Opinion: How to avoid gender inequality in access to credit financial services

15 March 2022

In this piece written for International Women's Day 2022 Julia Dias and Fabio Pasin of Fair Finance Brazil examine how the lack of bank policies supporting women's access to credit is a challenge and further exacerbates gender inequalities in the context of the pandemic.

International Women's Day is celebrated on March 8. Two years after the arrival of Covid-19 in Brazil, we have, however very little or almost nothing to celebrate when it comes to combating inequalities, including gender. If for some time we imagined that we would all be in the same boat in the face of the deadliness of the virus, reality quickly imposed itself; while the first confirmed Covid case was of a man who entered a well-known private hospital upon returning from a trip to Europe, the first person to die of the disease in Brazil was a domestic worker - his mistress, recently returned from Italy who when suspected of contamination, was not given time off nor the necessary care.

With the closure of schools and day care centers, many women were forced to give up their jobs to carry out unpaid domestic work and caring duties; cases of domestic violence skyrocketed; and unemployment rates also disproportionately affected this segment of the population. Globally, data presented by Oxfam shows that the economic impacts of the pandemic were much more severe among women, who lost $800 billion in earnings in 2020. According to the research, the joint wealth of all women and girls in Africa, Latin America and the Caribbean - one billion people - is still less than the fortunes of the 252 richest men on the planet.

And what do financial institutions have to do with the rampant rise in gender inequalities? To answer this question, we could start from a different perspective. In this article, we will focus on gender discrimination in the provision and granting of credit and the challenges faced by women entrepreneurs.

Among the sectors most affected by the pandemic are those with a high proportion of female workers, such as paid domestic work. Dat from Dieese shows that the domestic worker sector, composed in 2019 of 6.4 million people, of whom 92% were women, 65% black and 75% informal workers, lost 1.4 million jobs in 2020, equivalent to 24% of available vacancies.

Without resources to pay the most basic expenses, and emergency aid that was often insufficient, many of these women had to resort to credit to ensure their survival and that of their families. And that's where the problem begins.

How can we prevent existing structural gender inequalities in society from being reproduced in the granting of credit to vulnerable women? There are repeated reports of women who went in search of loans and were faced with different conditions - and more burdensome - from those available to men, such as higher interest rates and smaller amounts. Having no choice, they often end up agreeing to unfavorable and discriminatory contracts, which can lead to over-indebtedness.

To tackle a problem, it must be identified. For example, we know that the gender gap exists in paying salaries - with women earning almost 20% less than men. From this, it is possible to think about wage policies to prevent the problem.

However, when we talk about the gender disparity in lending, there is no official data on the subject. In other words, empirically we know that women are discriminated against when they seek credit, but we do not know the scale of the problem and is not even considered by financial institutions and the Central Bank. In this case, in addition to directing specific credit policies to the female public, considering structural inequalities, it is urgent that data and statistics be produced to highlight - or not - discriminatory practices of credit granting, creating mechanisms for addressing the issue.

In addition to the possibility of assisting women in unfavorable financial conditions, the provision of credit by financial institutions can directly impact the development of female entrepreneurship in the country. On this topic, during the pandemic, the companies run by black women were the ones that were hardest hit, the ones that had least access to credit and, still, are the majority in the group of people who were denied credit due to the negative growth of their CPFs, according to a study conducted by Sebrae.

Entrepreneurship is often a means of survival, being the only possible way out for women who need to seek alternatives to unemployment, exclusion from the formal labor market and lack of income. However, even in this scenario, women do not find guarantees or incentives for equitable treatment. On the contrary, according to the Survey Female Entrepreneurship in Brazil, women entrepreneurs pay higher interest rates than men (34.6% compared to 31.1% p.a.).

In this sense, it is important that financial institutions consider basic aspects of gender inequality - such as the fact that women are the main (if not unique) caregivers of children and the elderly, in addition to not having support in the creation of businesses - by providing investment lines for female entrepreneurship, so that they can continue activities even in a context of crisis.

A more inclusive financial system for women, allows greater access to financial services, with the practice of lending with fairer interest rates. Women are already exposed to the management of financial resources and administration of the house with double or even triple working hours, most of them unpaid. Consequently, the greater the economic vulnerability of women who guarantee family survival, the greater the bottlenecks of social inequality.

Stopping discrimination is not enough. In order for women to break the cycle of violence - domestic, political, economic - it is also necessary that financial institutions implement cross-cutting gender policies in all their actions. This means responsible and committed practices, from the offer of credit to investing in women who in the face of all adversity are rising to the challenge. First and foremost, however we need data - and transparency - on lending to the female audience.

Gender equality and public commitments of financial institutions

Since the policies and practices of financial institutions produce significant social impacts, it is necessary for civil society to require minimum commitments from these agents to prevent negative consequences of their activities. It is with this purpose that the Guide of Responsible Banks (GBR) conducts a policy evaluation every two years and measures the degree of integration of social and environmental responsibility issues within the policies of financial institutions. The initiative is part of Fair Finance International, an international network of civil society organizations present in 15 countries, and which since 2011 has been pressuring banks and other financial institutions for more commitments related to social, environmental and human rights standards. The Brazilian coalition of the GBR is led by the Brazilian Institute of Consumer Protection (IDEC) and has the participation of Conectas Human Rights, Instituto Sou da Paz e Proteção Animal Mundial.

Among the commitments evaluated in the last edition of 2020, it is appropriate to highlight the performance of banking institutions in the theme of Gender Equality.

Notes given on a scale from 0 to 10. 

This theme analyzes the policies of banks both in relation to their staff, companies in which they invest and the treatment of consumers. Thus, in the evaluation of public documents, one of the elements assessed is if the "financial institution has operating systems to prevent and mitigate gender discrimination with its clients".

All nine major banks evaluated in this element received a zero score for not considering this policy in their public documents. Thus, there is a serious failure in the sector in ensuring that financial services are provided in an equitable manner between men and women in Brazil. The lack of specific systems to prevent gender discrimination contributes to the reproduction of inequalities, including in the granting of credit to women.

Unfortunately, in view of the poor performance of this theme in the last edition, it is concluded that there is still much to be improved with regard to the commitments of the banking sector to take an active stance in preventing and combating gender inequality.



Julia Dias, Lawyer in the financial services program of Idec (Brazilian Institute of Consumer Protection)

Fabio Pasin, Researcher and Lawyer of the financial services program of Idec (Brazilian Institute of Consumer Protection)