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How providers can help close the financial gender gap- Report
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Bankable Frontiers Associates (BFA) has on Tuesday released a report exploring why women in emerging economies don’t access and use formal financial services to the same extent as their male counterparts.
BFA is a global consulting firm specializing in the development of financial services for low-income people around the world.
Through the analysis, the report identifies leveraging women’s social networks, tailoring tools to manage day-to-day transactions, and creating new digital, branchless platforms as some of the steps needed to better cater to this segment.
It is estimated that 1.1 billion women around the world are excluded from the formal financial system1—55 percent of the global number of unbanked individuals.
In developing countries, women lag men by 9 per cent when it comes to access to a bank account. The report hailed Kenya’s mobile money innovations and agent networks recommending that financial service providers in other emerging economies should adapt these into their product designs.
The report further indicates that leaving women out of the formal financial system is not just bad for women but also bad for business because women as a segment represent an important market opportunity.
Although we have made great strides to expand access to financial services through new technologies and innovative business models, the gender divide stubbornly persists in most emerging markets
-Tilman Ehrbeck, partner at Omidyar Network.
“This report highlights the importance of designing products and services that take into account behavioral insights as a key piece in cracking this issue. The reality is that traditional bank accounts just aren’t that useful for a lot of women who move in and out of the workforce, earn very little money, and are typically managing day-to-day cash flows rather than big, long-term investments with their savings,” explained Julie Zollmann, senior associate at BFA and co- author of the research.
“For financial service providers, this means building even lower cost tools to solve women’s money problems.” She added
| Behavioral Finding | Product Design Recommendation
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| Women play defense in the household, doing a lot of backstopping, stretching budgets, and stepping in when men do not meet expected financial obligations. While men are culturally expected to play offense, being responsible for growth-oriented investments that position the family for future prosperity.
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Offer better tools to manage day-to-day transactions and flexible financing to address stretching and gap filling needs |
| Women’s networks tend to be horizontal—which can be limiting when it comes to monetizing relationships. While men tend to pursue more vertical social networks, preferring to build relationships with those of higher standing, who might be able to offer them new job connections, investment opportunities, etc. | Leverage women’s social networks as a channel to offer new opportunities. Exposure to
new earning and investments are opportunities for growth.
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| Women tend to earn lower incomes than men and to move in and out of the workforce several times over the course of their lives. | Build financial services that cater for smaller balances and transaction sizes. Digital
channels can reduce costs enabling such services to also make business sense.
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| Women have less incomes therefore smaller savings balances and loan bearing capabilities |
Providers might consider offering blended financing products that combine elements of different product types—savings, credit, insurance, remittances/payments—into a single unit, helping clients with liquidity challenges to pool financing resources around substantial needs. These are not bundled products in which, for example, insurance comes with a loan; instead, these are new products that combine functions to serve a single customer need. For example, one might offer a crowd funding solution for parents raising money for university fees that also includes a credit component, bridging a gap if the target is not fully reached by the time fees are due.
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| Some of the most compelling use cases driving adoption of existing financial service products for men—like receiving a formal salary, borrowing for business investments, insuring for big things like hospitalization and death, and borrowing for land and housing—are less likely to be relevant for women. | New services can be designed to ease some of the stresses women face in the financial responsibilities they are expected to manage within the household, which often involve higher frequency, lower value transactions, like daily shopping and outpatient medical care. Here, providers can pay more attention to how they can offer short-term nano credit, leverage loyalty points on debit card usage, offer layaway options for things like clothing and shoes, and offer flexible forms of financing directly at schools and clinics, where women are eager for just-in-time solutions. Thinking creatively about a full spectrum of financial services that help women manage risk can benefit women; insurance is just one tool, and isn’t always the best one for small, temporary needs. |
| Contributions—monetary and in kind—that many women generate via their social networks are an important asset | We believe it might be possible to help this redistributive financing mechanism work even better by offering multipayer accounts, whereby remitters can more directly support women’s projects, like paying for construction materials or paying off a construction loan, paying for secondary or tertiary school fees for a child, helping a woman finance farm inputs or purchase an important asset like a solar unit or refrigerator. Inviting remitters to contribute directly may encourage larger, timelier contributions. These kinds of solutions do not replace individual and private accounts, which
women also, understandably, value. They could just be one additional tool to help build more effective overall portfolio |