Jenny Johnston
Analyst, Investments

Include a Woman, Include a Generation

March 7, 2017

Growing up, I was a tomboy through and through. The youngest daughter of two, from a young age my father taught my sister and I how to throw a ball farther than the boys, how to fly-fish in the backyard, and how to introduce yourself by looking someone in the eye and shaking their hand—extend your hand with confidence and shake with a firm grip. I used this technique on the branch manager when my parents took me to our local bank to open my first bank account—I was 14.  It was only years later, when I traveled on my own and lived abroad, that I realized this wasn’t a common rite of passage for women in other countries, especially in developing countries.

As the world celebrates International Women's Day, an estimated 1.1 billion women are left out of the formal financial system—representing 55 percent of the global unbanked. The financial gender gap between men and women varies significantly in developing countries, but on average, 59 percent of men have a bank account, compared with 50 percent of women. In South Asia, the gap in account ownership is the largest of all surveyed regions, cascading 18 percentage points from 55 percent for men to 37 percent for women.

Omidyar Network has partnered with Bankable Frontiers Associate (BFA) to revisit financial diaries data collected in India, Kenya, and Mexico, in order to bring about a deeper understanding of the financial lives of low-income women in these countries. The resulting report, “A Buck Short”, uncovers demand-side insights and suggests compelling product design recommendations, so that financial service providers can play a larger role in addressing the financial gender divide.

Excluding women from the formal financial system is purely bad business. Research shows that women tend to be active savers and to have better repayment rates than men for certain types of credit. While financial institutions today do not appear to discriminate or intentionally exclude female clients, small barriers coalesce to make formal finance unappealing and impractical for many women in developing countries. The BFA offers concrete action items to financial institutions for being active stewards of change to eliminate the gender gap, including:

1. Cater to small, inconsistent incomes and offer better tools for managing day-to-day transactions and small-scale risks. Because women’s incomes tend to be lower than men’s and often depend on self-employment and transfers from government programs or remittances, they have less money available to mediate formally and have less capacity to absorb transaction costs. Providers, however, don’t need to create women-specific products. But rather, create flexible products—for example, savings accounts with fee structures that cater to small, inconsistent incomes—can solve an important access barrier for women as well as other excluded segments.

2. Be accessible. In some markets, women’s economic geographies are substantially smaller, closer to home, and more restricted than men’s. For instance, the study found that in Mexico, 82 percent of the value of women’s total spending took place inside their communities, while men did a greater proportion of their total spending farther away, at a distance beyond a 30-minute walk from home. I often witnessed this while living in rural Ecuador as well—rarely did women leave the community to conduct their everyday lives, while men made the extended trips into Quito to sell goods at the markets.

3. Help women better leverage their social networks. Our research found that men tend to pursue more vertical social networks, preferring to build relationships with those of a higher standing, who may be able to offer them new job connections, investment opportunities, or even new ideas. Women’s networks were more horizontal, with their circles consisting of female extended family members and women of similar socio-economic standing. For providers, this means the financial services that are offered to women’s groups have a better chance of achieving adoption and usage.

4. Offer services that support major life transitions, unexpected events, and building long-term wealth. While men in all three countries were culturally responsible for ‘playing offense’—being responsible for growth-oriented investments that positioned the family for future prosperity, women played defense in the household—doing a lot of backstopping, stretching budgets, and stepping in when men did not meet expected financial obligations.

While working with women from all over the world to help them earn their high school GED, my mom’s motto was always “educate a woman, educate a family.” I thoroughly believe that the benefit of bringing women into the formal financial landscape will have cascading benefits for generations to come.

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