For women, it's a long walk to financial inclusion

Designing financial services for women makes good business sense. Women have lower defaults, tend to save more and make timely repayments compared to men

India has made great strides in financial inclusion. According to Global Findex 2021, bank account ownership in the country has grown to 78 per cent. Delving deeper into gender-disaggregated data, however, reveals alarming facts. Women are 13 percentage points less likely to use their accounts for digital payments. And while women tend to save more money than men, only 28 per cent use savings accounts. If a woman applies for a loan to buy a two-wheeler, she is likely to be asked to bring along a male guarantor. This is commonplace in rural settings for banks to exercise caution when extending loans to women without the presence of a guarantor or collateral. What could potentially be a channel for mobility and independence is marred by dependence on male family members.
 

It is no surprise that despite widespread bank account ownership, women still struggle to experience true financial freedom.

Women make up a meagre 16 per cent of management roles in financial services, according to the 2022 ‘Mind the Gender Gap’ report by the CFA Institute. An industry that intends to serve women has so few of them in its ranks, and is missing valuable perspectives as a result. This leads to traditional socio-cultural norms and personal biases seeping into policy, product and process design. Increasing women hires is imperative at every level to make financial services more accessible. The business correspondent (BC) model was introduced to extend banking services to unserved areas. Originally seen as a supplement to brick-and-mortar banking, BCs have become the predominant delivery model for financial services. Unfortunately, less than 10 per cent of the BCs are women.
 

This matters because a World Bank study shows that women, particularly those with low literacy, are more likely to ask questions, seek help and transact if they can interact with a woman banking agent. If financial institutions hire more women banking agents, they get more women customers who will then use financial services more often.
 

Most gender-neutral systems suffer from the problem of ‘shrink it and pink it’, a flawed design approach that originated in manufacturing where everything was made smaller and coloured pink to appeal to the stereotyped feminine without any attempt to understand women’s needs and challenges.
 

Women face financial exclusion due to illiteracy, absence of smartphones, and distant bank branches. This leads them to rely on cash, depend on friends/family, or resort to usurious moneylenders, making them susceptible to theft and exploitation and perpetuating the cycle of poverty. In 2021, a panel of Yale University economists worked with the government to digitally empower women in a cluster of 197 villages in Madhya Pradesh. These women were given bank accounts in their own name and had their Mahatma Gandhi National Rural Employment Guarantee Act (2005) wages directly deposited there. The study found that getting financial control increased these women’s workforce participation, gave them bargaining power and status within their family and society.
 

First-time women borrowers are often denied loans from formal institutions because they do not have a credit history. This credit invisibility keeps them out of the formal credit economy and reliant on loan sharks.
 

Embedding gender-sensitive features in the process design (such as eliminating the need for a male guarantor), providing doorstep delivery of banking services, gender-pro models like alternative credit scores, using technology to simplify financial access are interventions that can help.
 

There are thousands of self-help groups and unbanked women whose everyday reality is hidden under layers of statistics. Women must be recognised as a distinct sector where we need to work on the entire fulfilment ecosystem – from hiring and distribution to technology, processes and policies. This might seem like a gargantuan problem but designing financial services for women is just good business sense. Women have lower defaults, tend to save more and make timely repayments compared to men. Designing for the invisible half of the population is not an act of generosity —  it is a pathway to equitable economic prosperity.

The writer is co-founder & CEO of FIA Global