Gender inequality is a common issue in all countries. The degree of this disparity is so high and so prevalent that it is one of the goals set for sustainable development by the United Nations. In meeting the goal of gender equality, financial inclusion is a very important factor. In fact, among the 17 Sustainable Development Goals, financial inclusion is implicated in at least 7 of them.
Fortunately, digital innovations are making great strides in the financial industries and one of its major implications is the increased financial inclusion. For women’s empowerment, it is an absolute necessity to be financially independent. After securing their own financial future, statistically, women are likely to contribute more to society in terms of greater spending on food, water, children’s education, and healthcare. Thus, it also promotes food security (both for women and children)—another major Sustainable Development Goal.
In this article, we will discuss how financial exclusion impacts women, the factors that lead to the financial exclusion of women, and what changes can be made to the established financial structure to promote the financial inclusion of women.
Women Taking Charge of Their Own Financial Future With the Help of Digital Finances
Globally, women are continually focused on unpaid housework, and even for many working women, especially in rural communities, their finances are usually managed by their husbands, father, or other male guardians. But, in order to efficiently manage their own household and subsequently their own future, women need to regain control over their finances.
In order to gain control over their own finances, they first need to have a source of income and access to financial services like savings, and investment opportunities. Sadly, women are still not privy to such financial services. In fact, on a global scale, 42% of women still lack access to financial services and products.
Such discrepancies in the distribution of financial services limit the growth of women in terms of education and career. This is especially harmful to women belonging to the poorer section of society or in rural areas.
Gender Gaps in the World of Finances
Financial inclusion in itself does not empower women. However, it provides the key tools such as savings, insurance, credits, and payments which help women empower themselves in the social and economic context. Financial inclusion will help all women—employed, unemployed, and self-employed—acquire assets, generate income, manage financial risks, and completely participate in the economy.
The incongruity in the financial statistics of men and women highlights how the gender gap is still very much prevalent in the financial landscape on a global scale. Some disturbing facts in this regard are as follows:
- Women have fewer economic opportunities as compared to men.
- Less than half of the entire labor force of eligible women are only employed while 75% of eligible men have some sort of employment.
- Women who are engaged in some sort of employment are involved in informal, vulnerable, low-paid, or undervalued jobs.
- Among the unbanked population around 56% of them are women.
Barriers to The Financial Empowerment of Women
The reason behind the huge gap between men and women evident in the world of finances can be understood by analyzing the obstacles that stand in the way of women’s financial empowerment. Generally, women face many problems in their regular day-to-day lives that keep them from participating completely in the economic transactions in a country.
In order to completely understand the barriers, we need to look at an in-depth level at both the demand side and the supply side of the transaction.
Demand Side Constraints
On the demand side, the barriers are understood from the point of view of the women who cannot take charge of their financial matters. Taking into account the state of financial inclusion from a consumer perspective will likely help us design better financial products and services. Here factors like the prevalent sociocultural norms and household practices, demands on women due to strict gender roles, and practical constraints like lack of income or lack of access to collateral keep them from utilizing the present financial services and products. The lack of education and access to information also plays a key role. Each of the demand-side constraints will be discussed in detail in the following section.
1. Established Sociocultural Norms and Gender Roles
Traditionally, men are responsible as the breadwinner of the family and so they are expected to handle all matters related to finances. But in this 21st century where women are a huge part of the labor force and are bringing in part the income of the household, they need the freedom and proper tools to manage their own finances.
However, the established gender roles and the norms associated with them still sees women as only homemaker who simply has no need for financial involvement. This viewpoint restricts the women’s activities to household chores leaving them very little time to participate in more productive activities.
Along with their time, the established sociocultural norms also restrict women’s mobility, preventing them from traveling great distances to reach financial institutions and make deposits or withdrawals. Such activities are also prevented due to the limited opening hours of the financial institutions.
In fact, gender roles are so commonplace that financial institutions do not even regard women as part of their primary client base. Yet, women are conducting their business with formal or informal financial institutions on a regular basis. Only, now they have to work with poorly designed financial services and products which do not fully meet their needs.
2. Lack of Stable Income and Access to Collateral
While acquiring financial services, the banks require the clients to put up assets against which they can take out loans. But this is not an option for most women who do not have any assets to their names. Fewer women, compared to men, are owners of houses, properties, or agricultural lands worldwide. This lack of ownership rights leads to legal discrimination against women in the financial sector, which ultimately discourages women from accessing any financial services altogether.
Although, at present times, a larger portion of women is entering the labor force, the majority is still working in informal sectors which translates into lower wages. Because they are getting lower incomes and have limited ownership rights to serve as collaterals, they are often dismissed by financial service providers as potential clients. This limits their scope of building a solid credit history and without a credit history financial institutions are further deterred from providing services to women.
