Best Way to Empower Women? Help Them Open a Bank Account
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Best Way to Empower Women? Help Them Open a Bank Account

Including the 1 billion women who are still unbanked in the financial system is a must. Engaging in women is a crucial step to the advancement of families and societies as a whole, and results in sustained economic growth.

The number of people excluded from the financial system has dropped by 20 percent since 2011 to 2 billion worldwide. When including the population growth during this period, it means around 700 million people opened a bank account. The gender gap, however, remained unchanged at 9 percent in the developing world. This means that, despite overall progress, approximately 1.1 billion women are still unbanked. They indeed face greater financial exclusion in every region and across every income level across the world: Only 9 percent of women in the Middle East/North Africa have access to financial services compared to 19 percent of the men. The gender gap is the largest in South Asia, where 55 percent of men have an account but only 37 percent of the women.

Account penetration by gender

Account penetration by gender

Source: The Global Findex Database 2014

Why Financial Inclusion Matters for Society

Expanding financial inclusion has a profound impact on overall economic growth and community development. "At the macro level, expanding financial inclusion increases GDP growth and results in greater labor force participation," said Karen Miller, Chief Knowledge and Communications Officer at Women's World Banking, a global non-profit organization aiming at giving more low-income women access to financial services. The International Monetary Fund (IMF) estimates that the global economy has missed out on 27 percent of GDP growth per capita as a result of the existing gender gaps in the labor market. Raising female employment rates and education in the Middle East and North Africa could add 1 to 2 percent to those regions' annual GDP. At the micro level, financial inclusion of women leads to a significant increase in financial capability and in the social stability of families and individuals, which in turn has a positive impact on society as a whole.

It Also Greatly Matters for the Women Themselves

When you do not have access to a bank, you are forced to conduct all your daily transactions by barter or cash. This cash is subject to theft and is within easy reach of family members and friends asking for money that will in many cases never be paid back. A cash-only society can also entail traveling long distances to carry out business, taking valuable time away from education or work. Women and in particular girls are also at greater risk when carrying cash. "Access to saving accounts, insurance and pension plans allows women to protect their family and business from unexpected risks, including health emergencies, without decapitalizing her business or using money allocated for food and housing," Miller explained. "Studies show that when a woman controls her own finances, she invests in the health, nutrition and education of her family – investments that drive intergenerational improvements and have an exponential effect on the prosperity of communities," Miller added. As all these facts clearly show, financial inclusion makes a major difference for women, and men.

Back-to-Basics Approach Needed

But how could these 1.1 billion women – mostly low-income earners – realistically be reached? The easiest way ahead for financial institutions is probably to adopt a back-to basics approach. The world's unbanked women need access to savings accounts, loans, insurance and pension plans. "Instead of dreaming up new financial or mobile products and hoping women will find their way to using them, private-sector players would have better luck – and bigger profits – if they were to reach out to women to find out what they need most, and then customize their existing products and services to help make their lives easier, more secure and more prosperous," Miller explained. Digital financial services are key to achieving full financial inclusion and also present an opportunity to overcome many of the barriers women face. These include the lack of ID documents needed to open an account, the lack of financial independence and thus money, the fees linked to holding an account… 

Barriers cited for not opening a bank account

Barriers cited for not opening a bank account

The Global Findex Database 2014

The recent growth in user-friendly digital financial services has had a tremendous impact on improving financial inclusion. The banking industry plays a significant role in making savings accounts and insurance more widely available to women through digital channels. "Such services are especially well-suited for women, as they address their needs for confidentiality, convenience and security," Miller noted. Diamond Bank, Nigeria's 6th largest commercial bank, has for example discovered a winning formula through its BETA savings product, said Miller: "This no-frills savings account allows clients, many of them low-income women, to make small deposits at their convenience through their mobile phones, and it does not require a minimum balance or impose fees." Greater cooperation between banks and mobile network operators as well as other private actors such as investment companies and insurance agencies, could lead to many additional low-income clients. Getting mobile phones into the hands of the 1.7 billion women around the world that do not yet own one would also help to eradicate financial inclusion at a faster pace.

Empowered Women Good for Companies in General

Focusing on women clients is indeed good for financial institutions. A study commissioned by Women's World Banking showed that there is a statistically significant correlation between the percentage of women clients and portfolio growth, client growth, return and credit. Focusing on female clients leads to outperformance of growth, return and credit quality for financial institutions, according to this study. Gender diversity in the management is also good for business. The Credit Suisse Research Institute's study "The CS Gender 3000: Women in Senior Management" that analyzed more than 28,000 senior managers in over 3,000 companies with a market capitalization exceeding 10 billion US dollars, showed that companies benefit from increasing leadership opportunities for women. Greater diversity in boards and management were empirically associated with higher returns on equity, higher price/book valuations and superior stock price performance. The message is clear: female leaders and female clients result in societal and business advantage. No wonder then, that Credit Suisse supports Women's World Banking's Leadership and Diversity for Innovation Program, which aims to equip leaders of financial institutions with training and tools for innovation to better serve women clients.