A sharper lens: Banks can better serve women-owned SMEs by redesigning their operating models
Lending to women-owned business could be a growth engine for African banks, but revamped ’gender-intentional’ credit models may be needed to serve these borrowers profitably. Dalberg Advisors argues that alternative forms of collateral, credit scoring based on cash-flow and behavioural data, and tailored loans should replace traditional lending models.
By Lillian Kidane & Chimdi Onwudiegwu
In 2016, KCB Bank Kenya found that only about 7% of its nearly one million MSME account holders had a loan. Customer research identified slow and opaque processes, high conventional collateral requirements, and a transactional service model as important barriers limiting SMEs’ use of bank finance.
KCB reviewed its credit processes, adjusted collateral requirements, explored alternative collateral and behavioural data, retrained staff, introduced new scorecards, and moved toward relationship management. The programme reported 656 SME loans, 52% of them to women-owned businesses, alongside a significant improvement in SME customer satisfaction. KCB’s financial modelling indicated that loans below KES 1 million would not be profitable under the prevailing interest-rate cap and relationship-management model. This pushed the bank toward digital delivery instead of relationship banking alone.
A stronger case for serving women-owned businesses
The commercial case for serving women-owned SMEs is not that every woman-owned business is a better borrower, and it is not a story of universally superior returns, lower risk, and greater loyalty. The more defensible claim is this:
Financial institutions are overlooking viable women-owned SME demand because their segmentation, underwriting, and service models weren’t built to serve it. Correcting those blind spots can expand portfolios without an obvious credit-risk penalty — but turning that into profit requires redesigning cost-to-serve, loan economics, and accountability, not just setting a lending target.
A closer look at the evidence
Institutional findings point to the upsides of taking a more intentional approach to women customers. Lenders with women-focused strategies have increased their share of women-owned SMEs. Women business owners have been found to be good borrowers and less likely to default on loans. These are positive signals even though the evidence does not support the idea that all women-owned businesses are inherently lower-risk. A quick scan of the evidence:
In 2024, women-owned SME loans represented only 19% of SME portfolio volume among 183 International Finance Corporation (IFC) client financial institutions, and average loan sizes were 28% smaller. Yet the weighted average 90-day non-performing loan ratio was broadly comparable, at 3.6% for women-owned SME loans and 3.8% for overall SME portfolios.
According to Aceli Africa‘s loan-level data, women-owned businesses in its agri-SME portfolio had average loans of roughly $52,000, against $90,000 for men-owned businesses. Overall, 90-day NPLs were lower among women-owned borrowers, at 3.3% compared with 4.6%.
Starting in 2012, Root Capital‘s decade-long analysis of 552 agricultural enterprises found a 4.12-percentage-point lower default rate among women-led enterprises after controlling for loan size, region, and industry.
IFC’s Her Fintech Edge survey of 49 lending-focused fintechs found that among firms that tailored products and services to women, 63% reported higher customer lifetime value among women, compared with 38% of firms that did not tailor their offering.
What a redesign of operating models would look like
Comparable repayment performance does not make the segment commercially attractive. Smaller loans carry proportionally higher acquisition, underwriting, and servicing costs, so simply taking a gender lens can expand inclusion without improving returns if the operating model doesn’t change. This is the reason the thesis needs to be about the operating model rather than the lending target. In practice, that means measures such as digitizing and simplifying small-ticket origination; substituting transactional and value chain data for fixed collateral requirements that structurally exclude many women-owned businesses; and using incentives where the economics aren’t yet self-sustaining. This also means using gender-disaggregated data to actually provide differentiated products.
Aceli’s own experience illustrates the same point at the ecosystem level. Across its partner institutions, the combination of technical assistance, origination incentives, and capacity building has been associated with a shift from ad hoc gender initiatives toward more systematic integration of gender into lending criteria, staff incentives, and portfolio management.
A framework for gender-intentionality
Intentionality must be specified across the parts of the business that actually determine whether a segment is served, and served profitably.
Dimension | What changes under a gender-intentional model |
Segment definition | Women-owned SMEs are defined and tracked as a distinct, measurable segment |
Application and approval funnel | Drop-off points are monitored by gender to find where viable applicants are lost |
Credit assessment | Cash-flow and behavioural data supplement or replace collateral-based scoring |
Collateral | Alternative forms of security (inventory, receivables, group guarantees) are accepted |
Product and pricing | Loan sizes and terms match actual demand rather than a one-size-fits-all ticket |
Customer acquisition | Channels and messaging reach women-owned businesses where they are based |
Service delivery | Tiered, often digital-first delivery, replaces uniform relationship banking |
Data | Gender-disaggregated data is collected and fed into product and credit decisions |
Staff capabilities | Loan officers are trained to recognize and underwrite non-traditional business profiles |
Incentives | Staff targets reward segment growth and segment profitability |
Leadership | An executive, not a CSR or compliance function, owns the segment’s P&L |
Portfolio economics | Contribution margin is tracked and reported at the segment level |
The bottom line
The cost of inaction cannot yet be reduced to one defensible number, and institutions and advisors should stop implying that it can. What the evidence does support is narrower and, for a capital allocator, more useful: gender-intentional SME finance is an operating-model discipline, and the institutions capturing the opportunity are the ones that have redesigned how they see, price, and serve the segment.
Lillian Kidane is Partner and Regional Director for Africa, Dalberg Advisors.
Chimdi Onwudiegwu is an Associate Partner, Dalberg Advisors.
