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Integrating behavioural dynamics to step up women’s input in financial services

In the past century, women have achieved remarkable success in social, political and economic circles, however, many barriers still exist for low-income women in developing world. A joint analysis by the World Bank and UN women found that poverty itself is sexist. They identified unexplained differences in how gender played a role in poverty as more than 5 million women as compared to men were living in extreme poverty globally, especially in South Asia and Sub Saharan Africa.

Challenges that women face are complex and multi-dimensional. However, economic empowerment through financial inclusion has proved to be a cross cutting solution with broad impact enabling them to move from oppression to opportunity.

Financial inclusion might be the most rational, effective and sustainable place to start to improve the lives of millions of women and girls in developing countries. It has been concluded that women spend, save and invest money in profoundly different ways than men. One of the key differences is that women tend to invest in their families when given the opportunity to be in charge. They tend to save for children school fees, health emergencies and other unanticipated economic shocks. Thus, access to convenient, affordable and secure financial services can have a multiplier effect on the well-being of household for generations. This is where providing a safety nets through microfinance and insurance becomes a financial priority for low-income women. Microfinance is a viable option as it doesn’t involve charity rather a sustainable solution for both women in business as well as the financial institutions. Thus, having reliable access to basic financial services like credit, insurance and savings has shown to give women control over their household decisions and lives.

However, women’s lack of engagement with financial services is exacerbated by disadvantages unique to women in developing countries. These women have lower awareness of financial services, lower levels of financial and digital literacy and lower phone ownership. In addition to these economic issues they also face social and cultural barriers that limit their use of technology and finance. As a result, the existing gender gap in many developing countries is in double digit, currently 27.6% in Pakistan, according to Global Findex.

Why are women still struggling with financial inclusion?

Only 7% of women in Pakistan have access to an account at a formal financial institution as opposed to 35% of men. Financial institutions need to understand that men and women interact with financial institutions and services in a different manner. Yet financial institutions rarely consider these differences when designing strategy and services. Formal financial institutions do not adequately appreciate the women’s role in savings as a life goal for low-income women. Research has shown that low-income women are inherent savers, managing to save 10-15% of monthly income on average despite low and often irregular income levels. They need financial services tailored for women and train staff to serve women in order to encourage women to access and use financial services. Previous research has shown that adding local perspective to service design, marketing, policy and other efforts refines the strategy and adds immense value.

 

One common example of failure to propose loan service for women in small business is the attached guarantee requirement with micro loans. Thus, major reason for lack of credit for women is the absence of collateral. This should not stop women from borrowing, thus, designing a cash-flow based lending approach will prove to be more effective to reach low-income women in business. Another tested approach to establish credit score of women who lack proper documentation and credit history with a formal financial institution is to use utility bills or mobile credit top up history to assess credit worthiness.

Moreover, the problem is not just the financial services but the distance to these services. There are two type of distances between women and financial services; physical and emotional. Physical distance is a barrier reported consistently mainly because women spend most of their time at or closer to home than men do, thus, placing a higher premium on convenience. This becomes a problem especially in rural areas with limited infrastructure. Whereas emotional distance is what women feel when they interact with financial institutions as they perceive that the financial services offered do not sufficiently represent their interests or needs. Hence, inaccessible and off-putting for women.

The case of JazzCash highlights the issue of social norms acting as barriers. Their product uptake and usage remained low despite the program targeting women specifically. Women’s World Banking found that JazzCash used male agents in their agent networks to acquire new customers and signup required the customer to provide some personal information like phone number. Pakistani women did not feel comfortable sharing the information with a male agent, thus, increasing emotional distance. As a corrective measure, Jazz activated a network of female retail agents in partnership with Unilever. This enhanced the trust and also tested for incentives and women-centric messaging to encourage referrals to be used as a channel for further client onboarding.

Pakistan’s progress in financial inclusion has been slow and the country is not on track to meet the 50% goal of financial inclusion by 2020. It needs to focus on well-designed financial services that are accessible and easy to use and appealing to both men and women alike. It is also essential to know that reaching women requires sustained institutional commitment. When targeting women and youth, the strategy must also target parents/guardians and male counterparts in order to be successful. As bringing together all stakeholders creates greater customer loyalty and sustainability for the institution. This has the potential to expand financial institutions customer base exponentially. Therefore, the private sector also needs to work with policy-makers to create a robust conducive environment that addresses challenges faced by women for greater socio-economic prosperity.

The writer is a Research Associate — Sustainable Development Policy Institute (SDPI)

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