Systemic biases in risk evaluation

In Central America, women face significant challenges in accessing SME loans, despite receiving a majority of microfinance loans.

According to the World Bank, only 26% of SME loans go to women. This gender disparity cannot be attributed to factors such as business informality, past performance, or the use of funds, as they are relatively equal across genders. Research conducted by Columbia University School of International and Public Affairs and the International Finance Coalition reveals that the ratio of SMEs owned by men versus women is 2:1.

However, it is important to note that limited business training and structural barriers, such as the scarcity of women-owned collateral, do contribute to the funding gap. These factors make it harder for women entrepreneurs to access the necessary financial resources to grow their businesses.

Nevertheless, systemic biases in risk evaluation remain the primary cause of this credit shortage. Financial institutions often underestimate the potential of women-led businesses, leading to a lack of investment and support. This highlights the urgent need for innovative solutions that address the underlying biases and promote equal opportunities for women in Central America’s business landscape.