At about $100 billion, the financing gap for micro, small, and medium enterprises (MSMEs) in Latin America and the Caribbean is the second largest in the world, according to the International Finance Corporation. The unmet demand for credit is even deeper for women-led MSMEs, who face systemic barriers in accessing credit. Women-led businesses are more likely to be denied loans than their male counterparts, and when approved, the terms are typically worse: smaller amounts, shorter tenors, and higher interest rates and collateral requirements.
However, banks have a compelling business case to reach more women entrepreneurs. By underserving women, they are leaving money on the table. To address this gap, IDB Invest works with financial institutions across the region to expand financing opportunities for women. From 2016-2024, through 44 operations in 20 countries, IDB Invest helped over 1.4 million women-led MSMEs access the credit they needed to grow. A key lesson from this experience is the importance of selecting partners with a strong strategic focus and value proposition for reaching women-led MSMEs, or those willing to build that capacity.
A case in point is Banco ADOPEM in the Dominican Republic. In 2024, IDB Invest supported the bank in issuing an outcome-based social bond in local currency, which includes financial incentives for meeting annual portfolio growth targets for women-led MSMEs provided by the Women Entrepreneurs Finance Initiative (We-Fi). This first-of-a-kind achievement for the bank and the country builds on a long track record of collaboration with the IDB Group.
From NGO to regulated bank with IDB Lab Support
Founded as a non-governmental organization (NGO) focused on microcredit for entrepreneurial women, Banco ADOPEM transitioned into a regulated bank in 2004 with support from IDB Lab. This transformation strengthened its business model, opened new funding channels, and accelerated its growth. Today, it is one of the Dominican Republic’s leading microfinance institutions, serving 509,848 clients as of 2024—63 percent of whom are women.
Over the years, IDB Lab has supported several grant and loan projects that helped ADOPEM innovate and tailor financial products, services, and training for different groups, including women microfranchisees and rural producers. Most recently, with IDB Lab’s backing, the bank launched the Crece con ADOPEM platform. This digital platform equips women entrepreneurs with skills to expand their markets, send and receive electronic payments, and access financing for digital tools and working capital. As of 2024, about 2,500 women entrepreneurs were enrolled in the platform, 800 were actively using it for digital payments, and 1,200 had incorporated digital technologies into their businesses.
Lending to women is good business
Banco ADOPEM’s mission to empower women through economic opportunity has remained constant throughout its evolution. The data shows that this ingrained mission is also profitable.
In 2024, IDB Invest analyzed over 170,000 loans issued by the bank to both male and female clients. The findings were notable: among otherwise similar clients, women applied for and were approved for larger loans than men. This contrasts with trends IDB Invest has observed with other banks in the region, where women typically receive significantly smaller loans, limiting their growth potential.
In addition, interest rates and repayment behavior were identical for both men and women. Consequently, ADOPEM’s administrative, provisioning, and loan recovery costs were the same, but the interest income from women’s loans was higher due to their higher average loan size. In short, the loan portfolio for women offers higher returns with lower risk.
The IDB Group will continue working with partners such as Banco ADOPEM to reduce the financing gap for women-led MSMEs and MSMEs more broadly to untap their growth potential.
Leave a Reply