One billion women are entirely shut out of the formal financial system, roughly another billion are woefully underserved by that system, and another 30 million women-led businesses are without sufficient access to capital to flourish: these are the stark numbers behind the current state of women’s financial inclusion. Whether you see these statistics—and the women they represent—as an unmet economic development challenge, an untapped source of inclusive economic growth, or an exciting commercial opportunity, enabling women’s access to the full suite of financial services is a daunting challenge. But it is also an achievable one.
Like any truly worthwhile goal, full women’s financial inclusion will only be realized by creating a rallying point for a broad set of stakeholders. The changes that are needed and the obstacles that stand in the way of that change are too complex and intertwined for any single actor to tackle alone. Governments will have to shape policies that are solutions-driven and address the differences in women’s access to and usage of both technology and financial services. Financial service providers will need to take off the blinders that keep them from seeing women as valued clients while they persist in offering products that are designed for men’s needs and preferences by default. That goes for “old-line” financial institutions like banks and insurance companies, but it applies equally to mobile money providers and fintech companies, which are already baking gender bias into their decision-making algorithms. And now that digital technology and the data made available through the cell phone have completely changed the playing field, no woman need ever again be considered too remote or too invisible to be served affordably. The caveat, of course, is whether telecom companies and mobile money providers have the will to get phones into women’s hands.
Interestingly, systemic change that can often take decades has been implemented with great speed out of the necessity created by a pandemic. The COVID-19 crisis has provided an unexpected nudge (or perhaps more of a kick in the pants) for many of the players that can be most instrumental in driving the necessary change. This is certainly the case for digitization, where governments have been leading the way with digital COVID-19 relief payments. Some agencies are motivated by the efficiency and transparency that digitization offers, some by the ability to track funds and spending patterns among recipients, and some by the financial inclusion impacts. The case for digital payments was strong before the COVID-19 outbreak, and after social distancing became a universal priority, contactless payments were truly in everyone’s interest.
India’s COVID-19 relief program provides a particularly enlightening comprehensive case study for the ways in which crisis conditions can be used to accelerate change. India leveraged two important elements of its existing financial infrastructure to provide timely pandemic relief to millions. The first element was a national unique identification number called the Aadhaar number, which can be used to meet KYC requirements to open a bank account; today over 95 percent of the Indian population have an Aadhaar number (obtaining one is voluntary). The Aadhaar was combined with a basic, no-frills bank account, the Jan Dhan account, explicitly designed to serve previously unbanked low-income Indians. When the pandemic first broke out, the Indian government specifically targeted relief payments to low-income women. With digital identification already in place, the government was able to distribute three months of digital cash transfers into the Jan Dhan accounts of approximately 200 million low-income women within one week. Twenty-five million new accounts were opened, primarily by women, to receive these government payments, although a further inclusion opportunity still remains with the roughly 176 million poor women who do not yet have a Jan Dhan account. While owning a bank account represents only one step in the process toward financial inclusion, the speed with which the Indian government was able to deploy relief payments on a large scale, through women, because of their prior investments in the “architecture” of financial inclusion is impressive.
All of us can contribute to building a more inclusive financial system, and we can start by demanding more of the financial institutions to which we entrust our money. If achieving gender equality is important to you, you can insist that your bank, your insurer, or your money manager does its part—or take your business elsewhere. Here’s a sample of what each player in this grand, interdependent global coalition can do to make women’s financial inclusion not just an aspiration but a reality.
So many of the barriers to women’s financial inclusion are systemic and will require a rethinking of the fundamental elements of a country’s financial infrastructure in order to see significant results. These changes cannot be addressed, let alone implemented, without the active engagement of policymakers and regulators. The first step they must take is to acknowledge that no policy is truly gender neutral; in practice, policy changes that are dubbed “neutral” typically default to the male perspective. When weighing the costs and benefits of any policy initiative it is essential to measure the likely consequences—intended and otherwise—for both men and women. Prioritizing policy changes that promote women’s financial inclusion can have a positive impact on the reach and effectiveness of a much broader range of economic objectives as well. All too often governments sideline financial inclusion as an instrument to achieve social or developmental goals without recognizing its broader macroeconomic potential. Yes, building an inclusive financial system that brings more women into the formal economy can lead to greater economic growth, reduce income inequality, and foster financial stability. But it can also improve the effectiveness of traditional macroeconomic or fiscal policy tools. Let’s say that a country’s central bank wants to stimulate the economy by lowering interest rates. It stands to reason that the more people operating in the formal financial system that can be touched by those rate changes, the more successful they’ll be as a stimulus.
Here are some things regulators and policymakers can do to promote women’s financial inclusion.
While global demand-side surveys such as the Global Findex database are an invaluable resource, national-level surveys can provide policymakers with a more nuanced picture of the state of women’s financial inclusion in their own countries. On the supply side, regulators should require financial service providers to report on the kinds of products being used and by whom and how frequently; the channels used (e.g., ATMs, branch, cell phone); and the effectiveness of different types of providers (e.g., banks, microfinance institutions, mobile money providers). All these data allow policymakers to design informed and effective policy interventions. This information is essential to develop baselines and then to set and monitor targets. Banks can use the data to improve their product offerings to women. Such a change in regulatory reporting requirements will undoubtedly require a combination of political will and changes to systems, processes, and ways of thinking. But there really is no other way to make informed financial inclusion policy decisions without a clear understanding of the differences in women’s and men’s financial behavior.
