Celebrating International Women’s Day – Theo Hadjimichael, Chief Executive at Responsible Finance

Last week was International Women’s Day, and to celebrate we’ve been speaking to some of the many inspirational women leaders across the community finance sector.

In the fifth instalment of our series we hear from Theodora Hadjimichael, Chief Executive at Responsible Finance about how CDFIs are making a real and lasting difference to the financial resilience of women in financially vulnerable circumstances, and more about the range of barriers between those women and access to mainstream finance options.

I really love and believe in Responsible Finance’s mission. I have also been inspired by our member CDFIs on a daily basis over the past 10 years I have worked in the sector. I want to contribute to growing our sector’s impact in any way I can, so when the opportunity came up about 4 ½ years ago to take on the CEO role, it was an instant yes. The motivation for me is to be the most effective I can be in progressing our organisation and sector’s mission.

It’s important to increase female representation in leadership roles and especially the representation of women from non-traditional backgrounds and younger women too. To get younger women into leadership roles, employers in financial services have to be flexible about working hours and location.

The data shows that women still cover more of the caring roles in their household. I am biased because I am a parent myself, but I see it in a lot of my friends and colleagues: mothers and carers have incredible skills (patience, negotiation, empathy, efficiency, and clear communication to name a few) that any employer would be lucky to have in their leaders.

However employers can place barriers in front of women by making it more difficult for working mothers/carers to be in control. Two important actions that can break down these barriers are:

1) making part time leadership roles more widely available, and

2) give everyone a chance to tell their story and be open to taking a chance on people.

It reminds me of a quote I heard last year which stuck with me: ‘remember what it’s like not to know’. We are all so focused on our own work and priorities that we may forget what it’s like not to know all the information we’re steeped in or not to be in the positions we’re in.

Similarly, inspiring inclusion to me is about taking the regular time to think about what it’s like to be in someone else’s shoes – whether it’s a colleague, stakeholder or customers – and taking actions to include their voices and make sure they’re being treated fairly.

Our CDFI members work with consumers who are on low incomes (more than 50% have an income under £21,000/year) and are more likely to live in the most 35% deprived post codes in the country. CDFI customers are unlikely to be able to access mainstream credit. Our members say that the biggest barriers for women accessing finance are:

  • Poor or no credit score: Women’s credit scores can be impacted by: women are more likely than men to be victims of financial abuse from a partner; in addition when in a relationship, many times the bills and payments are in the partner’s name so women do not build up a track record.
  • Lack of personal wealth: First of all, gender wage disparity still exists so women are earning less than men. Second, women are more likely to have caring responsibilities (often unpaid) than men. That means they can’t take on full-time work and especially those on lower incomes/fewer qualifications are in low-paid part time work. Finally, the high cost of childcare means that women may choose not to work, or their savings are depleted.
  • Lack of financial confidence: Research from the FCA shows that women report feeling less confident and knowledgeable about finances. Women also feel more risk averse.  In reality how this plays out is that women may not know where to go for credit, and they may be put off by financial jargon.
  • Non-traditional sources or timings of income: We also hear that some lenders do not consider income from benefits or self-employment as it is lumpy and non-traditional. This can make the loan affordability look worse and exclude low income or self-employed women from finance.

These are the barriers for women; we know that people from ethnic minority backgrounds, those living in more deprived areas and individuals with disabilities also face additional barriers to accessing finance, so we can imagine how these issues are compounded if you are a woman from an ethnic minority background and/or have a disability and/or live in a less affluent area.

It is very frustrating to see how the impact of gender inequality permeates into so many aspects of life including women’s access to credit.

About 2 in 3 CDFI customers are women; CDFIs also serve a lot of single mothers. The majority of CDFI customers have poor or no credit scores when they apply, yet the majority repay their loan.

We are very proud of our sector’s reach and ability to get great customer outcomes. CDFIs do this in the following ways:

  • Their brands, marketing and communications are designed to be friendly and easy to engage with.
  • The service is personal: this means both talking to the customer which builds their confidence, and looking at an individual’s circumstances which can take into account sources of income such as benefits or self-employment income.
  • Flexible products: CDFIs give their customers control because it’s important that things like how they want to be contacted, repayment dates and whether they need a repayment holiday are accessible and manageable. 
  • They provide wrapround support based on the customer’s unique circumstances, like helping them access benefits income they’re not claiming.

All of this improves the financial wellbeing and independence of their customers. In particular for women it breaks down a lot of the barriers mentioned above by building confidence through a personal approach and practical financial skill-building and taking a tailored approach based on the individual’s circumstances.

More broadly, CDFIs saved their customers almost £30 million last year in interest repayments compared to high cost lenders, and identified an average of £5,000 extra income/year for their customers – both of these go a long way to increasing the disposable income for the women who are customers and are on extremely stretched budgets.

It’s also worth remembering that many women want to use entrepreneurship as a route to improve their lives and being more financially independent, for example by launching their own business. Access to finance for women entrepreneurs is also unequal and Responsible Finance represents CDFIs which lend to businesses, social enterprises and to people who want to start their own business, as well as our personal-lending CDFIs. I’ve heard powerful stories from women who have been able to make their entrepreneurial dreams come true thanks to support from our members. Some of these entrepreneurs had faced extraordinary challenges. 

‘It was such a relief to be treated like a human being instead of feeling judged and overcharged.’ – quote from a customer whose CDFI loan paid for driving lessons that enabled her get a higher paying job, and helped her improve her credit score.

The reality is that women in vulnerable circumstances often don’t have good options when they need a loan and that can feel terrible – especially if it’s something they need to help their kids or their family.

The CDFI sector’s approach: being empathic, considering individual circumstances, helping customers through flexible products and support to prove that they can pay, all has a demonstrated track record of improving the financial lives of women in vulnerable circumstances.

CDFIs’ goal is not to make a huge profit from selling customers loan after loan, but instead to use the journey to create a track record and eventually help the customer access lower cost credit. This can have a profound impact on a customer’s wider life through greater financial confidence, less mental and physical stress caused by money concerns and making it easier to interact with companies and shops on a day to day basis through being banked. The list goes on. Given that the majority of CDFI customers are women, CDFIs are making a meaningful contribution to women’s financial capability and wellbeing, particularly those who have the most to gain from being financially included.

I am always impressed by CDFIs’ drive to innovate solutions for their customers who are more vulnerable, difficult to serve or are declined – to make sure they get a good outcome. The wonderful thing about CDFIs is that they know their customers well and don’t take a one size fits all approach to them.

Looking at the impact of our wider membership, there are many social and community enterprises which exist to support vulnerable women which could only do what they are doing through CDFI support.

A lot of the barriers women face are from institutions taking a one size fits all approach based on a customer profile that is does not reflect the financial lives of women who are on lower incomes. To grow the CDFI sector so that we can help more women improve their lives we call on government, banks and the wider social sector to work with us to: drive more investment into CDFIs and raise awareness of the sector.

If CDFIs can help more women become financially included, then our whole society and economy can prosper.

I’ve never felt so good. I proved to myself I could do it – quote from a customer who repaid her CDFI loan on time after a history of missed payments with payday lenders.

We know from our latest segmentation research that women are at a greater risk of financial exclusion because of gender specific barriers, which can heighten cost-of-living pressures and weaken financial resilience – you can read more about these barriers to inclusion here.

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