Why FIs, policy makers, and local community leaders need to work together for women’s financial inclusion to become reality

For most parts of the developed world, basic financial services like checking accounts and access to loans are a rite of passage. But this is far from being table stakes in the least developed countries in the world, especially for women. Around three-quarters of a billion women in the world are excluded from the financial system, according to Mary Ellen Iskenderian, President & CEO, Women’s World Banking. Their exclusion means they are unable to build, save, and progress towards a financially secure and healthy future.

To combat the widespread exclusion of women from the financial system in the least developed countries in the world, Women's Digital Financial Inclusion Advocacy Hub has spearheaded the release of an open letter that sets out actionable targets which governments, financial service provides (FSPs) and local community groups can use to guide and inform their inclusion efforts. The signatories of the letter include Mary Ellen Iskenderian, President & CEO of Women’s World Banking, Henri Dommel, Practice Director at UNCDF (UN Capital Development Fund), Sian Hawkins, Director of External Affairs of Cherie Blair Foundation, and Carmen Correa, CEO of ProMujer.

The breadth of the problem and a case study

The issue of financial inclusion of women cannot be resolved by the isolated actions of any one stakeholder, such as a financial institution or a non-profit. In fact, improving women’s participation in the financial ecosystem requires a concerted effort on behalf of different parties, like governments, FIs, and local community leaders and organizations. This becomes clearer when we analyze particular geographies, like Latin America, that have a unique set of socioeconomic conditions which inhibit women from participating in the financial system fully.

Women in Latin America are 15% less likely to be approved for a loan than men, and only 49% of women in Latin America and the Caribbean have a bank account, according to Carmen Correa, CEO of ProMujer, a firm that focuses on the financial and physical health of low-income women in the region.

A big reason for this is how the society and economy are structured in the region. For example, a large portion of the women in the region work in the “informal economy” in jobs and enterprises that are not regulated by the state. This impacts their ability to get funding through traditional channels.

Many of these women also have less access to digital services and technologies in comparison to men. This further exacerbates issues of digital literacy and prevents them from building “digital financial capabilities” that would aid and ease their entry into the financial ecosystem. These issues are even more damaging for the women who belong to indigenous communities, many of whom are the most excluded from the financial system, Correa adds. 

An app or a financial product on its own cannot overcome these socioeconomic barriers and structures. Instead financial inclusion of women becomes a question of overcoming existing social disparities. This can be done through the means of digital technologies as well as a macro-level restructuring of how people's economic activities are catered to, by the state. 

Why is the inclusion of women important?

Unlike the ‘how’ of financial inclusion of women, the ‘why’ is fairly straight-forward. Inclusion builds equality, it allows women to be financially independent and resilient, and their participation has a domino effect on those around them: “Women’s economic participation has a multiplier effect on communities as they tend to invest a significant portion of their financial income and resources in education, healthcare, and well-being of their families, leading to improved social outcomes,” said Henri Dommel, Practice Director at UNCDF.

How can women be included?

The open letter by Women's Digital Financial Inclusion Advocacy Hub identifies digital financial capabilities as the key enabler of inclusion of women. Here, things like trust, design of products and policies, and digital literacy play a critical role in ensuring women are able to build digital capabilities that can empower them.

Trust and Digital Literacy: “Education is the foundation of building trust within communities of women who have no previous experience with digital banking platforms. When we begin by leveraging trusted local community networks to facilitate DFC training, women micro-entrepreneurs are able to not only learn how to use these digital services but receive the information from trusted peers,” said Iskendrian.

Beyond education, trust is also built by how regulatory structures account for women citizens: “Making it easier to open an account and designing consumer protection rules to promote trust and fairness are critical to women’s economic empowerment,” said Dommel.

Here, financial services providers, regulators, and local community leaders all have big roles to play: FIs need to make their products and services accessible to women and treat them equally. Regulators pass laws that support and safeguard their interest. And local community leaders and organizations should leverage their roles as trusted members of the community, to contextualize these services and bridge the gap between the individual and institutions.

Design: For inclusion to work, efforts should go beyond products that treat women fairly. Instead, products can be designed with women in mind and in collaboration with them. “One key reason for the gender disparity in financial access is that when financial products are not intentionally designed for women, they tend to perpetuate the gender gap in access to and usage of financial services,” Iskendrian added.

To enable this type of design work, Women’s World Banking has developed a women-centered design methodology, which enables FIs to create financial products that keep the needs of women consumers at the heart of development. One way to do this is by leveraging principles of behavioral design methodologies, such as context, design features, and choice architecture to aid women’s interactions with these systems, according to Iskendrian.

For example, through Policy Accelerator, UNCDF works with governments to research, design, and improve consumer protection and account access regulations to better cater to women’s financial needs in Africa.

“Building the capacity of women in decision-making roles is critical but also insufficient. Women's groups and their representatives should also be consulted in designing and implementing policies that will directly impact them. This is particularly the case for consumer protection regulations, where privacy, transparency, and fairness are addressed directly,” said Dommel.

The most powerful boardrooms often don’t let enough women through the doors, and in turn, their decisions often exclude women from the equation. For this to change, FIs and governments have to make an active effort to include women in every step of the process. Systemic problems require systemic solutions.