Identification and mobile phone ownership, increasingly the passport to financial inclusion, are closely linked; the lack of appropriate identification documents exacerbates and reinforces the gender gap in mobile phone ownership. SIM card registration that requires government-recognized identification documents is mandatory in over 150 countries. According to the Global Findex, the most popular use of identification documents in sub-Saharan Africa is to obtain a SIM card or mobile phone service, but women are 9 percent less likely than men to have the necessary documents.
Financial service providers across the board—from traditional legacy providers such as banks and insurers to newcomers such as fintechs and mobile money providers—have failed to optimize the commercial opportunity in serving women clients. In its latest Women in Financial Services report, Oliver Wyman refers to women as “the single largest underserved group of customers in financial services . . . [whose] needs consistently are not being met.” The report then goes on to identify at least a $700 billion revenue opportunity that financial service providers are missing each year by not serving women customers. To put that figure into context, the money that Oliver Wyman estimates banks, insurers, and asset managers are leaving on the table represents 5–20 percent of total revenue for each of those sectors of the industry and far exceeds the annual revenue of the world’s leading financial institutions. The world’s largest bank, China’s Industrial & Commercial Bank, had 2019 revenues of $123.6 billion; JP Morgan Chase was in the number two position at $114.6 billion. As financial service providers respond to technological disruption and the economic fallout of the pandemic, this overlooked market opportunity is long overdue for serious consideration.
Though low-income women constitute only a portion of that underserved customer group, they represent a loyal client base with an increasingly influential role as buyers for themselves and other members of their households. Many of the adaptations and new ways of thinking that financial service providers embrace in order to serve more affluent women will be equally applicable to women in other income segments. In particular, acknowledging that the design, marketing, and delivery of financial products and services is not gender neutral will open up possibilities to serve all women regardless of their socioeconomic status. Applying a “gender lens” will not only result in products that do not simply default to men’s preferences, it can lead to better products for men as well.
Here are some things financial service providers, whether cutting-edge fintechs or traditional banks and insurance companies, can do to realize the commercial potential of women’s financial inclusion:
Organizations that have built successful, trusted platforms for women-led businesses and women retail customers have done so by offering both financial and non-financial services. For instance, women generally want more information than men do and prefer taking more time to decide on significant financial actions. And, across the socioeconomic spectrum, women express less experience, confidence and knowledge than men in making financial decisions. Women are also more likely to have limited access to networks than men, but also tend to engage more deeply than men with those relationships. Paying attention to these types of customer insights, rather than making assumptions about women’s preferences or, even worse, slapping a pink “wrapper” on a man’s product, can lead financial service providers to rethink the design and delivery of financial service.
To reinforce the understanding of women-led businesses as a distinct segment with a well-defined value proposition requires buy-in from the board and executive management and clear communication and training for employees about the importance of this customer segment and how best to serve them. The most successful women’s banking programs also institute clear accountability to a new or existing business unit and KPIs to track both individual and institutional performance.
Building an ongoing connection with a financial institution, particularly with an individual relationship manager, appears to be effective in coaxing both reluctant men and women borrowers to take that first step and apply for a loan. And if that relationship is established long before a discussion of credit is even on the table, the financial institution is able to learn more about the enterprise over time, enhancing the chances that an eventual loan application will be approved. Research indicates that men entrepreneurs are more likely than women to build that banking relationship early on by seeking banking services other than credit. For their part, women entrepreneurs can reward those financial service providers who are ready to build those relationships, rather than assuming that a loan won’t be granted and self-selecting out of this opportunity for business growth.
Much of the recent gains in financial inclusion are directly attributable to cell-phone access and the proliferation of financial services delivered through mobile phones and the internet. Conversely, the persistence of the gender gap in access to finance is exacerbated by inequality in access to smartphones. The acceleration of digital financial services in response to the COVID-19 crisis, particularly through digital government relief payments, offers an unprecedented opportunity to expand access to cell phones.
The constant refrain from nearly everyone associated with women’s financial inclusion is the need for more data, better data, and a deeper understanding of women’s financial lives. Researchers have a vital role to play in expanding the evidence base for both the policy and business case for women’s financial inclusion, and the impact of expanding women’s access to finance. There are two urgent contributions that researchers can make to the fight for women’s financial inclusion:
In fact, breaking out the effects of a research experiment or a government program by gender should extend beyond the household as well. A team at the Brookings Institution recently performed a meta-analysis of studies undertaken to assess the effectiveness of a wide range of entrepreneurship programs (e.g., training, financing, mentorship, technical assistance). The authors found that only a very small subset of the prior research had either addressed women entrepreneurs as a target group or disaggregated the programs’ results by gender, leading to the lukewarm conclusion that programs to encourage entrepreneurship had little or no effect on women. The Brookings team expanded the number of programs reviewed, including only those where women entrepreneurs had been engaged, and the effects of the intervention were broken out by gender. This more nuanced analysis revealed training plus one of the other interventions was always more effective for women than just training alone. This more “gendered” review also clearly pointed to the impact that women’s unpaid care obligations had on the success of any entrepreneurial support. Even entrepreneurship programs that offered multiple forms of support would have limited effect on the growth of a woman’s business if they did not also address her child care responsibilities.
