Using Digital Financial Services to Bridge the Gender Gap in Financial Inclusion

Apr 12, 2016
Tags :
  • Digital Financial,
  • Financial Inclusion,
  • Gender Gap,
  • Despite encouraging advancements in the number of first time bank account holders, a startling gender gap persists in financial inclusion as a result of a variety of barriers to access across the developing world. Bringing women into the formal financial sector not only empowers them directly but also leads to welfare gains for the entire household and the community at large. This blog lays out the empirical evidence linking empowerment of women to participation in the formal financial sector and explores the potential of digital financial services (DFS) as a means to deliver financial products and services.

    At present, out of the 2 billion unbanked globally, 1.1 billion are women. The problem is especially acute in developing economies with women 20 percent less likely than men to have a formal bank account and 17 percent less likely to have borrowed formally in the past year. In the case of Pakistan, only 3 percent of women are banked. There are many factors that shape this gender gap including a lack of financial literacy, informal or irregular sources of income,  the high cost of opening or operating a bank account, inaccessible bank branch locations or lack of government-issued identification documents required to open an account.


    Research indicates that there is a link between female empowerment and financial inclusion. In particular, financial inclusion can increase women’s productivity as well as personal consumption levels. For production purposes, financial inclusion can support women in earning a regular income and in enabling them to save, borrow and invest to advance their business or entrepreneurial activities. For consumption purposes, financial inclusion can help women directly influence how resources and money are spent and utilized within their households.  Increased access to financial services can also help women decrease their vulnerability by giving them opportunities to insure against risk or borrow to meet unexpected expenses.

    Financial inclusion of women can also promote collective socio-economic development through increased spending on education and nutrition. Evidence from various countries shows that children benefit more – in the form of increased spending on food and education – when household income is under the control of women. Up to 90% of women’s income is invested back into their own families compared to only 35% of men’s income. Ensuring that more women are financially included is thereby intrinsically linked to improving household welfare, and subsequently, in achieving broader development goals.


    Research conducted by Women’s World Banking shows that women value the ability to save above other financial services. According to a recent report, in spite of low or irregular earnings, women save 10 to 15 percent of their income for various short and long-term goals. The majority of industry experts interviewed by Women’s World Banking stated that “savings are the formal financial service most likely to appeal to women.”

    In the absence of any formal savings vehicles, women will often save through methods that are risky, volatile and unreliable, such as ‘under the mattress’ or through neighborhood savings groups. Women are forced to rely on these methods due to the barriers they face in trying to access safe spaces to save their money, such as a lack of financial literacy, lack of mobility or high costs of opening accounts.


    An opportunity to bridge part of the financial inclusion gender gap presents itself in the form of DFS innovation which can provide more accessible, convenient, private and secure means to save. New channels, such as mobile phones, can deliver low cost services through a digital medium mitigating some of the barriers related to identification, cost, and mobility. DFS also lends itself to more flexible savings products allowing those with small or irregular incomes to save frequently and in small amounts, and easily access funds in times of an emergency. By engaging with women more than traditional providers, DFS providers are also more likely to cultivate trust and develop financial literacy thereby creating a virtuous cycle.

    Two recent innovations exemplify how DFS can serve as a vehicle to bridge the gender gap. UBL Omni in Pakistan no longer requires a client to come in to record their biometric information to open level ‘0’ account (accounts with lower balances) and instead allows agents to digitally capture photos of the client and her ID at her home or business. This greatly simplifies the account opening processes for women that have less mobility.  In Kenya, the KCB M-Pesa mobile money wallet allows account holders to save at a smaller scale for a specific target (such as school fees) while earning higher interest and for funds to be dissolved immediately if customers need access to their savings. This illustrates how DFS products allow for more flexibility to help women meet their saving needs and preferences.


    Although DFS-based saving products can  help women overcome existing barriers to financial services, more needs to be done to develop sustainable and scalable financial services and products for low-income women. Greater efforts must be made to first address the ‘digital divide’ whereby women lag substantially behind men in purchasing and using mobile phones. In low- and middle-income countries, the gender gap in mobile phone ownership is 14% and in Pakistan that figure is even starker at 62%. Not only do DFS providers need to be incentivized to tailor their products to female consumers but a broader effort focused on bringing women over that digital divide is also required.

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