The potential of digital loans to reduce gender disparities in financial inclusion among female health entrepreneurs in Kenya

In Sub-Saharan Africa, female entrepreneurs are well represented in healthcare but struggle to access financial services. Digital financing technologies could help close this gap. This study assessed the readiness, perspectives and gender disparities in (digital) loan characteristics among Kenyan health Small and Medium Enterprises (SMEs). We interviewed 24 and surveyed 410 health SME owners and retrieved loan-history data for 850 health SMEs. Appropriate parametric and non-parametric tests were used to compare key variables across groups, focusing on gender disparities. In addition, multiple regression analyses were employed to explore how different factors, particularly gender, influence uptake and characteristics of traditional and digital loans taken. In-depth interviews (IDIs) identified low trust in digital lenders, while survey results indicated a strong demand for loans, regardless of gender. SME owners willing to take risks (OR = 2.32, p = 0.052), with monthly financial needs (OR = 4.22, p = 0.001), and positive perceptions of digital loans (OR = 3.14, p = 0.004) were more likely to take a digital loan, compared to the low risk takers, those who never or rarely experience acute financial needs, and those with negative perception of digital loans, respectively. Loan-history data showed a gender difference in the initial traditional loan amount, with women-owned businesses receiving an estimated 47.7% less than the male counterparts (p = 0.022) however, this gap disappeared for digital loans. Over 50% of women-led businesses using digital loans experienced significant growth, suggesting increased digital revenues linked to these loans. This study underscores the financing gap faced by Kenyan health SMEs and demonstrates the potential of digital loans to improve financial inclusion, particularly for female entrepreneurs. It addresses a gap in the literature by providing new evidence on how digital financial products can reduce gender-based barriers in the health sector. Low trust in digital lenders, especially among non-users, highlights the need for improved information and transparency to foster confidence in these tools.