The Surprising Link Between Trade Finance and Gender Equality

Trade finance increases women’s ability to fully participate in the global economy. Photo: Mimi Thian
Trade finance increases women’s ability to fully participate in the global economy. Photo: Mimi Thian

By Steven Beck

To level the playing field in Asia and the Pacific, women-owned companies need financial backing to support their importing and exporting needs.

I’ve been asked what’s the connection between trade finance and gender equality. People find the connection kind of weird. But it’s not weird at all. Women’s participation in the work force, including at more senior levels, is important for development of over half the population. It is also important for broader economic growth and prosperity. And, as gender equality is Sustainable Development Goal (SDG) number 5, it’s something we’ve all agreed to achieve with specific milestones and timeframes.

It’s clear we won’t be able to achieve the SDGs, including gender equality, unless sufficient financial backing is made available for each goal. We don’t need the Addis Ababa Declaration on Financing for Development to tell us this, but for those who like “official” info, it’s ensconced in that document, including a requirement for short-term financing, such as trade finance, to meet our goals.

According to our research, there is a global market gap – unmet demand for financial backing – of $1.5 trillion. Women-owned firms fared the worst, with 44% of requests for financial backing to support their exporting/importing needs rejected. Once rejected, women-owned firms were less likely to seek alternative finance—whether formal or informal.

It’s an alarming reality check and one that will most certainly impede women’s ability to fully participate in the global economy, let alone achieve the gender equality enshrined in SDG 5. Ensuring women entrepreneurs have better access to finance will yield potentially transformative economic and social development outcomes.

Sadly, the trade finance gap for women in this region is not surprising. Just under half of working-age women in developing countries in Asia participate in the labor force, in contrast to 80% of men. Women are poorly represented in senior management across Asia and the Pacific, with some notable exceptions, including the People’s Republic of China.

It is no longer debated that getting more women into the paid workforce is good for economies. It improves diversity of thinking in the workplace which helps to bolster the bottom line. McKinsey’s groundbreaking study, The Power of Parity, shows that advancing women’s equality can add $12 trillion to global growth.

It’s incumbent that banks offer trade and supply chain finance to businesses to address this gap, so pronounced among women.

  Trade finance is key to bringing out the full potential of Asia’s women entrepreneurs

First and foremost, banks need a supportive legal environment to maximize the potential for technology to reduce the gender gap. Given that a significant proportion of businesses in Asia are run by women, the first step is to reduce barriers to access for all businesses. Until a basic legal and institutional framework is in place to govern digital trade and ecommerce, a significant proportion of both female and male-led business will remain outside the system. Moreover, a harmonized set of international digital trade standards and protocols, would ensure the different parts of the trade ecosystem – from exporters to warehouses and importers – are better integrated, boosting efficiency and lowering the barriers to access for businesses, including those run by women,

Secondly, to make information on individual small and medium-sized enterprises accessible the Legal Entity Identifier system should be adopted globally.  Overseen by more than 70 financial regulators worldwide, this system verifies who is who and who owns what. This would help banks comply with “Know Your Customer” and anti-money laundering regulations that are designed to crack down on fraud and terror financing, but which often inadvertently erect barriers to a healthy flow of trade finance.

Another way to tackle the problem is to employ more women at banks in our region. By enhancing the number of women in banking, especially in senior positions, banks will become more understanding about the challenges faced by women entrepreneurs.  And financing gaps will be closed as a result.

ADB’s Trade Finance Program is doing its part to address these issues. We have a network of over 200 bank relationships. Nineteen of our partner banks in 8 countries -- Bangladesh, Myanmar, Pakistan, Viet Nam, Kazakhstan, Mongolia, Samoa, and Uzbekistan -- participated in phase one of our Gender Initiative by offering their human resource policies for analysis.  We had gender specialists analyze their policies to see how they could be enhanced to attract, retain and promote more women in banking.

Twenty-five recommendations emerged from this process and were implemented by 12 of the banks that participated. The second phase of the initiative will examine how the human resource policies at 19 more banks can be enhanced to attract, retain, and promote more women in banking.  We will work with banks to implement the more challenging recommendations like establishing grievance procedures and remedies around gender issues in the workplace, and equal pay.

In the end, though, the most important success factor is workplace culture.  If women and men are shy about taking leave or working flexible hours to look after family, for example, human resource policy changes won’t help much.  And if conferences, panels and senior positions continue to be stacked with old guys like me, the signal is clear for women and we’ll all be the lesser for it.

Establishing a global superstructure of appropriate rules and regulations to improve access to trade finance is a key step in empowering women who run businesses. And banks staffed with more women will likely be willing to increase support to women owned businesses.

That’s the future, if we have the vision and determination to make it happen.