Momina Aijazuddin, International Finance Corporation (IFC) Regional Industry Head, Financial Institution told about financial inclusion in Central Asia, women’s entrepreneurship, their access to finance, IFC's support SMEs, including female entrepreneurs.
Q1. Can you please share your insights on the current state of financial inclusion in Central Asian region?
Financial inclusion in Central Asia has made significant progress in recent years, but there is still much work to be done. Access to financial services remains limited, especially in rural areas and among vulnerable populations. According to recent data, only about 40% of adults in the region have access to formal financial services. For example, 48% of women entrepreneurs in the Kyrgyz Republic, especially those from rural areas, consider access to finance to be a major obstacle to opening and running a business.
One of the key barriers to financial inclusion in Central Asia is the high rate of informality in the economy. A substantial portion of economic activity occurs in the informal sector, which limits access to formal financial services for individuals and businesses. The inadequate infrastructure, particularly in remote areas, combined with limited access to digital financial services, hampers the provision of financial services to underserved populations. Another challenge is the low level of financial literacy among the population. Many individuals have a lack of knowledge of financial products and services, which hinders their ability to make informed financial decisions and effectively utilize the available resources.
Despite these challenges, there have been efforts made by governments and financial institutions in the region to promote financial inclusion. For instance, all Central Asian countries have implemented regulatory reforms to encourage the development of microfinance institutions, or MFIs, which provide small loans and other financial services to low-income individuals and small businesses. These institutions play a crucial role in extending financial services to underserved populations who otherwise would not have access to formal financial institutions.
Furthermore, the adoption of digital technologies has the potential to greatly enhance financial inclusion in the region. Mobile banking and digital payment systems can bridge the gap between traditional financial services and unbanked or underbanked individuals. These technologies can provide affordable, convenient, and secure financial services, especially in remote areas where physical bank branches may be scarce.
Collaborative efforts between governments, financial institutions, and development organizations are also imperative in driving financial inclusion in the region. These partnerships can support financial education initiatives, expand the reach of financial services, and develop innovative solutions tailored to the unique needs and context of Central Asia.
Q2. IFC works with financial institutions to support smaller businesses, particularly women entrepreneurs in Kazakhstan. In your opinion, what is the role of women-led SMEs in the country’s rising business landscape?
We strongly believe in empowering women entrepreneurs. Women’s entrepreneurship and economic empowerment are critical to inclusive economic growth. Where women are empowered, they can contribute their full potential—leading to a more diverse and dynamic workforce. Countries with higher levels of gender equality have a much higher national income per person, and experience faster economic growth. If women across Central Asia were to participate in equal measure to men, national income would be significantly higher – in the case of Kazakhstan, this could lead to a 27 percent increase.
According to the Fund for Sustainable Development and Support of Women's Entrepreneurship, women currently represent 51.8 percent of the population, contribute to about 40% of the total GDP, and manage about 42% of SMEs. Female entrepreneurs provide 30% of jobs in small and medium enterprises in Kazakhstan.
That was one of the reasons why we decided, in February this year, to invest $20 million in the country’s largest MFI. This enables KMF, our long-term partner, to provide much-needed financing to smaller businesses, especially in rural areas of the country, with at least half of the funds earmarked for women-owned businesses.
Moreover, just this week, we announced a new financing package of up to $60 million to Shinhan Finance, of which the first tranche of $20 million has been committed, will be disbursed over the next few months. The financing will help the MFI to continue to provide vital longer-term loans to small enterprises, at least a quarter of which will be earmarked for women-owned small businesses across Kazakhstan.
Q3. What about the access to finance for women in the broader Central Asian region?
This remains an important issue despite efforts to promote gender equality and financial inclusion in the region. Women face various barriers that limit their access to financial services and impede their economic empowerment. Cultural norms and societal expectations are an important factor. Traditional gender roles and expectations may discourage women from actively participating in economic activities or seeking financial independence. As a result, it’s difficult for them to access finance due to insufficient collateral, weak credit histories, and perceived high credit risks. As I mentioned earlier, one of the main challenges is the gender gap in financial literacy. Women often have limited knowledge about financial products and services, and how to manage their finances effectively. This lack of financial education hinders their ability to navigate the financial system and make informed decisions.
Despite these challenges, efforts are being made in Central Asia to address the gender gap in this area. Governments, non-governmental organizations, and international institutions are working towards promoting women's financial literacy and encouraging gender-responsive policies that enhance women's access to finance. It is crucial to continue reducing these barriers, promoting women's financial inclusion, and creating an enabling environment that empowers women economically. For example, IFC research shows that financial institutions in the Kyrgyz Republic could see a staggering 638 percent growth in annual revenues from $67.6 million to $431.5 million by adopting a dedicated approach to meeting women’s financial needs. By understanding and addressing the unique needs and constraints of women entrepreneurs, a more inclusive and innovative service model can be created.
Q4. How does IFC support SMEs, including female entrepreneurs, in Central Asia to improve their access to finance?
Empowering small businesses and entrepreneurs is a key focus for us in Central Asia. IFC supports small entrepreneurs, including female entrepreneurs, by improving their access to finance through various initiatives. We invest in local financial instructions to help expand their capacity to provide loans and other financial services to SMEs, including female-led businesses. Since 2018, IFC has invested $155 million in 15 local financial institutions across the region.
We also offer advisory services to commercial banks in Central Asia to enhance their ability to address the specific needs of the women's market. This assistance includes training programs for bank staff to better understand the challenges faced by women entrepreneurs and to develop products and services tailored to their needs. By improving the capacity of commercial banks, IFC aims to create a more supportive environment for SMEs, including female-led businesses, to access finance.
Additionally, IFC conducts research to identify the barriers and challenges faced by women entrepreneurs in accessing finance in Central Asia and develops reports on the status quo, women’s needs, and gaps in the provision of services. These reports also provide insights into scalable approaches to increase access to finance for women entrepreneurs and offer policy recommendations to empower women entrepreneurs and create an enabling environment for their economic growth.
Q5. Lastly, what are the potential benefits of achieving greater financial inclusion in Central Asia?
Greater financial inclusion in Central Asia can bring numerous benefits to individuals, communities, and the overall economy. It can help reduce poverty and inequality by providing individuals with access to the financial tools and resources they need to improve their livelihoods. It can also promote entrepreneurship and economic growth by enabling small businesses to access credit and financial services. Moreover, financial inclusion can enhance financial stability and resilience, as a more inclusive financial system can better withstand economic shocks. Overall, achieving greater financial inclusion in Central Asia is not only a matter of social justice but also a catalyst for sustainable development and prosperity.
IFC is doing its part by continuing to promote financial inclusion in Central Asia. We will expand our partnerships with local financial institutions to further increase access to finance for small enterprises and individuals. We will also continue to support the development of digital financial services and financial infrastructure, particularly in underserved areas. In addition, we will work closely with regulators and policymakers to advocate for reforms that create an enabling environment for inclusive finance.
Comments
Post Comment