People living in the world’s most challenging economies have long been unbanked, living without access to critical financial tools that enable progress toward healthier, more resilient and empowered lives. The United Nations (UN) along with other leading international thought-leaders, academics, organizations and governments know that access to basic financial resources can transform lives, strengthen communities and alleviate poverty. The UN also states that women are more likely to invest their money into their family’s wellbeing, this then increases financial stability, which empowers women, leading to better health, education and economic outcomes for communities down the road.
Yet, according to the not-for-profit organization, FINCA, nearly 2 billion of the unbanked worldwide are women, who are 28% less likely than men to have an account at a formal financial institution. While there have been strides in advancing financial inclusion through mobile phone access, women on average are still 14% less likely than men to own a mobile phone.
This gap is a problem because bank accounts are an important element in reducing poverty and increasing prosperity. Having a bank account is safer than cash, can encourage savings and allows for cheaper and more secure transfers of funds. Other financial products such as loans or insurance can be more easily layered on top of a bank account, allowing women to weather unexpected difficulties and grow a business. However, traditional financial institutions have been slow to adapt to the changing needs of their customers.
Plus, women face several challenges to accessing bank accounts from location, where banks may be physically too far away from women in rural areas and even with local access, women may not have time to visit a bank or make bill payments in person due to family or work responsibilities. But probably, one of the biggest barriers is that women often face legal hurdles to inclusion as well. As women are less likely to have an ID, which can prevent them from being able to open traditional accounts.
In some countries, women may also be legally unable to own or inherit property that can be used as collateral, hindering their abilities to get loans. Even in countries with no such barriers, women may still have difficulty accessing loans because of irregular credit history. Lastly, there may be cultural barriers that prevent women from accessing traditional financial services. In some cases, women may not be comfortable or feel welcome in a traditional bank, or interacting with a male agent.
This is why fintechs have been able to step in to provide necessary services, as they provide new opportunities for women to increase their participation in the economy and invest in themselves and their families. Digital banking can also make it easier for women to make or receive government payments or accept payments in their businesses. The latter of which is important, as women are much more likely to work in the informal economy, receiving payments in cash.
These technologies like ours at The NAGA Group offer ways to overcome these barriers and several countries have demonstrated notable financial service reforms. Nigeria has been identified by Goldman Sachs as one of 11 emerging economies with high growth potential in the coming decades, bolstered by an additional 4.7 million women who achieved financial inclusion between 2012 and 2014. In India, mobile money platforms are also opening new financial channels, particularly for rural women. Biometric ids are being introduced in countries like Pakistan to ensure that women can receive payments directly, rather than through male family members.
Addressing the physical barriers, mobile banking services like M-Pesa in Kenya and bKash in Bangladesh are allowing women to pay bills and send money conveniently and safely. M-PESA is the groundbreaking mobile money transfer service in Kenya and strongly demonstrates the power of mobile banking. It has been a game-changer for rural poor who have generally had scarce access to financial institutions and for those, where the trip to the nearest bank is costly in terms of travel or lost time at work. Data shows that because of M-PESA, around 185,000 women in Kenya moved from subsistence farming to business or retail sales and their savings went up as a result. As mobile phone ownership grows, this may be a way to jump past the traditional ways to access a financial institution and bring access to people where they are.
These new technologies in the world of finance are not just making progress happen faster, they are allowing progress to happen. Now that women are entering the formal financial system, it means that financial literacy is needed for girls and women. It’s not just about improving their reading and writing skills, but teaching them how to budget, how to save, how to use a transaction account; and at the same time, the social, emotional and psychological aspects of financial decision-making can be just as important as basic technical skills…welcome to the next frontier of women’s economic advancement: financial inclusion.