There’s Nothing Micro about a Billion Women, Making Finance Work for Women by Mary Ellen Iskenderian
Nearly one billion women, globally, have no access to the financial system. Failure to include women costs financial institutions billions in potential profit. Mary Ellen Iskenderian, president and CEO of the nonprofit organization Women’s World Banking, explains the causes of this exclusion, how to combat it and why everyone benefits from financial inclusion. Citing examples from India, Nigeria, Indonesia, Rwanda, Colombia, the Dominican Republic, Bangladesh and Mexico, Iskenderian details myriad ways to give women access to financial tools and emphasizes that financial institutions can do well by doing good.
- Despite decades of effort, almost one billion women remain financially disempowered.
- Digital and financial literacy training are prerequisites to successful financial inclusion.
- Digital finance ought to help empower women.
- Some commercial banks succeeded by prioritizing medium and small enterprises led by women.
- Saving and credit opportunities are fundamental for women’s financial inclusion.
- Including women in finance requires action from regulators and policy makers.
- Financial firms and private citizens can help achieve greater “financial inclusion” for women.
There’s Nothing Micro about a Billion Women Book Summary
Despite decades of effort, almost one billion women remain financially disempowered.
One-third of the planet’s adults have no access to financial services. More than half of these 1.7 billion people – almost a billion – are women. Women share the financial problems of low-income men, but gender norms can make their financial exclusion even more onerous.
For example, certain societies disapprove of women owning smartphones, which stops them from banking by phone. Yet when women control money, they are more likely than men to invest it for their families’ benefit. In households where women have more financial authority, children receive superior nutrition than in households where they don’t.
The “rotating savings and credit association” (ROSCA) offers a traditional option for impoverished people. It enables people without access to banking to pool their resources and lend money, sequentially, to its members. Such groups may form due to shared activities or backgrounds, and they rely on high levels of trust. Such cooperatives were precursors to modern banks.
“Improving a woman’s financial access brings with it an intergenerational multiplier effect that leads to consistently better outcomes in the health, education and lifelong earning potential of every member of her entire family…”
Muhammad Yunus invented microfinance in 1975 in Bangladesh, where he pioneered lending small sums of seed capital to groups of impoverished people. The capital gave them an opportunity to start self-sustaining businesses. Nonprofits worldwide experimented with microfinance institutions (MFIs). Initially, a few offered savings accounts and the ability to save became a precondition for receiving a loan. Most MFI borrowers have been women. Typically, MFIs lend money to people who are part of a group and repayment becomes the group’s responsibility.
Although MFIs are, by definition, self-sustaining, they initially relied on donations. Their evolution revealed problems. For example, to cover operating costs, MFIs charged high interest rates – sometimes as high as the local loan sharks charged.
Mexican MFI Compartamos, for example, went public with an IPO in 2007. In 2010, several women who borrowed from MFIs committed suicide when they couldn’t repay their debts. They knew that if they defaulted, their entire group would be responsible for their debt.
Digital and financial literacy training are prerequisites to successful financial inclusion.
When a Dominican bank included financial education in a telenovela about a house cleaner whose husband discovered her cash savings and splurged on a party, its account opening rate rose 39% over the next half year. Many women mentioned the TV drama as their reason for opening their accounts.
In Indonesia, one fintech company partnered with midwives to enable women to open savings accounts and gain access to digital finance services without having to share their phone numbers with male bank representatives.
“A woman’s ‘strategic life choices’ extend far beyond the purely economic options she has available, but her economic empowerment is an essential step toward gaining both resources and agency.”
Banks in the developing world often accept only immovable assets – such as homes – as collateral, which financial institutions often require. Thus, women often need title to their property in order to borrow, but their ability to secure title varies depending on the laws of their home country. For example, Rwanda’s government did not give women land inheritance rights until 1998 – a critical step toward recovery from the nation’s genocide. The settlement of Colombia’s conflict with Communist guerillas prioritized distribution of land to women.
Women often face obstacles that do not confront men. For instance, a greater number of women than men lack legal identity documents. Even gender neutrality can become an obstacle, since “gender blind” policies tend, implicitly, to favor males. Also, women’s economic empowerment requires them to learn more skills, including literacy, negotiation tactics and knowledge of their rights.
Digital finance ought to help empower women.
While mobile financial tools matter, by themselves, they have a limited impact on women’s financial agency. Still, cell phone ownership is a critical tipping point for empowering women’s financial lives. Cellphone banking gives women confidentiality and convenience, so they can manage their money without proximity to a financial institution or input from a spouse or some other authority figure.
Women in India benefited from receiving economic advice along with the digital deposit of their federal “workfare.” Those who received supplemental information stayed employed longer and earned more money than those who received their digital payment without that information.
Gender norms in Niger make it difficult for women to assert opinions about their family’s money in public, so they benefit from receiving cell phone digital deposits which enable private financial discussions at home.
“Empowerment is, at its heart, the freedom to make one’s own choices…And sometimes that includes the choice to walk out the door.”
Whether financial inclusion increases a woman’s risk of domestic abuse remains unclear. In some countries, inclusion seems to correlate with higher risk. However, the self-confidence and security women gain from financial inclusion can make it easier for them to leave violent relationships. For example, a bank in Colombia observed that women whose account balances reached a certain trigger point would often leave abusive relationships. The bank partnered with shelters to keep its customers safe.
Some commercial banks succeeded by prioritizing medium and small enterprises led by women.
