Let’s close the gender gap in financial inclusion in India

Imagine it’s the end of the month and your housekeeper needs to be paid. If you look beyond the mundane nature of such a transaction, you will quickly notice a gender divide in financial choices and behavior. To give you an idea of ​​the problem with this gap, let me share a recent anecdote.

Before the pandemic hit, I was paying my housekeeper, Asha, in cash. She has a savings account in a nationalized bank and occasionally receives money transfers from the government into this account. For the past year, lockdowns have restricted our visits to ATMs, so I asked Asha if we could transfer her paycheck directly to her bank account through a payment app. She refused and asked me to send the money to her son or husband’s account as they have smartphones and actively use payment apps, while she has neither one nor the other. She also found it intimidating to go to a bank or ATM without a male relative. After asking, I found out that this was a common story in most households in my housing company. What they handle most easily is cash.

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The gender divide

Statistics tell a similar story. The India Debt and Investment Survey (AIDIS) administered by the National Statistics Office provides an important measure of financial inclusion in India. The most recent survey (2019) includes data disaggregated by sex, which is a useful measure of how women own and use various financial instruments. According to the survey, 80.7% of women in rural areas and 81% in urban areas had deposit accounts in banks. This is an improvement over the 77% of women who have bank accounts in India, as reported in the latest Global Findex report (2017), which examines a similar demographic sample. The gender gap in holding bank accounts has narrowed in recent years with the launch of Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts. Currently, just over half of Jan Dhan account holders are women. But access to financial services per se is not financial inclusion.

According to various research reports, 55% of women are still not actively using their PMJDY accounts. Women from low-income households usually save small amounts of cash at one or more places in their home, in funds / bishis, and with their employers, friends and relatives. In addition, India has one of the lowest female labor force participation rates in the world, at less than 20%, after dropping to almost 16% in the second quarter of 2020-2021, hit by the pandemic. Low use of financial services can be attributed to low labor market participation and low income.

When it comes to embracing digital financial products like credit cards, debit cards, and payment wallets, the disparity between men and women is glaring. According to the AIDIS survey, 20% of rural women said they had debit or credit cards, compared to 64% of men. There is a 17% gender gap in card possession, even in urban areas. This is intriguing, because all PMJDY account owners should have a Rupay debit card.

Another reason for the slow adoption of digital financial services by Indian women is the gender gap in mobile device ownership and mobile internet use. In India, women’s mobile phone ownership is 20% lower than that of men and mobile internet use is 50% lower. Moreover, only 14% of women in India own smartphones. This significantly discourages the access and use of mobile digital financial services by women.

On the credit side, the loan refusal rate for women-owned businesses is 2.5 times higher than for men. Lack of collateral, difficult access to a guarantor, weak property rights and various cultural barriers collectively prevent them from benefiting from loans for productive purposes. The very anticipation of rejection discourages even women from applying for loans. For financial service providers, the perceived risk of lending to women is often greater than the actual risk. In addition, certain cultural norms exclude some women from using formal financial services. Women in low-income households often leave their phones at home when they go to work, have little digital literacy and do not have complete autonomy in using their phones. Such unfavorable practices make telephone transactions, transfers and loan repayments a major challenge for them.

The financial inclusion of women can have a huge impact on their households as well as the country’s economy. Women in emerging economies reinvest 90% of their income in human resources such as education, nutrition and health.

There are three approaches we could take to effectively bridge the gender gap in achieving financial inclusion: Design gender-responsive products, create a network of female correspondent banks, and publish gender-disaggregated data on inclusion. financial.

Designing better products for women requires a customer-centric approach, where providers begin by identifying and understanding how women use and interact with money, financial products, and technology. Design elements such as vernacular communication and voice and video tools can reduce friction for women in their use of digital financial products.

To mobilize small savings, we must make banking products known and offer them to women users of the last mile, for whom a solid network of female correspondent banks (CB) would be of major help. They are widely regarded as accessible by clients, who would be willing to entrust them with sensitive financial information.

Finally, the periodic publication of sex-disaggregated data on various parameters of financial inclusion can help track the gender divide and also advocate for gender-sensitive products.

Monami Dasgupta is responsible for research initiatives at D91 Labs

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