Nang Kwak, a dominant figure in Thai folklore, is a female deity considered to be a good-luck charm by merchants in Thailand. Just like Nang Kwak, women in Thailand play a key role in Thai businesses, accounting for over 40% of small and medium-sized enterprises (SMEs).
In Thailand, women score well in most aspects of business and corporate leadership, revealed a recent survey by Grant Thornton International. More than 33% of top management roles in Thai companies are held by women, which is higher than the Asean rate (21%) and more than double the global average (15%).
This comes as no surprise, given that females in Thailand tend to excel in business. Many family businesses in the country are run by women and the country ranks first for enrolment of females in higher education. Consequently, a combination of cultural exposure, opportunities and education gives women a competitive edge in business, and shows that harnessing the potential of Thai women can unlock the country's growth prospects.
However, despite women's empowerment in the country's boardrooms and corporate headquarters, the finance gap for women-owned SMEs (WSMEs) is estimated to be US$25 billion (760.8 billion baht), accounting for 61% of the overall micro and SME finance gap in Thailand. Against this backdrop, expanded credit lines to WSMEs are key to enabling them to upgrade, innovate, and expand to higher-value sectors.
According to the World Bank Group's Enterprise Survey, Thai SMEs, particularly WSMEs, lack access to bank loans for working capital and investment financing compared to other emerging markets. Only 16% of Thai firms have a bank loan and a mere 15% use banks to finance investments.
Thailand's economic growth has been impressive over the past three decades, but it has slowed compared with the pace of the early 1990s. To transform into an advanced economy by 2027, the country needs to produce a more resilient growth model -- one that will ensure increased participation of women in the nation's economy. For any country, tapping into the full potential of both women and men is key to a greater pool of talent, stronger performance and productivity, higher profits, better reputation and increased innovation.
While the government of Thailand has strategically prioritised financial inclusion for SMEs, there is a pressing need for specific programmes that target women entrepreneurs. This is because global findings show that WSMEs face specific challenges in obtaining financing, for example higher collateral requirements and loan rejection rates. Women's participation in the global labour market remains nearly 27 percentage points lower than for men. Yet, if women were to participate at the same rate as men, global economic output could increase by up to $28 trillion by 2025.
In order to address these challenges and leverage this untapped potential, banks in Thailand need to think beyond traditional banking methods and find new delivery channels that specifically cater to the needs of women entrepreneurs. For example, digital innovations can help provide affordable financial services to the underserved WSMEs. With the rapid pace of digital technology, ICT (information and communications technology) and fintech solutions can become enablers to help WSMEs overcome typical barriers and become more competitive.
Further, as IFC studies in Vietnam and Cambodia show, WSMEs are likely to be profitable clients with lower default rates than their male counterparts. Drawing lessons from the studies, banks that identify and serve this potential market of women-owned SMEs can enjoy a low-risk business opportunity by providing financial and non-financial services to this underserved segment.
This is relevant because the benefits of women's access to finance go well beyond business. Research shows that women entrepreneurs are more likely than men to reinvest their earnings in health and education for families, to create new jobs and services for communities, and to help local economies.
In this context, investing in women is not a social and moral imperative, but it makes good business sense. A growing body of global evidence shows that factoring in gender diversity helps companies improve performance, drive growth, attract investments and gain a competitive advantage.
Given the scale of investment needed to address the unmet demand from WSMEs in Thailand, it is essential to tap into both private and public sector resources. Subsequently, a judicious mix of public and private approaches can introduce innovative solutions and leverage Thai capital markets.
The Women Entrepreneurs Bonds issued today by one of Thailand's largest universal banks, Bank of Ayudhya (locally known as Krungsri), is an example of this innovative approach. Leveraging the financial innovation of a gender bond to augment access to finance for women entrepreneurs in Thailand, Krungsri raised up to $220 million. IFC, a member of the World Bank Group, provided up to $150 million as anchor investment and helped mobilise an additional $70 million from DEG (Deutsche Investitions und Entwicklungsgesellschaft).
The proceeds from this first private-sector gender bond issuance in the Asia Pacific will boost lending to WSMEs in the country. The initiative also aims to improve the quality of financial and non-financial products as well as services tailored to meet the specific challenges of WSMEs. By leveraging the capital markets, the bonds will also introduce an innovative funding mechanism to increase private sector funding for WSMEs and demonstrate the financial viability of investing in women entrepreneurs.
We need to remember, WSMEs are major drivers of economic growth and employment. As Thailand works towards an inclusive and sustainable growth trajectory, increased access to finance for WSMEs will help more women participate in the economy, unleashing fresh growth impetus in the country.
Vivek Pathak is IFC's Director for East Asia and the Pacific.