If financial institutions treated women’s business loans as they treat men’s loans, they could gain $30 billion in new income. Kenya Commercial Bank (KCB), for example, is among the banks that offer women’s business clubs for developing contacts, education and even business travel. Women find its training and networking particularly valuable.
Acknowledging that its credit-approval process relied too heavily on collateral, KCB reformed its procedures to focus on a company’s cash flow. The bank implemented “gender sensitization training” in its branches, and its loans to female entrepreneurs grew substantially over two years. The bank’s portfolio for this project featured fewer non-performing loans than its overall loan portfolio featured, even though the loans’ basis did not include collateral. While addressing the women’s market required a significant commitment of resources and changes in processes, training and products, KCB expanded the program’s availability.
“Rarely do these households receive a regular, daily income of any kind.”
In 2013, when a third of Nigeria’s population had no access to financial services, the national government tried to expand its availability. Diamond Bank, one of Nigeria’s biggest, designed a savings account for small-scale market traders, many of them women.
Informal savings schemes, like ROSCAs, were already popular in West Africa. To secure a loan, a group member would coordinate the process, collecting cash from each member and holding the funds for a fee. Women appreciated having the bank’s coordinator collect funds at their doors, but they objected to the fees.
Diamond emulated informal savings groups by sending representatives door to door. It introduced customers to ATM cards and cellphone banking, but the personal relationships they formed proved the most significant factor in women deciding to create bank accounts.
“The lack of appropriate identification documents exacerbates and reinforces the gender gap in mobile phone ownership.”
Millions of women have become faithful customers of banks that make such efforts. Despite a subsequent decline in Nigeria’s economy, many clients report that banking helped their businesses and their families.
Savings accounts have advantages over informal savings groups. Such groups require members to take turns using the combined money, so cash might not be available to individuals when they need it. With a personal bank account, women also can maintain confidentiality, which reduces demands for money from their kin and neighbors. Diamond Bank’s leadership in the women’s market was a crucial factor when Access, Africa’s largest bank, acquired it in 2009.
Saving and credit opportunities are fundamental for women’s financial inclusion.
Women need health insurance. In some countries, the lion’s share of a patient’s financial burden comes from the cost of transportation to the hospital and bribes to get decent care.
Jordan’s Microfund for Women bundles hospitalization insurance with loans. In partnership with the Jordan Insurance Company, the Microfund provides about a day’s pay for each day of hospitalization. The fund’s managers initially didn’t think it would be possible to devise an insurance product the poor could afford and would accept. The Microfund insisted on having no exclusions for pre-existing conditions. Jordan initially resisted, but then officials discovered that it cost less to do without the exclusions than to collect the data necessary to enforce them.
“Female regulators and others from previously excluded groups must be listened to and their recommendations endorsed, so that their lived experience is valued as a resource for developing better policies.”
Although they don’t prioritize financial inclusion, Fintech companies with big data are lowering the costs of extending credit and expanding the potential market for loans. By contrast, inadequate data availability constrains traditional banks.
Peer to peer (P2P) lending can be faster and less onerous for women than traditional forms of borrowing. Analysis in China found that peer lending to women was more profitable than similar lending to men. In 2019, P2P loans totaled $67.9billion worldwide.
Including women in finance requires action from regulators and policy makers.
Those in power can take numerous steps to include women in the financial system:
- Simplify procedures – Some countries have implemented simpler customer protocols to facilitate people opening accounts even with only scant documentation. These basic accounts helped provide COVID-19 pandemic relief to millions of people previously excluded from the system.
- Collect data about gender – Failure to “disaggregate” data by gender impedes financial inclusion.
- Remove legislative discrimination – The World Bank found that 167 countries have at least one law constraining women’s financial opportunities.
- Subsidize phones for impoverished people – Governments should subsidize phone ownership for their poorest constituents. They can take measures to reduce the cost of having a phone, such as building infrastructure and encouraging competition.
- Enable women to own property in their own names – When women own property, they have collateral for a bank loan. A registry of movable collateral helps women by expanding the pool of qualified collateral.
- Send government payments to women’s bank accounts – Too often, countries send such payments to a male “head of household.” Directing payments to women would provide more benefits to their families.
- Add women to regulatory boards – Banks have a poor record on gender diversity, but regulatory institutions have even worse records. Greater representation of women on supervisory boards correlates with more stable banking sectors.
Financial firms and private citizens can help achieve greater “financial inclusion” for women.
Financial institutions that neglect women surrender up to $700 billion in annual revenue. This amount represents up to one-fifth of the revenue that “banks, insurers and financial service providers” could generate. Institutions should do the following instead:
- Make sure senior management supports a “women’s proposition” – Women behave differently than men and have distinctive needs and preferences. They may seek more information and want more time than men to consider a financial decision.
- Analyze data by gender – Data tools that address how women use financial services should guide the design and delivery of products and staffing decisions.
- Encourage “discouraged borrowers” – Some creditworthy potential borrowers expect to be declined and, thus, they don’t apply for loans in the first place. In fact, women-owned companies are no more likely to suffer rejection than male-owned firms. Raising expectations promotes greater inclusion.
- Diversify teams – Women remain dramatically under-represented in financial firms’ upper management and on their boards. More women in leadership positions correlates with fewer non-performing loans, higher profits and more innovation.
Concerned consumers can check their financial institution’s support for women. Becoming informed equips you to help stem financial abuse and broaden the teaching of financial literacy.
About the Author
Mary Ellen Iskenderian is president and CEO of Women’s World Banking, a global nonprofit devoted to giving more low-income women access to financial tools and resources.