The extra care and discretion required for this important research should not, however, be a barrier to further work. It is imperative that we gain a complete understanding of the potential that greater access to finance has to expand or narrow a woman’s physical and emotional autonomy. To realize all of the benefits of women’s financial inclusion, we must fully comprehend how we can first, do no harm. This is a research topic worthy of serious time and attention.
A well-known Harvard Business Review article on the “female economy” notes that “financial services wins the prize as the industry least sympathetic to women and one in which companies stand to gain the most if they can change their approach.” With 84 percent of US consumers expecting companies to stand up for women’s rights, users of financial services—women themselves, as well as male allies who recognize the importance of equality of access to finance—can use their clout to reward those financial service providers that are more inclusive. It’s easy enough to check whether a bank or insurance company has a gender-diverse leadership, but with just a little more research, the attentive consumer can determine whether a financial service provider is genuinely supportive of women as both clients and leaders. One source for this information is the Bloomberg Gender Equality Index, which measures the gender equality performance of 325 companies around the world, including nearly all global banks and insurers as well as a significant number of local providers in both developed and emerging economies. The Index assesses performance across five dimensions: female leadership and talent pipeline, equal pay and gender pay parity, inclusive culture, sexual harassment policies, and pro-women brand.
Likewise, a woman should exercise her right to work with an investment adviser who treats her with dignity and answers as many questions as she wants to ask. Globally, women control $11.2 trillion in investable assets ($5 trillion in the US alone). Yet wealth management firms seldom tailor their products and services to meet women’s needs and investor profiles. In fact, 67 percent of the more than six thousand women interviewed by Coqual in the US, UK, China, Hong Kong, India, and Singapore reported being misunderstood by their financial advisers. And on the occasions when wealth advisers do consider women, they tend to see them as either widows or wives, ignoring the fact that 62 percent of women with a net worth of $500,000 or more have built their own wealth.
Research also indicates that women want their values reflected in their investments, so wealth management firms might also consider encouraging their wealth managers to adopt a “gender lens” investment strategy. A “gender lens” or “gender-smart” approach incorporates gender into investment analysis to uncover missed opportunities; investments typically include companies that are led by women or that offer products and services that are inclusive of and empowering to women. To date, approximately $8 billion has been deployed using a gender lens in both public and private capital markets. There are over fifty publicly traded gender lens investment funds, including Fidelity’s Women’s Leadership Fund, an equity mutual fund that invests in publicly listed companies that prioritize and advance women’s leadership.
In addition, to being a more informed and active consumer of financial services, there are a few things that everyone can do to work toward a more inclusive financial system:
Equality of access to financial services is not a cure-all. Women’s financial inclusion will not, on its own, fix all the economic and social problems facing the world today. But just for a moment, imagine what might be possible if all stakeholders—regulators, financial service providers, researchers, consumers—not only did their own part but worked collaboratively toward the goal of financial inclusion. Let’s start with the most fundamental element of inclusion, a safe place to save in a savings account. And since we’re imagining, let’s make sure that this account can be accessed through a smartphone. If a government were to make it a priority for each of its citizens to have a savings account, ensuring that everyone had an individual identification and a cell phone in their own names, and then if that government corralled the nation’s banks and cell-phone providers into compliance, the country would see an increase in net savings that could be used for productive investment (think infrastructure) and consumption. All the people gaining access to those savings products and their families would be more resilient in the face of shocks (think pandemics and global warming). The women, in particular, would likely invest in the health and education of their family members, which in turn would lead to higher economic growth because this well-educated population would be able take greater advantage of technological changes. And we know that educating girls pays off in numerous other ways over the course of their lives and their own children’s lives. If this far-sighted country made a special effort to ensure that farmers opened savings accounts, they would be able to invest more and increase crop yields, which would improve food security in that country as well. As our hypothetical country’s financial system became more robust and inclusive, there’s a strong chance that its poorest citizens would see their incomes grow at a faster pace than the country’s average. And that means you’ve taken a big step toward reducing income inequality.
This is just an illustration of the potential behind universal access to a digital savings account. We haven’t even looked at what additional crop insurance might do for farmers or how health insurance might insulate families from unexpected loss of income. We haven’t touched the job creation and economic growth that would be generated if regulators and banks got serious about closing the financing gap for MSMEs. On their own, the smartphone and identification documents could drive tremendous progress, but when harnessed to a financial account they could do even more. In the end, that is the greatest promise of financial inclusion. Financial services alone may not solve the world’s problems, but they ennoble and empower women and men, girls and boys, by putting the tools to improve their lives into their own hands.