Viewpoint: Women’s Financial Inclusion Needs a Bigger Fix Than Digital IDs
IF WE WANT women to have the same economic opportunities as men, we need to improve financial inclusion. That means giving women equal access to the formal banking system and offering them services to manage their money that are more affordable than more casual arrangements.
India, with its well-known comparative advantage in I.T. services, has been attempting to boost financial inclusion by linking its digital unique identification (UID) scheme, Aadhaar, with access to bank accounts. But will it actually succeed in increasing women’s participation in the formal financial sector? The answer is not obvious.
To judge the potential for UID systems to improve financial inclusion, we first have to ask what prevents women (mostly in South Asian economies) from holding bank accounts.
A tentative answer comes from the Global Findex Database maintained by the World Bank. The data clearly shows lower participation in formal banking among women relative to men, particularly in the South Asian region. This gap is as large as 18 percentage points for the region and compares unfavorably with the 7 percentage-point gender gap in account ownership worldwide.
The data also seems to show that institutional reforms can, indeed, change savings behavior. The Global Findex reveals a large jump from 35 percent of the population holding bank accounts to 53 percent between 2011 and 2014. During the same period, there was also an 8 percentage-point rise in internet penetration. So, one obstacle to opening bank accounts is a lack of internet access. It would follow that improving access to online services can boost access to banking for those who are currently excluded from formal financial systems.
Photo courtesy of Biswarup Ganguly.