(Intro)  Those women running formal companies are really kind of survivors. They have defied the odds. And how that shows up then is that in many aspects they are, at least as I’d say, stereotypically male as a lot of the men.

– Benedikt Wahler, Partner  at ConsumerCentriX

Ana Singh: Through funding from the European Bank for Reconstruction and Development, ConsumerCentriX undertook a large-scale field research in Morocco, surveying more than 800 male and female entrepreneurs in a nationally representative sample to thoroughly understand the needs, priorities and constraints of business owners with regards to running their businesses and their finances. This ultimately enabled a three-level analysis. First, a mapping of the entire market and a comparison of current offers by banks. Second, an identification of relevant gender-differences that banks could respond to in their non-financial and financial services, and finally a detailed segmentation of female entrepreneurs.

 In our second podcast, Benedikt Wahler, Partner at ConsumerCentriX, and István Szepesy, an Associate Consultant, will share key insights learned from this project as well as a few surprises that turned up in the research and segmentations. So, to start off, Benedikt, can you share the main objectives of this particular project? 

Benedikt Wahler:  The objective was essentially twofold. On the first hand, it was about making sure that we have a very thorough and nuanced understanding of the Moroccan markets market when it comes to female entrepreneurs. We can build strategy; we can build product innovation and a communications strategy that would really resonate with those female entrepreneurs that in the end were intended to be targeted. 

The second objective was really to bring the conversation with executives, in this case at banks, bring that conversation onto a factual basis. Because one thing that we’ve encountered a lot is that when the topic is women – it’s a little bit like football. Everyone has an opinion. But that opinion, normally, isn’t far away from stereotypes. And if you do not have solid information you can confidently point to and base your decision making on, then the stereotypes are going to carry the day and are going to carry us into the direction of the pink credit cards and other solutions that we know do not work well.

Ana Singh: What were you hoping to accomplish when you created a gendered comparison of Moroccan entrepreneurs?

Benedikt Wahler: The real question, if the charge is to build out a gender-intelligent finance solution, is to understand where differences between men and women exist that are relevant in the finance context –  that are persistent and wide ranging enough to really merit a dedicated approach. Merit that you have a conversation with bank executives around “you guys need to be changing this because it really doesn’t work with women, even though it might work with men.” So, at the very least, the logical starting point then becomes I need to survey or speak to not only women, but also men to have that gender comparison.

Ana Singh: István, after reaching that logical starting point that Benedikt just mentioned. What were the next steps in terms of research? 

István Szepesy:  First, there was very thorough secondary market research to get an understanding of the market.  And then with primary research, both quantitative and qualitative, to build a first-hand understanding of how the market is. In the quantitative approach, our key objective was to get representative data on the country level. Meaning that having enough respondents, both male and female respondents, that we could have a complex and reliable picture of the country as a whole, not just some random deep dives, based on interviews or focus groups. 

We put together a questionnaire which was built up by three different building blocks. First, the basic socio-demographic questions to get an understanding of who they are and then we wanted to understand also the entrepreneurial profile, based on values and attitudes and lifestyle questions as well – who they are as entrepreneurs and who they are as businessmen and women. So, the third block was more about understanding how banking and finances works for them.

Ana Singh: So, what did you learn?  

Benedikt Wahler:  I think what was really striking and shows the value of going to the making, the effort of such nationally representative research, was that really in some surprising ways there aren’t a lot of differences when we talk about formal women in business. Meaning those are the women who run businesses that are registered with the tax authorities, have all their paperwork in order and really are the finest of the crop in the country. Morocco isn’t an easy place to do business overall. It’s even much harder if you’re a woman. So, those women running formal companies are really kind of survivors. They have defied the odds. And how that shows up then is that in many aspects they are at least as I’d say stereotypically male as a lot of the men.

When you talk about female entrepreneurs in emerging markets, you very often hear “oh, but they’re more risk averse and they’re less educated and they’re not as interested in growing their business because they’re so busy taking care of the family.” And the nuance that this research really added is, yes, that tends to be true if your level of analysis is all of the 400,000 companies, including the many informal ones in Morocco. 

But if you zoom in to those who run a formerly registered business, which is really where the banks currently want to be focusing, where their starting point is. They don’t want, at the moment yet, to go after the informers. That’s a different conversation. So, if you start with the point of the kind of clientele to which banks are currently open,  then we find that actually the Moroccan female entrepreneurs who run such businesses are slightly better educated than the average men. That risk doesn’t scare them. It’s something that they’ve come to embrace. Growth is something that drives them. They more frequently actually than the men, they have entered business because of a sense of opportunity that they wanted to pursue. So, this exercise really brought us to an understanding that pointed us that in this sector, Morocco doesn’t conform to the stereotypes.

Ana Singh:  If the women-led formal SMEs were comparable with their male counterparts, why would banks need to create a separate approach to the women’s market?  

Benedikt Wahler: Interestingly, though, despite those commonalities, we still found that with regards to dealing with finances, there were important nuances that really should translate into the dedicated approach. Because on the one hand, having assets against which you can borrow is still a huge headache for them. And again, the typical pattern of women having much fewer such assets, meaning a piece of land, an apartment, a car, something of big value that banks are happy to lend against in their name is still much rarer in Morocco for female entrepreneurs than for male entrepreneurs. If they show up at the bank and the bank says, “happy to give you a credit, if you sign over, then your house as collateral.” That’s not something that they can realistically do.

