Bridging the $1.7 Trillion Credit Gap for Female-led SMEs

Dacxi Chain
4 min readJun 10, 2024


Source: crowdfundinsider

To the surprise of nobody, female-led SMEs often face significant hurdles in the hyper-competitive global marketplace, primarily due to systemic biases and gender disparities entrenched within financial systems. Studies have consistently shown that women entrepreneurs encounter more challenges in securing financing compared to their male counterparts, leaving them at a significant disadvantage. Now, the International Finance Corporation estimates that female-led SMEs are facing a credit gap in the region of $1.4 trillion to $1.7 trillion, capturing the gulf in credit accessibility that is significantly undermining their growth prospects.

Over the course of my decade-long career in the cross-border payments arena, I’ve worked at some of the world’s most renowned Fintech companies, such as Paypal, Payoneer, and Ant Group. This body of work gave me an invaluable insight into the trade bottlenecks confronting female exporters and exporters in general, most notably due to a lack of accessible financing options and an overreliance on upfront payment terms to cover the cost of new production cycles.

The unfair ‘high risk’ perception of female-led SMEs

Female SMEs are finding it hard to shake off their ‘high risk’ perception among financial institutions, further limiting their access to credit. Cultural and social factors can play a role in this regard, and I would wager that ‘baked-in’ discriminatory lending practices and inherent gender biases are at play. Additionally, a lack of representation in decision-making roles within financial institutions could be contributing to this disparity. When it comes to building networks and credibility within the business community, capital accessibility is a key piece of the puzzle. Without it, you’ll hit a financing glass ceiling pretty quickly. In order to thrive in today’s increasingly fragmented supply chain landscape, female entrepreneurs need reliable access to financing. It is an absolute prerequisite for their longevity.

It also doesn’t help when financial institutions stick to a rigid set of criteria when vetting prospective credit applications. The bottom line is that they’re not making it easy for female-led SMEs to access the capital they need in a timely manner. These institutions usually require substantial amounts of paperwork to be filled out (a typical trade finance application for cross-border transactions can involve up to 100 documents), as well as a demonstrable credit history. Unfortunately for early stage SMEs in general, they don’t have the desired ‘track record’ that institutions are seeking, undermining their perceived ‘creditworthiness.’ In their search for capital, SMEs often face significant delays for their applications to be reviewed, undercutting potential sales and revenue. For SMEs who rely on Letters of Credit (L/Cs) to address cash flow issues, their experience is also marred by reams of red tape and delays. In some cases, SMEs are forced to resort to informal sources of financing, incurring higher financial risks.

The statistics don’t lie — the World Trade Organization has reported that SMEs are 7 times more likely to be denied trade financing than multinationals — giving expression to the steep uphill battle SMEs face on the trade financing front. The limited access to financing for SMEs has contributed to the growing trade finance deficit — which now stands at $2.5 trillion — having risen significantly from $1.7 trillion in 2020. It should come as no surprise that over 75% of SMEs are worried about credit accessibility, according to a recent survey by Goldman Sachs.

Fintech-led solutions

Addressing this clear imbalance requires concerted efforts to promote gender equality in entrepreneurship. Technology will play a pivotal role in bridging the credit gap and improving levels of financial inclusion. Unlike conventional banks, fintech platforms can execute more accurate risk assessments to get a proper gauge on SMEs’ creditworthiness. By swiftly analyzing a range of pertinent data points such as transaction history, AI-powered analytics can offer tailored financing solutions, even to early-stage SMEs without the extensive credit histories that institutions are looking for.

Recognising the chronic need for intervention (and innovation), the International Finance Corporation is sounding the alarm, calling for more streamlined credit support for SMEs. Additionally, the UK’s Centre for Finance, Innovation, and Technology (CFIT) recently established a task force with a remit to extend credit accessibility for SMEs through Open Finance initiatives. As part of this pivot towards Open Finance solutions, automated underwriting can greatly expedite processing times, delivering financing within hours, faster than the protracted legacy offerings by an order of magnitude. With more opportunities to access credit and thrive in the business landscape, female entrepreneurs can seize time-sensitive opportunities and make informed decisions around inventory management.

Looking ahead, the impact of a level playing field for female-led SMEs can be far-reaching. Remember, if you can’t see it, you can’t be it. Budding female entrepreneurs need to draw inspiration from successful female business leaders who are already succeeding in high-powered business roles. Equal credit accessibility can provide proof points that their aspirations are achievable and that they can chart their own entrepreneurial path and plan for the future with a genuine sense of confidence. In order to make this vision a reality, we need alternative credit avenues paved by automated underwriting. This can help female-led credit applications go from undesirable to undeniable, enabling them to seamlessly finance their operations, drive growth, and successfully navigate financial setbacks with conviction.

Read the full article:



Dacxi Chain

Dacxi is a fintech company pioneering crowd finance, with a mission to change the lives of everyone with new wealth opportunities. Welcome!