Women and access to finance: What is the role (if any) of trade policy?

25 October 2018
  • Discrimination based on gender or marital status is yet to be prohibited in areas relevant to women’s use of financial services in many countries.
  • Firm-level data show that women-owned and -run firms differ significantly from other firms in terms of their ability to access financial services, and the conditions upon which such services are supplied.
  • Although the direction of causation needs to be established by careful empirical work, the data suggest significant links between trade, finance, and gender. From a policy perspective, moving forward in this area requires a consideration of the ways in which exchanges of market access concessions in trade agreements is inherently gendered.


As in other areas of economic and social life, women face significant barriers in accessing financial services. The World Bank’s Women, Business, and The Law Database (WBL) shows that in all regions, a significant proportion of countries do not prohibit discrimination based on gender or marital status in access to credit (Figure 1).

The failure to prohibit this behaviour means that traditional cultural attitudes can be given full sway in a way that has historically been detrimental to women’s ability to start and run businesses that require credit, as most businesses do at some point in their development. Even as cultural norms change, the lack of a prohibition on discrimination means that credit providers can use gender or marital status as a noisy signal of repayment ability, and may therefore fail to extend credit to otherwise worthy businesses because they have a female owner or manager.

Figure 1. Percentage of countries that prohibit discrimination in access to credit, by World Bank region, latest available year

Source: WBL Database.

This finding is repeated in relation to other aspects of accessing financial services. For instance, women-owned and -run businesses are, in some regions, less likely to have overdraft or loan facilities, and when they do, they typically have to put forward more collateral relative to the underlying loan value than do other businesses. Although the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) was signed in 1979, discrimination against women in the economic sphere remains an issue in all countries, developed and developing, and is particularly apparent in the case of access to credit.

Given that trade agreements now often cover financial services, as well as investment, and that some are even including chapters on gender, what can we say about the role of trade at the intersection of gender and financial services?

First, firm-level evidence from the World Bank Enterprise Surveys (WBES) clearly shows that women-owned and -run firms that engage with the international economy through trade and investment tend to enjoy easier access to financial services than women-owned and -run firms that are exclusively focused on the domestic market. Figure 2 shows that among women-owned and -run firms, those that are internationally engaged typically have much lower collateral to loan value ratios than domestic firms, for example.

Figure 2. Average value of collateral relative to loan value, by global value chain involvement

Source: WBES.

Note: Averages apply sampling weights. Middle East and North Africa not shown due to an implausibly large value for domestic firms.

But does this finding mean that global connections are a positive force for women’s financial empowerment? Not yet. Descriptive statistics can only provide evidence of correlations in the data, not causal links. Untangling the causal effect of international integration on women’s ability to access financial services requires more research using fully specified econometric models. But intuitively, it seems likely that causation runs in both directions: firms with better access to finance find it easier to engage with the world economy, and then perhaps receive a boost to financial access from that international integration itself.

This analysis suggests that trade agreements can perhaps influence women’s ability to access financial services and grow their businesses, but not through their rule-making function: what matters is most likely the traditional business of exchanging market access concessions. In other words, trade negotiators should be identifying market segments and product types that have known positive implications for women, and working to free up access to those products and services at an early phase in trade agreement implementation.

The first reason for putting this argument forward is that state practice is far from encouraging in terms of the willingness of trade negotiators to engage concretely with laws and practices that discriminate against women.

For instance, the Canada-Chile FTA, which has a dedicated gender chapter, restates existing obligations, and uses general, hortatory language. True, it sets up institutional mechanisms for cooperation and perhaps raises the profile of the issue, but it is unclear that exchanging views at the governmental level in this way will necessarily lead to concrete improvements in anti-discrimination law and practice on the ground. The WBL database shows that women’s access to financial services depends on deep social policies like anti-discrimination laws, inheritance laws, and marital property regimes. There is no evidence to date that countries are willing to include these measures within the scope of trade agreements.

A second reason for taking this view is that gender equality and trade is fundamentally different from other areas of social policy where trade agreements have been used to some effect, such as labour and environmental standards. From a trade standpoint, there is an argument that unduly lax labour and environmental rules create an unfair competitive advantage for firms in one country, which in turn has spillover effects for other countries seeking to export in the same markets. It is impossible to make such an argument for gender discrimination: the economic evidence suggests that discrimination against women is an economic cost to the discriminating economy, not a gain. So it is unclear where there would be a cross-border spillover in goods or services markets that might create the rationale for a trade agreement.

Finally, a focus on market access makes clear that in goods markets and services markets alike, the decision of which sectors to liberalise on what schedule is necessarily gendered. Financial services is a good example. Women-owned and -run firms tend to be smaller than other firms, and therefore particularly interested in financial services like microfinance. However, financial services negotiations are typically focused on “core” sub-sectors like commercial banking and insurance. Coming up with market access concessions or aid for trade commitments that could boost access to microfinance would be a way of prioritising the needs of women-owned and -run small and medium-sized enterprises. Similarly, prioritising types of services where women are believed to have a particular interest, like digital products, would also be a way of using market access talks to promote gender equity.

While the links between trade, finance, and gender are complex and still to be uncovered in detail by future research, the basic data suggest that there is certainly a role for trade agreements in helping promote gender equity in this area. But it is not the role that is most typically at the forefront of discussions, namely the inclusion of gender-specific provisions and chapters among the rules sections of trade agreements. Rather, trade negotiators need to come back to the basic machinery of trade agreements, the mutual exchange of market access concessions, to identify priority financial services sub-sectors and service types for women-owned and -run businesses.


This article is derived from the paper Financial Services: The Trade and Gender Nexus authored by Ben Shepherd and commissioned by ICTSD. 

Ben Shepherd is Principal, Developing Trade Consultants.