In addition to the above factors, in many developing countries, women lack access to a range of official identity documents (identity cards or passports). But these identity proofs are a necessary requirement to even open a basic bank account. In fact, in some countries such as Chad, Niger, or Guinea-Bissau, women require permission from their husbands or a male relative to open a bank account. Such regulatory provisions restrict women and bind their possibilities to manage their own finances.
3. Access to Formal Education, Financial Literacy, and Relevant Information
In developing countries, the rate of illiteracy is extremely high, especially among rural communities. And, even among the rural community women are the minority in receiving higher education or any education at all. Education is crucial in improving your skills or developing new skills to upgrade to a better lifestyle.
However, without proper education, women lack the skill to handle financial tools or find relevant information or even educate themselves on financial matters. This is a problem for women as at every step of financial transactions, information regarding rules, contracts, statements, cheques, and letters are conveyed in written form.
Along with a limited understanding of official documents, a lack of formal education limits financial literacy in terms of understanding the different kinds of financial products and services there are, their usage and purpose, and comprehending the rights women have as clients so that corrupt financial officers cannot exploit them.
Thus, financial illiteracy leads to a lack of confidence among women who then turn to informal financial services where generally, groups of women provide the information they need.
Supply Side Constraints
On the supply side, the practices and operations of financial institutions and regulatory bodies which stand in the way of women’s participation are brought to light. This section also discusses the obstacles that financial institutions need to overcome before successfully marketing their products and services to women.
1. Infrastructural Inadequacy in the Design of Customized Financial Services and Products for Women
Financial institutions are not fully equipped to provide information and customer service along with financial services and products to women, especially in rural areas. This stems from the fact that there are fewer established financial institutions operating in rural or remote areas and even if there are functional banks in the village region the staff working there are not skillful in dealing with women clients.
The personnel are not properly trained and therefore lack the knowledge to design need-specific services and products. They lack the knowledge to understand gender-related client characteristics that are relevant in the rural context.
Another infrastructural problem that deters women from utilizing the available financial resources is the fact that the rural banks are mostly staffed with men. This is a problem in more conservative societies. Due to the poor representation of women in top management positions, there is little understanding of the needs and problems women face while accessing financial services and products.
Also, the financial infrastructure is not stable and cannot withstand during times of crisis. Take, for example, microfinance and the economic toll of ebola. The aftermath of ebola was terrible for the microfinance industry.
2. Incompetent Services and Products
The financial services and products marketed to women are no different than financial services and products marketed to men. However, diversity in the range of products is essential to meet the differing needs of men and women, the urban and rural population, individuals and business owners, etc. Financial institutes need to understand the varying nature of their client’s needs and the usage of financial products in their lives and design their own services and products to be more efficient and cost-effective.
Generally, the qualities of financial products and services that make them competent are their safety, reliability, convenience, and price. But the desired degree of each of these qualities differs among clients. For example, women in rural communities with limited income will not be able to afford a highly-priced financial product. So, a product should be designed that will serve a similar purpose as its higher-priced counterpart but it will be delivered at a lower cost in rural areas.
3. Ill-suited Delivery Mechanisms
All the above factors that lead to poor participation of women suggest to the financial institutions that they are not a profitable client base. So, much of their marketing strategies remain directed towards men, especially in urban areas. When they do in fact tend to concentrate on the minority, the delivery mechanisms prove to be inadequate. This inefficiency of delivery systems is mainly due to poor infrastructure for communication, electricity, and transportation.
The challenges faced during delivery result in higher transaction costs which increases the overall prices of the services making it unsuitable for their customers who have lower income. The present delivery mechanisms do not take into consideration the mobility or time restrictions of women and so they fail to be useful for women who cannot access these financial services and products.
Steps Towards Improving the Financial Inclusion of Women
Repairing the gender gaps in the economic sector is a huge task and it requires the involvement of local and national governing bodies, financial regulatory bodies, individual financial institutions, fintech companies, and social development NGOs. So, the gender gap is likely to reduce only as a result of the efforts of everyone involved.
The implementation of necessary improvements for the financial inclusion of women can be done at two broad levels: at the product level and at the institution level.
Product and Service Level Approaches
At the product level, innovative and customized designs need to be developed to increase women’s engagement while meeting the specific needs of the excluded group. The key steps that need to be implemented at this stage are as follows:
1. Designing Financial Services to be Gender Sensitive
The target of the financial sector needs to be to design products and services that remove gender bias in their access and delivery. Women, who face several hurdles before they are able to properly access the available financial products, need assistance from financial institutions to improve their inclusivity within the financial sector.
