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Financial Inclusion of Women: Empowering the global economy

Oct 12, 2018(12:11)
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Money boils down to be the crux of our lives. A majority of our life decisions are said to be focused either on earning money, spending money, saving money or investing money. Considering this, it appears more obvious why the banking sector has been booming in the recent times. But are financial services consumed by all participants of the society?  Well, not actually.

Women account for a little more than half of the total world population and yet, their contribution towards economy, growth, and wellbeing is minuscule. Women have always played the role of the primary caretaker and homemaker, giving her less time and scope to make a career and be financially independent. As reported by the International Monetary Fund (IMF) only 37% of women across the globe were recorded to be earning an income in 2017. Women still play an active role in managing the daily finance of their households, and it is highly notable the crucial financial decisions are usually taken by men. This prompts us to think about the underrepresentation of women at all levels of business across the globe and emphasizes the need to change. A major financial inclusion for women is the need of the hour.

But how do we achieve this? Let begin with considering the current international and domestic situation.

The Global Exclusion:

Research conducted by International Monetary Fund (IMF) highlights that the inclusion of women in the financial services as users, providers or regulators will facilitate in narrowing the gender gap, foster greater stability in the system and boost the economic growth.  It also highlighted, on an average in 2015, less than 2% of financial institutions across the globe had women chief executive officers and less than 20% of the executive board panelists were women. Moving to the other side of the table, the report highlighted, that only 40% of women on an average accounted for the global bank depositors and borrowers in 2016. On the other hand, nearly 75% of businesses across the globe have at least one woman in senior management, a considerable rise from 66% recorded in 2017. Concurrently, the senior roles held by women is proportionally low, claimed another report, bringing to light that businesses tick off the gender diversity box by just including women in management, instead of creating an inclusive culture.

The Indian Scenario:

As per the recently published Global Findex Survey, there was a sharp rise in the bank accounts held by Indian women from 43% recorded in 2014 to 77% in 2017. This could be attributed to demonetization and Jan Dhan Yojana, the government scheme of financial inclusion, which played a vital role in boosting the number. However, the report also indicated that women still trail behind in accessing the financial system as barely 17% of women are regular depositors, meager compared to the already low global counterparts and only 5% borrowed formal loans, while 30% Indian women availed informal loans from friends and family in 2017. On the other hand, nearly 11% of chief executive officers and 22% of banking sector employees in India are women, a good number compared to the global statistics. Considering other sectors, 20% of senior roles in India are held by women, higher than 14% and 17% recorded in 2014 and 2017, respectively.

Why the exclusion exists?

While the numbers might differ, the overall picture for both is painted in the same colors, a large portion of women population is in not included in the financial systems, and only a small proportion of women work in the banking sector or avail banking services. One of the primary reasons for the lack of their representation is that a majority of women across the globe do not have formal employment, which renders them financially dependent. According to the World Bank, in 2017 only 26% of Indian women were involved in the workforce, as compared to the world average of 50%. An abysmal situation. It is even lower than the 35% recorded in 2005. Another report by IMF claims that India could become 27% richer if more women started working outside the household. If the gender gap in employment is narrowed, it will also bridge the gender gap in financial inclusion. Growth in the number of working women would also enhance the chances of more women occupying leadership positions. The previously mentioned research of IMF also suggests that bridging the gender gap in leadership can have a profound impact on the stability of the banks.

Apart from the historical impact of patriarchy, cultural stereotyping is a major demon acting against the financial inclusion of women. Stereotyping of women needs to be addressed at different stages across the world. There are several biases against women right from childhood to businesses.  Several measures have been taken, and various policies have been introduced to overcome these biases based on stereotyping. However, policy-making is not the only solution, implementation and constant practice are required, which is where most policies fail. For instance, the current strength of women in the lower house of the Indian parliament is merely 12%. On the other hand, we have a bill demanding 33% reservation of seats for women in Lok Sabha waiting to be passed for nearly two decades.

How financial inclusion can help

United Nations Development Programme in a recent article claimed small and medium-sized enterprises are 54% less like to default on payments as compared to men. Another interesting fact brought forwards was that women invest 50% less compared to men but make 20% more profits. This highlights how women are better at money management. On the same lines, an IMF report affirms that women are better risk managers. From the observed samples, the report claims banks with women leadership were more stable, had higher capital buffers, lower proportion of nonperforming loans, and greater resistance to stress.

The Way Ahead:

To put it simply, empowering women economically drives social progress and mobility. And to empower women, we first need to look at bridging the gender gaps in different aspects of the society. For instance, the gender gap in average years of schooling, the gender gap in wages, gender gap in employment, are only the tip of the iceberg. On the business front, comprehensive and actionable plans need to be devised to support and advance women, which further need to be regularly revised and updated on the basis of new insights. 

If explored deeply, the superficial challenges boil down to the actual challenges of lack of women empowerment, societal discrimination and lack of awareness. The collectively call for gender-inclusive financial sector policies. While some gradual streaks of changes are noted, this growth can further be catapulted by supporting women education, empowerment, and employment. According to a report published by the World Bank, Indian companies are biased towards men over women, both concerning hiring and salaries. Overcoming such inhibitions too would help to cover a large portion of the gender gap.

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Rajiv Singh

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