Access to affordable credit is one of the biggest barriers facing women entrepreneurs in low- and middle-income countries. Without financing, many women-led businesses cannot invest in inventory, equipment, employees, or new market opportunities. Yet only 21 percent of women access loans through formal financial institutions or mobile banking, compared with 25 percent of men, contributing to an estimated USD 1.9 trillion financing gap for women entrepreneurs. 

But access alone is not enough. Credit products must also fit how women run businesses, balance household responsibilities, and make financial decisions. What kinds of lending products work best? How can financial institutions better serve women entrepreneurs?

A 2024 IPA evidence synthesis identifies what we know—and where important evidence gaps remain. To help fill those gaps, IPA has funded nine new research projects that will test innovative approaches to expanding women's access to effective credit. 

Lender Bias: Documented, but Under-Addressed

Evidence shows that removing bias in the loan approval process is essential to enable more women to access credit. Despite having similar income and education levels as men, women struggle to access credit due to traditional financial institutions' reliance on credit history, financial statements, and legal status, which often overlook gender-specific factors. However, we still know relatively little about which interventions reduce bias in lending decisions. 

In Kenya, IPA, in partnership with the research team, is taking this question directly to the source — testing whether loan officers systematically evaluate applications differently based on gender, and whether adding objective data to the process can close that gap. The study will also examine whether low-cost digital tools can reduce concerns about borrowing and repayment that discourage some women from using formal credit.

Asset-Based and Alternatives to Traditional Collateral: Promise, with Conditions

Standard microfinance has produced limited results for women, partly because loan products are often designed without their specific circumstances in mind. Many lenders require borrowers to pledge assets as collateral. Because women are less likely to own land or other productive assets, they often face greater barriers to qualifying for loans. Asset-based financing models—or products that finance productive assets directly—may help overcome these barriers and invest more effectively. However, more research is needed to understand when asset-based financing is most effective, which types of assets matter most, and whether impacts vary by business size, entrepreneurial ability, or other income-generating activities within the household.

IPA is testing two approaches that push on this question from different angles. In Pakistan, researchers are partnering with the National Rural Support Program and Rural Community Development Programs to finance rickshaws for women entering the transport sector. The study will test whether linking repayment to business performance improves business outcomes and loan repayment. In India, researchers and the Dharma Life Foundation are testing whether providing inventory on credit, rather than cash, keeps funds in the business and out of competing household demands, and whether pairing that credit with marketing support amplifies the effect. 

Loan Size and Repayment Terms: Targeting the Right Borrower

Repayment schedules, loan size, and borrower experience are all factors that influence the effectiveness of credit products for women. We know that strict repayment schedules can discourage experienced women entrepreneurs from investing in riskier opportunities with higher financial returns. Repayment terms that better match business cash flow may help experienced entrepreneurs take more productive risks and improve returns. Additionally, women also tend to receive smaller loans and face higher interest rates than men. But we know little about formal alternatives and how well they compete with informal lending practices that meet women’s needs.

Two studies in India are exploring how tailoring innovative credit products to borrowers' needs and experience level impacts women’s business outcomes. In the first study, researchers, J-PAL South Asia, and Sanghamithra Rural Financial Services plan to evaluate Tatkal-M. This is a loan product designed specifically for Tamil Nadu market vendors that offers short repayment periods at lower interest rates comparable to microfinance. This study asks whether formal alternatives can effectively compete with informal lenders and whether male and female vendors use such products differently. In the second study, Sanghamithra Rural Financial Services and the research team aim to test TVK graduation loans, which offer experienced microfinance borrowers a loan two to three times larger than standard products with flexible repayment terms, and examine whether giving high-potential borrowers more room to maneuver unlocks growth that tighter products hold back. 

Digital Channels: Expanding Access, with Caveats

Digital loan disbursement and repayment can improve women's financial privacy and control over resources by directing funds into accounts they manage themselves. This can strengthen business outcomes and financial resilience. That said, digital tools do not uniformly benefit all women, and whether they consistently expand access or create new exclusions for harder-to-reach borrowers remains an open question. 

IPA is testing two studies in Tanzania that ask how far digital tools can actually go. In the first study, researchers from the University of Washington and BRAC Tanzania plan to test whether the way a loan is repaid affects how women use it. By comparing mobile money repayment to cash, the evaluation tests whether the privacy and control that come with a digital account can improve women's financial decision-making and control over resources. In the second study, researchers in partnership with Viamo will focus on an earlier step in the credit journey, tackling the financial literacy and confidence of borrowers. The study tests whether voice-based learning modules and a generative AI chatbot delivered in local languages can build the financial literacy and confidence that women need to seek out and use credit in the first place.

Beyond Product Design: Making Credit More Effective for Women Entrepreneurs

Designing better loan products is only part of the solution. Women entrepreneurs also need financial systems that can sustainably provide affordable credit, alongside complementary support that helps them use financing effectively.  Our new projects aim to examine both questions. Across nine countries in Africa and South Asia, researchers are examining how microfinance institutions and commercial banks access wholesale debt markets and whether risk-sharing mechanisms can help them scale affordable credit to women without sacrificing financial sustainability. At the entrepreneur level, researchers, along with the Dharmalife Foundation, will test in rural India whether credit is more effective when paired with market development or product development support, helping identify what kinds of complementary support may enable women micro-entrepreneurs to translate access to finance into business growth, improved financial health, and economic empowerment.

Stay tuned

IPA's nine funded projects span India, Kenya, Pakistan, and Tanzania, as well as a nine-country wholesale financing landscape study across Africa and South Asia.

Together, these projects represent one of IPA's largest coordinated efforts to generate evidence on how credit can better serve women entrepreneurs. Findings will be released through 2027 and will help inform future lending policies and products across Africa and South Asia. To learn more, read the full evidence synthesis on women's access to credit and explore all nine newly funded research projects.