The financial institutions could help by adapting their delivery mechanisms to increase their reach locally. Also, understanding the purpose of financial services in the lives of women and other excluded communities will help in the designing of services that will be demand specific. In addition to this, the marketing strategies will be more successful in reaching marginalized women if they are designed to be gender sensitive. In summary, the approach of financial institutes should be customer-oriented instead of product-oriented to be more successful.
2. Digitization of Financial Services
Through the advancement of information and communication technology, financial service providers have been able to deliver their services to a large group of people at a minimal cost. The digitization of financial services has helped reduce transactional costs by removing the need for physical financial institutes and allowing room for innovation.
Digitization has found applications in mobile payments and biometric cards. Mobile payments give customers the privacy to take charge of their own finances. While biometric cards provided by the banks allow women who are without formal documentation to also participate.
3. Promoting Financial Education and Access to Information
Although digitization of financial services is crucial in financial inclusion, it also needs to take into consideration the point of view of a digital immigrant. What is it like to be a digital immigrant in a developing country? The digitized services need to be promoted along with instructions on how to use them.
Digital literacy is a major portion of financial literacy, the lack of which is one of the key challenges faced by women in the financial environment. In order to address this problem, financial institutes can promote financial awareness through campaigns, workshops, organized training sessions, and reliable sources of information.
However, the campaigns should be designed keeping the target audience in mind so that they can have the most impact.
Providing Alternative Collateral and Group-Based Approaches
For many women, the lack of official collateral has prevented them from utilizing financial services. However, creating transparent collateral laws that acknowledge this problem and provide an alternative solution can ease the path toward the financial inclusivity of women. Alternatives like allowing women to open bank accounts or access credits without formal collateral, or using alternative forms of guarantees like warehouse receipts, future harvests, or mortgages on moveable assets such as livestock or farm machinery.
Alternatively, applying group-based approaches to solve the problem of collateral can prove to be quite effective. This approach is based on social collateral instead of physical collateral. Financial institutes allow customers to take out loans as a group. The joint liability provides collateral for the asset-poor clients and it also ensures close monitoring and timely repayment of loans through close social networks.
Policies and Strategies at the Institutional Level
At the institutional level, more financially inclusive policies and strategies need to be rolled out. This is necessary to change the system at the core and reach out to a higher number of women. At this stage, the critical changes that need to be made to the system are as follows:
Adapting Government Policies and Legal Frameworks to Promote Gender Equality in Finances
The majority of the prevalent financial policies and legal frameworks are discriminatory against females. This can be avoided by reforming the policies and frameworks to consider the constraints faced by women and addressing their struggles. The policies should include a budget that is to be allocated for promoting equal financial opportunities for women.
The intervention of local and national governments is crucial in promoting gender equality with their power to facilitate cordial relationships between the public and the private sectors such as NGOs, financial institutions, and community cooperatives.
Reforming Institutional Practices to Be More Gender-Sensitive
Making small changes here and there will not be productive unless gender-conscious practices are completely absorbed into the core principles of the financial industry. The entire institutional culture needs to be built on the basis of gender equality. This objective can be attained by maintaining a near-equal male-to-female ratio among the staff of the institute and ensuring that all personnel are properly trained to work with female clients.
As a way of improving, every financial institute should take guidance from a gender equality expert. A specialist will assess the steps taken for gender equality within the institute, identify areas for improvement and provide solutions to address this issue.
Conducting Regular Surveys and Maintaining Records to Reduce Negative Impacts
The regulatory bodies should conduct regular surveys to assess the success of policies implemented to promote gender equality. The records of household data, market information, women’s engagement in financial sectors, and other related information need to be maintained to analyze and identify features that are likely to cause negative impacts on the system. This also helps in identifying areas for improvement.
The merging of the financial industry and technology has been immensely successful in financial inclusion. Such collaboration with organizations working on social causes will help in reaching out to more women living in rural communities and remote areas. Organizations working towards financial inclusion, food protection, gender equality, and promoting education will achieve greater results by combining their efforts towards an inclusive, equal-opportunity environment.
Digitization of Finances and its Beneficial Impacts on Women’s Finances
The combination of digital technology and financial services has been a boon to both the financial industry and women who receive greater access. Access to financial services allows women to have greater control over their finances, and by extension, their own lives. In fact, the freedom to manage their own finances not only improves women’s economic empowerment but also social empowerment.
The beneficial effects of digital finances are observed in different areas of a woman’s life. Financial freedom gives women more autonomy within their households, improves food security, and promotes education within the community.
The different mechanisms which have been instrumental in increasing women’s empowerment and the impact of digital finances on each of these areas are as follows:
- Higher amounts of transfers and stronger social networks – Through digitizations, females can transact larger amounts of money without carrying cash or worrying about safety.
