The following post was first published by TransferTo and has been cross-posted here with permission.
Economic heroines: Empowering women in emerging markets using Digital Financial Services
In today’s society, it’s staggering that nearly 50% of women across the globe do not have access to formal financial services, lacking even the rudimentary tools to manage their money. Up until now, a large majority of women in emerging markets have been subjected to financial inequality, attributable to unfavourable social constructs, lack of access to adequate financial services and deficient financial literacy.
Now, taking advantage of the digitisation trend, an instrument like a basic mobile phone is a revolutionary tool for empowering women in developing countries and unlocking their financial independence.
A woman’s worth
Women are typically perceived to be the primary household coordinator, yet, still have very little financial decision-making ability within their own households or of their own hard-earned incomes. Consequently, women habitually set aside money furtively without their spouse’s knowledge, saving a larger proportion of their incomes for their household and family. Many have the tendency to plan for expenses relating to emergencies, health and school fees. However, whatever money saved is often done so through informal mechanisms, such as hidden at home in food jars, in clothing or under mattresses. This, of course, heightens the risk associated with cash, as it could be subjected to theft, misplacement or even degradation from insects.
Hurdles to overcome
The fundamental reasons behind women having limited access to formal financial accounts is largely restricted by:
- Legal and regulatory barriers: A lack of adequate documentation and identification to open formal accounts and having fewer assets to her name (i.e. to pledge to a bank). For example, in 155 countries worldwide, there is at least one law in place impeding women’s economic opportunities.
- Technological barriers: Fewer women owning or having access to even the most basic mobile phones.
- Cultural restrictions: Where in some countries, it’s legal for husbands to prohibit their wives from undertaking employment and earning a wage.
The World Bank estimates that global Gross Domestic Profit (GDP) suffers a loss between 10% to 37% by excluding women from employment. In emerging markets, losing this staggering chunk in GDP is a detrimental blow and impedes these nations from advancing. Those who can work face the ever-present gender wage gap, resulting in lagging behind their male equivalents.
Alongside these limitations, women lack the access to financial services and, in turn, do not possess the appropriate financial literacy and education to take power of their finances.
Digital financial services are giving women a voice
A ubiquitous solution to bring women in emerging markets up to the same speed as men is through digital financial services (DFS) – offering simple, reliable and quick methods of moving and saving money, particularly for those who are typically unable to reach traditional financial services. Mobile phone penetration has grown exponentially in the last few years, with 4.7 billion people owning mobile phones around the world. The power of mobile is especially life-changing in emerging markets and so, is the most suitable tool to make DFS accessible to all, regardless of location or wealth.
For women, DFS delivered through mobile are providing the necessary tools to maintain their households or support their businesses, and accelerate financial inclusion. In addition, savings are made formally, injecting funds back into the economy, lifting hundreds of thousands out of poverty and eliminating the risk of hiding and hoarding cash. Digital wallets are a favourable and trustworthy method of storing money and can be easily accessed through even very basic feature phones via SMS or USSD.
Education is key
Having adequate equipment is the first step to economically empowering women in emerging markets. The second is to educate this demographic to get the most out of DFS. Key industry stakeholders such as governments, NGOs and financial institutions, need to be openly promoting more opportunities for financial inclusion through legislation, sponsorship, education and training.
Teaching needs to be effective, and tailored towards demonstrating to women how DFS will improve their livelihoods, understanding fundamental financial processes, and visibility on how their funds are being used. With teaching women comes the notion of sharing information amongst themselves and their communities. Expanding the knowledge base through this ripple effect is exactly what developing countries need to advance economically.
AFI and TransferTo share a commitment to financial inclusion with TransferTo being especially interested in global remittances and de-risking issues. TransferTo President Eric Barbier is a key responder on AFI’s High Level Public-Private Dialogue (PPD) Roundtable twice annually, and TransferTo provides knowledge and content at working groups and other member events. Visit www.transfer-to.com for more information.