What business can do to close the financial inclusion gender gap
This article originally appeared on BSR's blog and is reprinted here with permission.
In April, the World Bank released the latest results of the Global Findex database, the most comprehensive resource to understand how adults use financial services to save, borrow and protect themselves against economic shocks. The report showed a remarkable progress toward financial inclusion: Today, 69 percent of the global adult population has a formal account — whether with a bank or a mobile money provider — compared to only 51 percent in 2014. The data also points to an increase in the number of women who own an account: from 58 percent in 2014 to 65 percent in 2017, which means more women can make day-to-day transactions, invest in a business, safeguard their savings and plan for their futures.
However, despite these achievements, the global financial inclusion gender gap in developing countries remains. Our key takeaway of the 2017 Global Findex is that the private sector can play a key role in helping close the financial inclusion gender gap by supporting greater account ownership and usage among the women who make up the majority of workers in their supply chains.
On average, the financial inclusion gender gap today is 9 percentage points in developing countries, the same as seven years ago. In some countries, such as Bangladesh, Pakistan and Turkey, the gap is even higher — close to 30 percentage points. Overall, in developing economies, only 59 percent of women own an account and only 18 percent of them are saving at formal financial institutions, compared to 67 percent and 24 percent of men, respectively.
This gap persists because women are more likely to have lower literacy and digital literacy rates, lack the required documentation to open accounts and are less likely than men to own a mobile phone or have internet access. In addition, pervasive gender norms still discourage women from accessing and using financial products and services.
It's time for the private sector to step up to help address this. One key lever is for companies that source from developing countries to invest in female workers in their supply chains by providing financial literacy training, connecting them with available services and focusing on confidence-building to encourage women to take control of their finances. In addition, global brands can support their suppliers to make the switch from cash to electronic payroll.
Brands can use their influence and relationships with their suppliers to improve the financial inclusion of female workers. In the private sector, 230 million unbanked workers are still being paid in cash. Moreover, 20 percent of account owners reported having an inactive account.This data points to the need for providing not only access to bank accounts but also for supporting active usage.
Digitizing wages in industries that primarily employ women, such as the footwear, textile and garment industries, and using the workplace to provide women with the tools to take control of their finances significantly can contribute to addressing this.
In 2013, BSR launched HERfinance, an initiative to ensure that the poor — particularly women — have the proper knowledge, skills and attitudes toward financial services, enabling them to participate in the formal financial sector. The workplace-based programs focus on building the financial capability of workers and promoting greater uptake of financial products and services. In addition, in 2015 we launched the Digital Wages program with the support of the Bill and Melinda Gates Foundation to drive financial inclusion by digitizing salary payments in global supply chains in industries where women make up most of the workforce.
In Bangladesh, we are working directly with more than 50 garment factories to support their transition from cash to digital payroll, allowing workers to receive their wages instantly and transparently in formal bank accounts. As of mid-May, the program has contributed to new accounts and training for 150,000 workers, 65 percent of whom are women.
After going through the HERfinance training, women in India were 23 percent more likely to say they decided what to do with their salaries and 36 percent more likely to save a portion of their salaries in a formal bank account.
Here are some actions leading companies can take to promote financial inclusion:
- Provide financial capability training for all workers to have the knowledge, skills and attitudes to fully participate in the formal financial sector;
- Encourage suppliers to improve financial inclusion of workers, such as by enabling access to financial products and services or digitizing wage payments; and
- Collaborate with suppliers and other brands to advocate for broader financial inclusion of workers.
At our current pace, it will take 18 years for all women to be financially included, according to our calculations. We believe that women should not have to wait this long to fully participate in the formal financial sector. Now is the time for brands to help close the gender gap by ensuring that the female workers in their supply chains can reap the fruits of financial inclusion.