get guidance on the “How-To” and exchange knowledge and lessons with like-minded banks from other parts of the world. It would also be useful to explore innovative underwriting methodologies and credit scoring models, such as psychometric test, to overcome certain restrictions that women (as well as men) entrepreneurs face. Our next blog will feature the work in the region regarding this innovative credit scoring tool.