And another aspect that always we found to hold also for these highly professional, business savvy women in Morocco, is that the way how their lives and what happens in them, whether it’s marriage, divorce, having a child, having to take care of elderly parents or in-laws much more strongly affects the way how they’re able to run their business and thereby their finances – by at least 20 percentage points. They’re more likely to say this affects me a lot. And that also shows up in how their finances react in such life situations when revenue goes down because you can’t run your business as effectively, cost out because, well, kids needs to be fed as well as elderly parents. If hospital costs and the cash flows overall go down. So banking relevant differences absolutely exist, even though a lot of commonalities and the picture is not one of the poor damsel in distress that needs your charity.

István Szepesy: They are still only 10 percent of the market. And that shows that there’s a much bigger obstacle in front of them to be successful. What was interesting to see is, however, the comparison of formal women versus informal women, where they are much bigger gaps.

Ana Singh: Thank you for bringing me to the next question. You guys created a very detailed segmentation of female entrepreneurs. What did you learn from it? 

Benedikt Wahler: You often hear said in an anecdotal manner that women are the less risky clients, the better at repaying keeping their obligations – seems to bear out. And we found a difference of 3.5 percentage points that women are more likely even if they come into financial difficulties, to keep up paying back a loan, stay in compliance with the obligations to the bank. 3.5 percent improvement on the level of an entire bank’s risk portfolio is already huge. But if we then zoom in on the seven segments that we’ve identified for business women in Morocco. All of a sudden, this 3.5 percent expands to 10.5 percent between the most risky segment and the one that’s most compliant, that always will try to keep up no matter how difficult the situation, keep repaying the loan. And a 10.5 percent at the level of a credit portfolio of a bank really is the difference between you are one of the most profitable in the market or you are  broke.

István Szepesy: So, what is isn’t also an interesting output from our segmentation is not only that we understand how these clusters look like, how many business woman do we estimate to be in each? But it also allows us, through using our methodology, to give a strong estimation on their business potential. We using multiple variables for this. We also calculate what we call an influencing index, which is using different variables to not only understand the potential within the segment, but also the aspirational and networking effects that each of the segments have. And from this perspective, what’s interesting is sometimes a segment which purely looking at their numbers might not seem that relevant. If you calculate this as well in they’d become was one of the most desirable segment potentially for banks.

Ana Singh: When it comes to creating a dedicated approach to the women’s market, how can you change the mindset of banks so they don’t revert back to those gendered stereotypes you mentioned earlier?

Benedikt Wahler: Getting the conversation towards the need for change is not an easy one to have. If you don’t have data. Now, the very interesting and relevant data and for that context were that common to men and women in Morocco, formal men and women. So, people were well educated who run their business in urban areas. They’re connected into life and business. They’re savvy. They’re very knowledgeable in a lot of ways.  But finance is not one of those ways.

 And actually, in a broader picture, the way how Moroccan banks are apparently doing banking as usual, SME banking as usual doesn’t work for men, just like women. So, it’s not women are the ones for whom we need to change this, but it’s rather if we change something and build a dedicated approach for women, it can serve really as a pilot for testing out ways in which Moroccan SME banking should change anyway because it’s not working for the entire market.

About half of men and women alike are currently what we would label business unbanked. Meaning their business finances remain purely in cash. Even for those who have a bank account in their name for private purposes, for instance, they don’t use it to do any of the business transactions. So, whether even with any account exists so formally, they are banked right there. They have a bank form for their clients. They’re currently not using that to run their business transactions at all.  The bank also doesn’t have a chance to ever see any of the business activity that go on in their accounts, try to analyze that for credit scoring purposes, for instance.

Ana Singh: How can stakeholders expand and deepen financial inclusion for Moroccan business entrepreneurs?  

Benedikt Wahler:  Well, if you’re a bank, the first realization is, of course, that your current SME banking as usual isn’t working. It’s not working for men and it’s not working for women. And one of the ways in which it should change that it starts working for women is to take off the focus, the almost exclusive focus on banking entrepreneurs that is on credit. 

Credit is something that is very important for the growth and development of their businesses. But it’s not something that’s top of mind. Actually, when we asked for the financial priorities of the entrepreneurs and again here the results for men and women were strikingly similar. Formal ones, who are really focused on their business, 92 percent and 93 percent came back with saying my top financial priority is protecting my family against emergencies. And only about 50 percent were answering that it’s important or very important to get a loan.

But currently, that’s what I said in banking and a lot of countries and also in Morocco focuses on. So, the way how to bring these clients who are currently not banking at all are very disengaged with financial services is to go after those things that really matter to them. And for entrepreneurs, that’s actually the way how they think about their finances. Private financial sphere and professional financial sphere are very closely linked. And if you want as a bank to more proactively engage women and have them understand that you are important part as a bank in how to run their lives and businesses, then credit is not the right way in. But all of these other things that start with putting some money aside every day, taking out some risk protection by insurance and helping her make her payments, helping solve the everyday business of her life will get her engaged will mean that money flows through the account.

You can collect data and then on that basis, you and that client can really start engaging the discussion around how a loan could help her expand what she has been working at so passionately.