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The Gendered Reality of Finance in India

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Despite active progress globally towards universal financial inclusion, approximately 1.7 billion people are estimated to be unbanked across the world. Of those who are unbanked, women, in particular, are structurally excluded for multiple reasons. The advent of technology in finance is believed to be a game changer for women’s access and usage of financial services, with the potential to overcome the traditional barriers faced by women. In this context, this blog series draws from a survey of secondary literature on women’s access to finance and technology, to consider the impacts of the gender gap in technology and finance on women’s access and usage of financial services in India. In doing so, it seeks to set the context for adding a gender lens to the discussions on financial inclusion and digital financial services in India. The first post in the series gives an overview of the gender gap in access and usage of financial services in India and the landscape of digital financial services.

The World Bank’s Findex Report 2017 observes that the gender gap in finance is persistent at 9 percent in developing countries (Demirgüç-Kunt, Klapper, Singer, Ansar, & Hess, 2017). The gender gap in finance is the difference between the percentage of men and the percentage of women who own bank account (Demirgüç-Kunt, Klapper, Singer, Ansar, & Hess, 2017). The Findex Report also reveals that there has been a large jump in female account ownership in India between 2014 and 2017. As a result, the gender gap in finance reduced substantially from 20 percent to 6 percent, with a major reason for the improvement being the strong government push to increase account ownership through biometric identification cards (Demirgüç-Kunt, Klapper, Singer, Ansar, & Hess, 2017).

Despite the huge jump, only 77 percent of women in the country own an account as against 83 percent men (Demirgüç-Kunt, Klapper, Singer, Ansar, & Hess, 2017). In any case, access does not always equate to use. India’s account dormancy rate is nearly double than what they are in other markets (El-Zoghbi, 2018). 48 percent of registered accounts in India remain dormant; the majority of which are women-owned accounts (Bull, 2018). According to the World Bank’s Findex Report 2017, only 6 percent of women in India have borrowed from a formal institution or used a credit card in the past year. Similarly, only 12 percent of the women received wages in the past year against 29 percent of men (Demirgüç-Kunt, Klapper, Singer, Ansar, & Hess, 2017). This appears to reveal that there remains a significant gender gap when it comes to the usage of financial services in India.

Barriers to access and usage of finance for women

All the literature on gender and finance agree that it is more difficult for women to gain access to finance than men. Women in South Asia access less than 10 percent of the formal finance (Narain, 2009). Along with the constraints faced by their male counterparts, women’s access is further restricted by factors such as culture, lack of collateral (because land and property are often registered in men’s name), women’s relatively lower income level and financial institutions’ inability or disinterest to design appropriate products and outreach strategies for women (Narain, 2009). Key barriers for women’s access and usage of financial services in the existing literature are social norms and customs, being out of labour force, lack of infrastructural facilities, laws and policies, lack of resources, general and financial illiteracy and intra-household bargaining (Gammage, et al., 2017). Three major factors underpinning these barriers that emerge from the literature are discussed here.

Social Norms and Cultural Factors:

Social norms and other cultural factors pose a big challenge in making finance accessible to women. Norms such as limiting women’s ability to work outside the home, engage with male agents, or even own a phone are prevalent in India (Burjorjee, El-Zoghbi, & Meyers, 2017). Female illiteracy is as high as 35 percent in India (MoSPI, 2011). The Indian Human Development Survey reports that 74.2 percent of Indian women need permission to visit a health centre. Further, 58 percent of women reported that they needed permission to visit the local Kirana (grocery) store in 2012, compared to 44.8 percent in 2005 (Desai, Reeve, & NCAER, 2015).

Lack of Property Ownership:

Women in India tend to have weaker rights over property due to existing norms, traditions or religious practices, even if laws and policies in India are changing to avoid intentionally creating barriers for women to access institutions or property (The World Bank, 2018). Indian society is predominantly patrilineal and patriarchal which leaves little room for women to assert their rights (Kelkar, 2011). Lack of ownership and control of assets significantly affects women’s creditworthiness and ability to secure collateral.

Low Participation in Labour Force:

The female participation rate in the labour market has a positive and significant coefficient on the female-to-male ratio of having a bank account, using it for business purposes and using it to receive money for work (Morsay & Youssef, 2015). This means women’s participation in the labour force can have a positive impact on their access to finance. As employees with regular income, women would be part of formal financial service to receive payments, save for the future or due to their higher need to avail credit.

Out of the total unbanked adults in the developing world, 47 percent are out of labour force. Among the unbanked, women are more likely than men to be out of the labour force (Demirgüç-Kunt, Klapper, Singer, Ansar, & Hess, 2017). Only 25 percent of the total female population in India is part of the labour force (The World Bank, 2018). Women’s work is often overlooked or not counted as they tend to be more active in household work and not directly contributing to market activities (Staveren, 2001; Chaudhary & Verick, 2014).

