February 29

Michael Fryar

NexThought Monday – What Stands Between Women and Full Financial Inclusion?

On a recent visit to a village in the Morena district of Madhya Pradesh, I witnessed what could amount to a snapshot of the newly financially included in India. A line had formed outside a square concrete building with peeling pale blue paint – villagers waiting for the Central Bank of India Customer Service Point to open. They ranged from men with thinning gray hair, to boys whose bangs nearly covered their eyes, to women draped in strikingly colorful saris.

It is certain that many in the queue were among the more than 200 million Indians who have opened bank accounts since India’s financial inclusion push, Pradhan Mantri Jan Dhan Yojana, was launched in August 2014. Most, if not all, were there to collect a government transfer: These days, child scholarships, workfare payments, old-age pensions and other benefits are deposited directly into citizens’ bank accounts.

If that picture depicted the progress that India has made in advancing financial inclusion in recent years, what happened next revealed one of the persistent challenges. As a growing number of men from the village congregated to see the foreign visitors, the two women who had been at opposite ends of the line scattered, drawing their dupattas across their faces. Although these women had bank accounts, they still lacked full freedom to use them.




I was in the area to view a research project co-led by five economists, including Rohini Pande, a Harvard professor and co-director of Evidence for Policy Design (EPoD), and Charity Moore, EPoD India director. Evidence for Policy Design is a Harvard-based research collective that will also host an executive education course on financial inclusion in May. (Note: The author is an EPoD research fellow.) Their ongoing research being jointly conducted with IFMR Lead and J-PAL South Asia in 199 villages in Madhya Pradesh, including the Morena district, is examining the relationship between individual bank accounts and female empowerment.

Women in India are 50 percent less likely than men to own an account at a financial institution, so just opening a bank account is an important first step toward inclusion and empowerment. But simply having an account is not enough.

For one thing, three times more men than women are in the labor force, which means that women are less likely to have money to conduct banking transactions. India’s large-scale public works program, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), has given many women a chance to work outside the home, but when a woman’s wages are deposited into a single household bank account, a man – usually her husband or father – may still get the money.

Depositing MGNREGA wages directly into bank accounts they control could give women much greater say over family finances. Yet even when women own an account and have money in it, a lack of familiarity with the bank – and even more importantly, a lack of comfort in asking for help from male bank employees – can still be a barrier to account usage.

To address this, the team is also experimenting with providing trainings that help women understand how to use their bank accounts and teach them about the benefits of saving. The initial results from the field are encouraging. Pande says, “Women are keen to engage with the formal financial system but a whole host of factors inhibit their access. As India’s government ramps up its efforts for financial inclusion, it is an opportune time for regulators and government officials to provide financial providers incentives to design financial products that are responsive to rural Indian women’s needs.”


Related article: The Hard Facts on ‘Soft Data’


Pande has been studying the intersection of financial inclusion and gender for more than a decade; much of her work has focused on designing products to overcome the barriers that prevent Indian women from being more fully financially included, such as limited social networks and the restrictions on their mobility outside the house.

In a 2015 study, Pande, Erica Field, Seema Jayachandran and Natalia Rigol invited 400 women in Ahmedabad to attend an established financial literacy training program. They invited half to come by themselves and half to bring a female friend or family member of their choice who would receive the training as well. Four months later, all 400 women were more likely to have taken out loans than a control group of bank clients who weren’t in the program. But the women who were invited alone mostly used their loans for home repairs largely unrelated to their businesses, while those who were invited with a friend were more likely to use their loans specifically for business purposes. And strikingly, those invited with a friend had significantly higher household income and consumption levels, and were less likely to report their occupation as “housewife.”

These results suggest that the power of training may lie as much in building up women’s friendships as in building up their financial knowledge. Perhaps if the two women I saw at opposite ends of the line outside the Customer Service Point had been standing together, they wouldn’t have felt the need to slip away and disappear beneath their scarves when more men appeared.

From April 17–22, Pande and many other financial inclusion researchers and practitioners will discuss their work at Rethinking Financial Inclusion: Smart Design for Policy and Practice, a program offered by Harvard Kennedy School Executive Education and Evidence for Policy Design. She will deliver the opening lecture, “Who We Must Reach, and How Markets Fail,” and she will guide the course throughout, in particular giving small groups feedback on group projects-based financial inclusion puzzles participants bring to the course. This is the third year of a program that has attracted scores of participants from banks, microfinance institutions, NGOs and government ministries from around the world.


Michael Fryar


financial inclusion, microfinance