November 30

Sarah Morgenstern

New Pathways to Financial Inclusion for Low-Income Women

Developing countries have made great strides on financial inclusion in recent years, and these efforts are changing lives. Between 2011 and 2014, 700 million people globally gained access to their first formal account. While this represents an important step forward in the aggregate, progress has not been uniform. In particular, the financial inclusion gender gap has proven stubbornly persistent. Per the same data, from the World Bank’s Global Findex, about 1.1 billion women remain left out of the formal financial system. That means that 55 percent of the global unbanked are women, with the gap being as large as 18 percent in South Asia countries on average.

With the magnitude of the financial inclusion gender gap now well established, a growing body of research is digging deeper into why women in emerging economies don’t access and use formal financial services to the same extent as their male counterparts. A new study by Bankable Frontier Associates for Omidyar Network seeks to contribute to this dialogue, and offers practical suggestions to financial services providers in designing products and services to meet the needs of low-income women.

Titled “A Buck Short: What Financial Diaries Tell Us About Building Financial Services That Matter to Low-Income Women,” the report analyzes real women’s stories and their detailed cash flows over time from financial diaries data collected in Kenya, India and Mexico, and mines that research for insights into the social and cultural dimensions that make women’s financial behavior different from men’s.

For example, low-income women often experience large interruptions in their financial lives when they are forced to stop working during their childbearing years. Furthermore, women’s formal income streams tend to be lower and less predictable, with men more likely to earn salaries from full-time work and women more commonly receiving remittances from the government, family or part-time jobs. As a result, women may benefit from financial services that cater to smaller balances and transaction sizes.

In addition, low-income women’s financial lives tend to be more geographically restricted than men’s, with a larger portion of their earning and spending activity happening within a tight radius around their family lives. In Mexico, for example, 82 percent of women’s total spending took place inside their communities, while 57 percent of men did more of their total spending more than a 30-minute walk from home.

Branchless banking, widespread agent networks and digital solutions might all be helpful in addressing these access limitations (although the promise of these digital financial solutions themselves is constrained by other technology “gender gaps”; a 2015 GSMA study found that women are on average 14 percent less likely to own a mobile phone than men).

The “Buck Short” report also provided a couple of other insights regarding low-income women’s money management practices, including:

  • Social networks of low-income women tend to be horizontal while men’s are vertical (i.e., men reach upward to relationships of higher standing where they benefit from opportunities not available to women, whose social affiliations are within their existing community). Given this finding, leveraging women’s social networks might be an effective channel to offer new products and services;
  • Financial priorities are “gendered”; while men are often tasked with growing their income through work and investments, women frequently oversee the household budget and are often forced to stretch and backstop to cover day-to-day expenses. This suggests a need for better tools to manage day-to-day transactions and flexible financing structures to address stretching and gap filling needs.

In short, the BFA report examines the lives of real women in developing countries to discover how we can begin to close the financial access gender gap. The challenges are undoubtedly complex and multidimensional, but we are optimistic that progress is possible if financial services stakeholders work together to innovate new channels, approaches, products and services. In doing so, we have the chance to bring hundreds of millions more into the formal financial system.


Sarah Morgenstern (@MorgensternON on Twitter) is an investment associate with Omidyar Network’s financial inclusion team.

Photos courtesy of BFA (Bankable Frontier Associates)

digital payments, financial inclusion, research