Why is it Important to be Gender Inclusive in Finance?

There are several reasons to make financial services accessible to everyone. Fundamentally, it is necessary to empower women in society. In addition, there is also a case for gender inclusivity for reasons of efficiency and overall development.

Essential for Reducing Poverty:

Theoretical studies aimed at analysing the effect of access to finance on income inequality contend that financial market imperfections are the most crucial reason for the creation of inequalities in income and the persistence of poverty (Bae, Han, & Sohn, 2012). Achieving gender equality in access to finance is vital to unlock resources for economic empowerment to a large segment of society. Lending to women can reduce poverty at a higher rate than to men as there will be a higher increase in household consumption if credit is lent to women. It will improve the household living standards (Staveren, 2001). Gender inequalities in access to finance can result in the prevalence of informal sources of finances and create a barrier for sustaining financial sectors reforms as a section of the population gets excluded. Resorting to informal finance sources can lead to over-indebtedness and lack of appropriate economic opportunities for women. (Morsay & Youssef, 2015).

To Ensure Market Efficiency:

Banks tend to discriminate women against men in credit offerings perceiving it to be less profitable because they tend to seek smaller and more regular loans. Many studies and analyses prove that credit markets are operating inefficiently when they discriminate women (Staveren, 2001). Evidence from studies indicates that women save more relative to their total income than men, repay loans at a higher rate, buy more products per capita, and are more loyal to their bank if they are satisfied with the customer service environment. It proposes that there is enough economic reason for financial institutions to do business with women (Villasenor, West, & Lewis, 2016).

Addressing the gender biases in financial systems is crucial. It would otherwise reinforce the inequalities between women and men. Financial exclusion of women can result in GDP growing very slowly or even declining at the macro level due to the reasons mentioned above. And at the micro-level, this means increased poverty for households and individuals, both in terms of reduced income and increased time in poverty, especially among women, as individuals struggle to work longer hours to make up the family income (Staveren, 2001).

The Digital Financial Services Landscape

Technology has become a large part of our financial landscape. It has reshaped various dimensions of how financial services are accessed and used. A global study by Capgemini, based on a survey of customers of financial services across 15 countries, found that consumers are embracing new FinTech providers (Capgemini, 2017). 50.2 percent of respondents globally said they do business with at least one non-traditional firm for banking, insurance, payments or investment management, with the percentage reaching the highest (58.5 percent) in the Asia-Pacific (Capgemini, 2017; Consumer International, 2017).

The Findex Report 2017, for the first time, has a section dedicated for “Increasing financial inclusion through digital technology” (Demirgüç-Kunt, Klapper, Singer, Ansar, & Hess, 2017). It indicates the increasing importance being laid on digital financial services (DFS) to address the problems of financial inclusion. DFS has the potential to remove the spatial constraint to access financial services and make them more affordable, and it is also expected to close the existing gender gap in financial inclusion (Gammage, et al., 2017).

Some early evidence shows that DFS has mixed impact on making finance accessible to women. The positive effect of DFS on gender and finance has been seen in the Kenyan context. According to Kenya’s 2015 Financial Inclusion Insights (FII) survey, 68 percent of women and 75 percent of men had a mobile money account. M-PESA (the mobile money system in the country) has proven to lift people out of poverty, and this impact is seen to be more prominent in households headed by women (Suri & Jack, 2016).

However, there are indicators that outcomes may not be positive for women as well. Another study conducted in Kenya to measure the economic impacts of social pressure to share income with kin and neighbours found that women tend to conceal the size of their income even if it may reduce their expected earnings. This indicated that they were willing to forgo a portion of their earnings to keep their income hidden from their kin and kith (Jakiela & Ozier, 2016). This may significantly affect the uptake of DFS by women due to the privacy and transparency concerns associated with women’s technology usage. This is particularly relevant to cultures in India, where digitisation may result in reinforcing the gendered segregation of private and public, unless done carefully and may lead to further restrictions on mobility and autonomy of women (Aneja & Mishra, 2017).

Currently, although awareness of non-traditional providers is growing in India, adoption of digital financial services is still nascent. The Findex Report 2017 reveals that only 3 percent of men and 1 percent of women in India have mobile money accounts. Only 7 percent of men and 4 percent of women have used a mobile phone or the internet to access a bank account. Similarly, only 35 percent of men and 22 percent of women in India have made or received digital payments in the past year (Demirgüç-Kunt, Klapper, Singer, Ansar, & Hess, 2017).

The promise of technology for women’s usage of finance is that it may help overcome some of the entrenched barriers outlined in this post. However, the access and use of technology globally is also marked by underlying gender norms.

To gauge the effect of DFS on the gender gap in finance in India, it is essential to consider how gender impacts access and usage of technology. The next post in the series will attempt to discuss the gendered reality of technology in India.



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