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Christine Lagarde, managing director of the International Monetary Fund has said that women "often bear the brunt of poverty and limited access to economic opportunity, including unfavourable financial access." Thus, inequality is not just a moral issue—it is a macroeconomic issue. For growth to be more inclusive, finance has to be more inclusive.
There are many reasons why women form a disproportionately large group in the world's unbanked population. Gender inequalities in employment and earnings, cultural—and in some places, legal—restrictions denying them access to property and other assets, lack of acceptable collateral and a large representation in the informal and unpaid sector have led to a lack of women's participation in financial markets.
The assumption that merely owning a bank account equates to financial inclusion is debatable.
While more women now have accounts in formal financial institutions (61%), the assumption that merely owning a bank account equates to financial inclusion is debatable. This is because financial inclusion means effective access to financial services provided by formal institutions, such as credit, savings, payments and insurance. What all experts agree on unequivocally is that there are huge economic and social costs associated with excluding women from participating in the economy. Women's access to formal financial institutions not only improves equity and growth in household income, but boosts their economic position within and outside their households. More interestingly, women who earn, save and control income have been shown to make better decisions regarding their children's nutrition and education, generating considerable positive social impact.
A greater degree of financial illiteracy among women is often cited as the reason for their exclusion from financial markets. However, experiments by non-profit or community organisations have shown that, that is not the problem. Chetna Gala Sinha of Manndeshi, India's first rural co-operative bank for women, has blamed "poor solutions for the poor". Manndeshi's clients are poor, illiterate women, but that hasn't prevented them from learning basic arithmetic. In fact, most of them are small entrepreneurs with an innate sense of numeracy. And the women's self-help group movement in India has always had financial literacy high up on its agenda.
The bigger impediments to greater inclusion of women have been around curbs on their geographic mobility, ineffective customer management practices and faulty product design.
The bigger impediments to greater inclusion of women have been around curbs on their geographic mobility, ineffective customer management practices and faulty product design. Indeed, mainstream banking has never viewed the poor as a profitable customer segment, and cost structures built over time (including brick and mortar branches, KYC and identity norms, the need for literacy) have hindered innovation and creativity in catering to the financial needs of not only women but also the poor. Interestingly, most of the innovation in product design for the poor and women has come from micro-finance institutions, women's groups and co-operatives with a better understanding of products and forms of service delivery that might appeal to this segment. Manndeshi is a case in point.
Manndeshi pioneered doorstep banking for women customers using biometric smart cards long before ATMs became a common sight in rural India. They also have an all-woman staff as it not only helps customer acquisition and management, but also is a great risk-mitigating tool as women tend to confide in other women. Manndeshi also listens closely to its women customers to understand their family and enterprise cashflow needs better. This is how credit products to finance tarpaulin roofs in the summer and monsoon for vegetable vendors, and recurring deposits that mature just in time to enable purchase of shoes and umbrellas at the beginning of the school academic year, were created. This naturally morphed into the creation of a business school for women to train women in basic business skills such as cashflow inventory and management, product pricing and profitability and marketing. Interestingly, women wanted to protect their savings from demands made by other family members (mainly alcoholic husbands!) and didn't mind some opacity and lack of flexibility (in terms of minimum deposit period or caps on number of withdrawals) in product design. In Chetna's words, their women customers began to reinvent banking. Their latest innovation has been a daily doorstep cash-credit facility for women entrepreneurs.
[W]e will need deliberate action from policymakers, looking at whether existing policies incentivise or restrict women's participation in banking.
If we truly want to work towards more social and gender equity in financial inclusion, we will need deliberate action from policymakers, looking at whether existing policies incentivise or restrict women's participation in banking. Intermedia's research shows that 77 million women were added to the banking system in one year, i.e. 61% or 358 million women have bank accounts in 2015 versus 69% for men. One of the major levers for this has been the Pradhan Mantri Jan Dhan Yojana (PMJDY), though the programme was not specifically targeted at women. PMJDY required banks to open accounts for any Aadhar card-holder, thus lowering social barriers for access. Over 21 months, deposits in Jan Dhan accounts grew 118%, according to IndiaSpend. However, the level of engagement of these account-holders with the banking system, in the form of savings and credit, is yet to be determined.
For an economy to rapidly close the gender gap in financial inclusion, it is essential that we understand the eco-system within which women live and formulate strategies based on their economic and social realities. Some of these realities have been spelt earlier in this piece, but the role of data in understanding the market being served cannot be underestimated. Organisations like Manndeshi who have adopted a social mission within a for-profit objective are well-placed to essay a strong business case for serving the financial needs of women.