Gendered inequalities persist despite the foundational roles many women play in economies across the region.
By Zachary Frye
Currently testing out its pilot program, the team at Lucy plans to launch full services later this year. After starting its services in Singapore, they plan to expand throughout Southeast Asia. The startup says its focus on using technology to make impactful investments for female business owners can help underserved entrepreneurs expand their operations.
According to Lucy’s CEO Debbie Watkins, the company will focus its client offerings on financial services through a mobile application that helps keep track of important information.
“We will be providing a range of financial services—from safekeeping and savings, to remittances and credit. Each of these will be customer centric. They will be tailored to address the specific challenges of the different [economic] segments that we will be serving,” Watkins told ASEAN Today.
They also plan to help foster community and connections to other business owners throughout the region.
“A key part of Lucy will also be the community—connecting women entrepreneurs across all socio-economic groups to enable them to provide practical advice to each other,” she added.
Gender-based inequalities persist despite the nuanced role women play in regional economies
In Southeast Asia, gendered disparities exist throughout the private sector, including within larger corporations and small and medium-sized enterprises (SMEs).
According to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), labour force participation among females was 23% lower than among males across ASEAN in 2018.
With that said, women continue to play an integral role as business owners on a local level, especially in informal sectors related to food and care services. Overall, there are an estimated 61.3 million women who own and operate businesses across the region.
While some countries in ASEAN have a better track record than others at female inclusion in the private sector—69% of firms in the Philippines and 64% in Thailand had female presence in company ownership in 2018—gendered inequalities remain a feature of regional economies and continue to be a drag on economic growth.
A lack of female labour participation and entrepreneurship costs regional economies an estimated annual loss of 7% of income per capita in Cambodia on the low end to 26% per capita in Brunei Darussalam on the high end.
Southeast Asia’s working poor often find it difficult to access credit
For many small business owners, access to credit continues to be a major hurdle for growth regardless of gender.
As per the SME Finance Forum, an organization dedicated to expanding access to finance for small businesses, the Asia-Pacific region is home to 45% the SMEs and microenterprises in the world that face some form of financing constraint—broadly defined as an organization that finds it challenging to obtain credit.
In Vietnam and Malaysia, two countries with some of the widest small business finance gaps in the region, male-owned SMEs account for a combined US$34 million in funding shortfalls. For women-owned enterprises, the two countries account for about US$11 million in small business financing gaps, the highest in the region.
According to Watkins, even if women own businesses they often have a more difficult time securing lines of credit in the region compared to men.
“One of the reasons that women-owned firms are smaller than men-owned ones are that they often get turned down for credit. For example, many small business lenders require collateral, and in many countries the household collateral, especially land, is in the husband’s name,” she said.
The success of microfinance organizations in the region is mixed
While Lucy attempts to help fill in persistent funding gaps by offering credit and loans, the jury is still out on the effectiveness of microfinance in the region.
On the one hand, the rise of microfinance organizations gives poor women and men a chance to access credit beyond formal banking institutions or predatory lenders with exorbitant interest rates.
According to a study by Esther Duflo and Abhijit Banerjee, two Nobel Prize-winning development economists, microcredit can indeed make a positive impact on underserved business owners under the right conditions.
Perhaps not surprisingly, a big part of its impact may be dependent on the entrepreneurial ability of the borrower.
According to the two economists’ data from Hyderabad, India, a boost in credit for business owners with “gung ho” attitudes and established practices resulted in lasting positive impacts. For business owners without these traits, however, there were few long-term impacts from microcredit schemes.
Furthermore, some microfinance organizations in Southeast Asia stand accused of taking advantage of women—or at least contributing to circumstances where women were left worse-off after taking up their loans.
In Cambodia alone, 2.4 million borrowers owed some US$5.4 billion in outstanding microloans in 2019. According to a report by the UN in 2017, for many Cambodians “microfinance loans only serve to push borrowers further into poverty.”
In some circumstances micro-borrowing can lead to unwanted financial outcomes for the region’s working poor.
Heng Hong, a Cambodian microfinance borrower, took on loans from multiple organizations but was later unable to pay them back. She lost her home nearly a decade ago after having to sell it to pay back outstanding debt.
“My former neighbours didn’t want me to sell the house, but I didn’t have a choice. I had no way to pay back the loan,” she said.
Lucy, for its part, seems determined to enter the microfinance fray and make a positive impact on the lives of women across ASEAN despite the possible pitfalls in the sector.
They claim to have identified four distinct groups of women who are underserved by banks in Singapore and will be the first targets for their services, although they were unwilling to share the details on those groups before Lucy’s launch.
“We are essentially a digital financial services platform,” continued Watkins. “We will be using leading-edge technology to firstly provide the kind of personal experience that is lacking in the typical banking app, enabling our clients to feel that we are really there with them,” she added.
“We will be leveraging machine learning and data analytics to enable us to ‘know’ our customers, which will enable us to say ‘yes’ to them when most banks would say ‘no.’”