Dominican Republic banks are channeling the bulk of credit to micro, small, and medium-sized enterprises (MSMEs) into commerce and consumer services, while sectors with higher potential for productivity gains – industry, logistics, agriculture, energy, and other productive services – receive a comparatively smaller share of financing. This dynamic, revealed by data collected through the We Finance Code initiative coordinated by the Dominican Association of Multiple Banks (ABA), highlights both the current state of MSME financing and opportunities for more strategically directed investment.
According to the ABA data, , 52.1% of approved credit for MSMEs is concentrated in commerce and consumer services. In contrast, the industrial and logistics sectors, along with agriculture, energy, and other productive services, collectively account for only 16.1% and 14.2% of the financing, respectively. This suggests that while credit availability supports existing economic activity, there’s room to bolster sectors capable of generating greater value-added and driving productivity improvements.
The analysis also reveals significant disparities in the average loan amounts disbursed to different types of MSMEs. Institutional companies receive the largest average amounts, accounting for 78.6% of the total. Companies with a mixed structure follow at 14.7%, while those led by men receive 5.4%. Notably, businesses led by women access the smallest average loan amounts, representing just 1.7% of the total.
The ABA emphasizes that this distribution doesn’t necessarily indicate barriers to access for women-led businesses, but rather reflects structural differences in the depth and scale of financing available to them. The association stated in a press release that the gender financing gap is not simply a matter of access, but one rooted in deeper systemic issues.
“The Dominican experience confirms that the financial inclusion of women cannot be addressed as an isolated effort or a short-term policy,” the ABA stated. “It’s a structural agenda for economic development that requires a national vision, institutional stability, and high levels of articulation between the public sector, the financial system, the productive sector, and international cooperation organizations.”
The We Finance Code initiative, adopted in the Dominican Republic, has garnered recognition both regionally and internationally for its early implementation and level of execution. The ABA highlighted the success of the WE Finance Dashboard, developed with technical and methodological support from BID Invest and BID Lab, as a tool for gathering data to identify solutions for closing the financing gap for women entrepreneurs.
The concentration of credit in commerce and consumer services is a common pattern in developing economies, where these sectors often represent a significant portion of economic activity and are perceived as lower risk by lenders. However, prioritizing financing for higher-value-added sectors like industry and agriculture is crucial for long-term economic diversification and sustainable growth. These sectors typically require larger, longer-term investments, which may be less attractive to banks focused on short-term profitability.
The disparity in loan amounts received by women-led businesses is a persistent challenge globally. While access to finance is often cited as a primary obstacle, the ABA’s analysis points to a more nuanced issue: women-owned businesses may be systematically smaller in scale and operate in sectors with lower revenue potential, resulting in smaller loan requests and approvals. Addressing this requires a multi-faceted approach, including targeted support programs, mentorship initiatives, and policies that promote gender equality in entrepreneurship.
The success of the We Finance Code and the WE Finance Dashboard in the Dominican Republic provides a valuable model for other countries seeking to improve MSME financing and promote gender equality. The data-driven approach, coupled with collaboration between the public and private sectors, is essential for identifying and addressing the specific challenges faced by MSMEs and women entrepreneurs. The initiative’s focus on data collection and analysis is particularly noteworthy, as it allows for a more informed and targeted allocation of resources.
Looking ahead, the Dominican Republic’s banking sector will likely need to continue its efforts to diversify its lending portfolio and prioritize financing for sectors with higher growth potential. This may require innovative financial products, risk-sharing mechanisms, and a greater willingness to invest in long-term projects. Addressing the gender financing gap will require a sustained commitment to promoting women’s entrepreneurship and ensuring that women-led businesses have equal access to the resources they need to thrive.
The ABA’s findings underscore the importance of a holistic approach to MSME financing, one that considers not only access to credit but also the structural factors that influence the size, scale, and sector of businesses. By addressing these underlying issues, the Dominican Republic can unlock the full potential of its MSME sector and drive sustainable economic development.
