Gender Equality and Financial Inclusion Start From The Top

When it comes to business, it’s a mostly male club.

Today, just 7% of Fortune 500 CEOs are women. This imbalance even permeates finance, which awards 97% of private equity and venture capital to all-male-founded teams.

So it’s more critical than ever to work toward a gender equal and financially inclusive society, according to the participants of a YPO Davos 2020 panel. Media consigliere, podcaster and author Paul Blanchard moderated the discussion, which included Daniel Shakhani, Founder and CEO RDS Capital and Co-Founder of Salary Finance; Catherine McGuinness, Chair of the Policy and Resources Committee of the City of London Corporation; Social Entrepreneur Sophia Swire; and Charlotte Crosswell, CEO of Innovate Finance; and Salah Goss, Head of Mastercard Lab for Financial Inclusion.

How exactly do we do this? It starts with education – literally putting out there and explaining the tools and resources available to women.

Mastercard’s Goss says a chief problem is the lack of access for women, the barriers created as a result and the missed opportunities that come with this.

“When we think about financial inclusion, it’s a buzz word,” she says. “But what does it really mean? It means being able to participate in the economy.”

The spending power is there, but many women are locked out of financial opportunities.

This is ironic, considering women control 80% of household spending decisions and women are on track to control USD72 trillion in global wealth.

But, only 20% of loans go to women businesses, and there’s a USD300 billion credit gap for women SMEs globally, she says.

“When we think about financial inclusion, it’s a buzz word. But what it means is being able to participate in the economy.” – Salah Goss, Head of Mastercard Lab for Financial Inclusion

It’s important to look at the services and sectors where women dominate, Goss points out. Examples are micro and small enterprises – places where women already have an expressed financial life.

Poverty has a female face

When it comes to salary, 25% of women are in low-paid work versus 16% of men. Single parents are the family type most likely to live in poverty, and 90% of single parents are women, notes Blanchard.

This directly translates into women being lumped into a “vast pool of underused, underpaid and under-performing talent,” explains McGuinness.

“That is not fair, and it means that the sector is not taking advantage of some of the great talent out there,” she says. “[This talent] could add so much to the culture of companies and to the bottom line.”

Rebuilding trust in the financial services sector will go a long way, says Crosswell.

“We have to look at how we fund women. Part of this involves bringing competition and transparency into financial services and looking at the gaps where people are underfunded from banks.”

Access to financial services is critical, and as society moves forward, it’s important to keep in mind the data and ethics around AI. A lot of times, future decisions are made by algorithms looking at past data, which was potentially engineered by male developers.

“[It actually may] bring greater inequality because that data is going to look back,” Crosswell says.

“We have to look at how we fund women.” – Charlotte Crosswell, CEO of Innovate Finance

The bottom-line impact on profitability

AI alone won’t solve things. Technology is only part of the answer, says Shakhani. It comes down to financial resilience.

“If we look at the workforce, there’s a massive amount that can be done to unlock the economic impact [globally],” he says.

This plays out in a vicious cycle. If you can’t solve the issue of debt, you can’t encourage people to save for their pensions and for the future. This can be a downward spiral for women, especially if they’re in lower-paying jobs.

As a byproduct, women turn to high-cost lenders, who may charge significant amounts – sometimes as much as 100% to 500%.

Solutions to this cycle include salary finance, access to affordable credit, collecting loan repayments through payroll deduction, and then reporting this back to credit bureaus. It’s led to an average 20% improvement in the FICO (credit risk) scores of these individuals, says Shakhani.

But there’s more: To continue building on financial resilience, there needs to be a way to measure it.

“If we can’t measure it, we can’t change it,” he says. “We’re reporting that back to the CEO because it has a bottom-line impact on profitability.”

Does social enterprise have a role to play here?

Years ago, social entrepreneur Swire put on hold her career to establish hundreds of schools in Afghanistan and Pakistan, with a focus on girls and women. They reached about 35,000 young people in the 1990s.

To Swire, many female business leaders already are social entrepreneurs.

“Women tend to care more about other people, the planet, the future and the future for their children,” she says. “Encouraging investment into the social enterprise space is a very good way to give women access to finance.”

But gender bias continues to get in the way: Just 8% of senior individuals on investment committees are women.

“Unfortunately, most men are more comfortable investing in other men,” Swire says. “Now, we’ve seen a big change in that in the last year there’s been a huge shift and effort to really include more women on investment committees.”

Swire maintains though, that this is not about charity.

“It’s the biggest unmet, untapped investment opportunity on the planet,” she says. “The fact is that women-led businesses are more sustainable and more profitable and especially in times of economic downturn, they’re more resilient.

In the U.S. alone, about 80 venture capital companies have popped up in the past 18 months to address access to capital for startups. Mastercard also aims to play a part in the solution, looking at ways women move money around.

“We treat it as a business imperative,” Goss says. “It just makes business sense to focus on women … if you don’t frame it as an opportunity, then we don’t get the attention of CEOs and we don’t understand that there’s a real business case to focusing on women.”

See the full discussion in this video from Davos 2020:

Discover more insights from the YPO Hub in Davos 2020:

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