- Improved career goals – Financial control encourages and directs women’s activities towards more stable occupational goals.
- Greater participation in the labor force – With financial empowerment more and more women are participating in the economy and the workforce.
- Reduced Transaction Costs – Digitization of finances reduces the transaction costs of financial institutes that can share these benefits with their client base.
- Promoting financially sound behavior – Through mobile phone notifications, customers are given positive feedback for good financial behavior. Women are thus encouraged to save and invest regularly.
- Privacy – Payments over the internet give women the necessary privacy they require. It keeps their transaction (amount received, amount paid, activity on which it is paid, any investments made, etc.) shielded from the community. This gives them greater control of their finances as they can conduct their business without any forced inputs from others or possible demands from friends and family. A woman who accesses her account over a phone has greater control over that account and who sees it and the freedom to decide how she spends her money or how she saves it.
- Reduced time investment – The time taken for transactions has been greatly reduced due to digital intervention. Thus, it saves a lot of time for women who can invest that time in more productive activities.
- Secure and safe transactions – As all transactions are now done over the Internet, women do not need to carry a lot of cash with them. Keeping cash with oneself is not the safest option as it may lead to thievery and even physical harm.
Success Stories of Digital Finances on Women’s Empowerment
Some of the success stories of digital finances on women empowerment come from M-Shwari and EcoCash Loans. These two digital financial service providers allow immediate access to capital without making their clients jump through hoops to meet their short-term needs or in case of emergencies.
As Allianz launches sharia compliant mobile loan service in Indonesia, it will be instrumental for the financial inclusion of women. This business model is based on Islamic principles and hence, cannot charge interest on their loans. Instead, they invest as a shareholder and help businesses grow and raise the cost of their shares. Having access to credit to increase their business growth will improve the chances of women entrepreneurs and encourage other women to participate as well.
The Grameen Bank in Bangladesh has successfully implemented group-based loans that provide loans to small groups of 5 women. This loan is based on joint liability which means that every member is responsible for the other member’s loans. The repayments are exacted in small, equal amounts that are paid every week. This method allowed more women in Bangladesh to access credit without any formal assets.
The use of mobile transfers has been linked to increased women’s autonomy in a study in Niger. Here, the women were observed to have more say in the decision-making process in their households, and there was growth in the cultivation of marginal crops which are mainly grown by women.
Frequently Asked Questions
Q1. What are the financial barriers women face?
Women face many challenges on their path to becoming financially independent. The main financial barriers that stand in the way of women and self-financial control are sociocultural norms that restrict women’s involvement in financial decisions, educational, financial, and digital illiteracy, restraints based on established gender roles, access to collateral, lack of identification, and mobility constraints.
This is in addition to the inadequate financial infrastructure such as a lack of financial products and services which are specifically tailored to meet women’s needs and unsuitable delivery mechanisms. These constraints are put on women on top of the limitations that lead to financial exclusion in general.
Q2. How can women secure their financial future?
Securing a financial future is extremely crucial for everyone as it helps you tide over emergencies, and sudden large payments, and reduces your dependency on others in the future. Women can take active action in controlling their finances to secure their financial future. The tips to follow for managing responsible finances are as follows:
- Starting early to maintain a savings account and regularly making contributions to that account.
- Invest extra income into well-researched investments like stocks and mutual funds to help grow your financial resources.
- Women need to maintain adequate emergency funds for unplanned circumstances like medical conditions, accidents, etc.
- Choosing optimal insurance coverage for life insurance and health insurance to reduce any risk and for peace of mind.
- Saving, investing, and insuring need to be complemented with proper tax planning.
Q3. How to empower women financially?
The financial empowerment of women is possible with the intervention of the government and other responsible authorities. Steps to promote finances among women should include financial literacy for all, providing alternative collateral and group-based approaches, introducing gender-sensitive designs of financial services and products, providing access to information, developing innovative delivery mechanisms, practicing gender-sensitive policies, and regular monitoring and data collection to avoid negative impacts.
The digitization of the financial world has brought a lot of improvements in the lives of women through greater economic and social empowerment. More and more women are now participating in the economy, making active and positive decisions within their households and for their own future. The gender gap is still quite deep, but the recent changes within the financial environment, especially the digitization of financial services are showing a lot of promise in reducing the gender gap and promoting gender equality.
- Jonas Taylor is a financial expert and experienced writer with a focus on finance news, accounting software, and related topics. He has a talent for explaining complex financial concepts in an accessible way and has published high-quality content in various publications. He is dedicated to delivering valuable information to readers, staying up-to-date with financial news and trends, and sharing his expertise with others.