Women’s Financial Inclusion: The Paradigm Shift

Greater access to financial services for women is considered a key enabler for Gender Equality and Women Empowerment, one of the 17 ambitious Sustainable Development Goals (SDGs). The momentum for financial inclusion of women is indeed increasing and this topic is receiving a growing amount of attention in global debate on economic, social and development issues, led by the private sector, civil society, and development partners.

Women at the heart of AFI: Commitment to gender and women’s financial inclusion

Women are also at the heart of the Alliance for Financial Inclusion. Under the auspices of the Denarau Action Plan (DAP), AFI’s commitment to gender and women’s financial inclusion, adopted at the Global Policy Forum in Fiji in 2016, the network has established governance structures, made public commitments, and launched in-country implementation efforts to accelerate the progress of women’s financial inclusion and halve the financial inclusion gender gap across AFI member jurisdiction by 2021.

More concretely, since the adoption of the DAP, the AFI working groups have completed more than 10 technical deliverables that guide policy and regulatory efforts to drive financial inclusion of women. Under the Maya Declaration, 27 AFI members have made at least one commitment related to gender and women’s financial inclusion. In 2017, seven countries within the AFI membership, have introduced gender-related policy changes to accelerate women’s financial inclusion under their respective national financial inclusion strategies or frameworks.

But why did financial inclusion for women come into the focus of financial policymakers and regulators? Why have they taken note of the fact that women are still disproportionately excluded from the formal financial system in such a remarkable way?

Full financial inclusion: Possible, but only with women

Just a few years ago, a widespread view within the international community was that providing financial services for women is more of a moral and social obligation. Reducing the financial access gap for women almost seemed to be a humanitarian imperative. Regulators viewed financial inclusion predominantly as an important but largely gender-neutral policy issue.

At sidelines of conferences, I was even asked why AFI has started to work on women’s financial inclusion, as this topic is supposed to fall more likely into the domain of humanitarian and socially-oriented non-governmental and development organizations, but not central banks or bank supervision authorities.

The World Bank’s 2014 Global Findex database revealed that although access to financial services had sharply increased by 700 million people between 2011 and 2014, the financial inclusion gender gap in developing economies was still estimated at 9 percentage points and therefore remained unchanged. It also became clear that full financial inclusion will not be possible without including women into the formal financial system.

Coinciding with Findex, there was an increasing availability of empirical evidence showing that financial inclusion can meet multiple macroeconomic goals such as economic growth and financial stability. A range of studies began to demonstrate that giving women access to basic financial services can unlock unprecedented potentials for economic growth. Micro arguments for investing in women’s financial inclusion were delivered by extremely valuable financial diary exercises, shedding more light on the true financial lives of women and how greater inclusion can impact the well-being of the family and the community, and ultimately the country as a whole.

This rigorous research and empirical evidence consequently influenced the debate and encouraged financial policymakers and regulators to analyze the barriers that hinder women from entering the financial system.

The Paradigm Shift: Women’s access to financial services drives inclusive growth

Based on a policy framework developed by Women’s World Banking and AFI, members with defined mandate to ensure financial stability were addressing barriers which fall into their remit. Supply-side barriers, such as lack of gender-disaggregated data and risk aversion of financial institutions to providing services to non-traditional clients, were included and identified as key constraints preventing more women from getting access to finance. Complicated language used by financial institutions was also a challenge, with women being left behind, as they are more likely to have low levels of financial education. Regulatory barriers such as KYC regimes that require documentation and identification to open accounts, which women often do not possess, were also acknowledged. In addition, important demand-side barriers were highlighted. In a survey carried out by AFI Working Groups financial literacy was classified by 75% of the respondents as the key barrier for financial inclusion, but only 22% of the respondents had financial literacy strategy in place that had an explicit focus on women.

As a result, AFI members recognized that policies and regulations matter for bringing down the barriers to women’s financial inclusion. It was well understood that more equal access to financial services would lead to increased economic welfare and enhanced financial stability. A paradigm shift emerged, leading to the endorsement of the DAP and demonstrating that it is crucial for financial policymakers and regulators to identify reasons emerging from their mandate for taking the gender dimensions of access, usage and quality of financial services into account and affirming commitments towards women’s financial inclusion.

Our funding partners, including the Bill & Melinda Gates Foundation, the German Ministry of Economic Development and Cooperation (BMZ), the International Development Research Center of Canada (IDRC) and the Omidyar Network, have been strong supporters throughout AFI’s journey toward endorsement and implementation of DAP. Support for AFI’s leadership role in advancing women’s financial inclusion continues to grow among our partners and stakeholders.

Financial and digital inclusion for gender equality: Unlocking $12 trillion of GDP

While we already believe that financial inclusion increases economic growth, it is now time to imagine what the global macroeconomic impact would be if the more than 1 billion women without financial access would be financially included. According to recent research by the McKinsey Global Institute advancing gender equality could unlock $12 trillion of incremental GDP in 2025 with financial and particularly digital inclusion being among the key enablers for making progress on gender equality. The potential of digital financial services to close the financial inclusion gender gap is indeed huge. However, despite dramatic successes in digitizing basic financial products in some parts of the world, women still face significant hurdles to accessing and using digital financial services particularly when mobile phone ownership of women is low.

Women’s leadership towards women’s financial inclusion has been strong in the AFI network, spearheaded by Dr. Tukiya Kankasa-Mabula, Deputy Governor of the Bank of Zambia and the Chair of the AFI Gender and Women's Financial Inclusion Committee. The DAP also recognizes greater gender diversity within member institutions as an important driver towards this end. However, in addition to supporting women to become leaders in their institutions, we need more male leadership and advocacy in support of women’s financial inclusion. The “HeForShe” campaign is a good model in this regard.

The compelling analytical foundation to include women for the benefit of economic growth, lower income equality and financial stability, rather than just a development issue, has been provided. We know that financial inclusion for women is in everyone’s interest, and the timing to implement what we have learnt could not be better. Let's do the work!