Gender inequality and financial inclusion

Financial institutions
Financial Economics
Gender Economics


Photograph: Joe Giddens/PA

Over half of women around the world are unemployed or not looking for a job. According to researchers, gender inequality causes a 15% loss of income in OECD member countries and almost 38% in the Middle East and North Africa. Women also earn on average 27% less than men and are more likely to be self-employed or in precarious jobs, particularly in developing countries. Sadly, the list of gender inequalities could continue.

It is nothing new the large number of difficulties faced by women compared to men in various areas of their personal and professional lives. Here we will discuss one of them, that inherent to the financial markets. Despite being 50% of the world's population, women still lag behind men in access to and use of financial products and services.

World Bank data for 2011 show that globally only 47% of women had a bank account with a formal financial institution compared to 54% of men. In its last survey carried out in 2014, 58% of women and 65% of men had accounts. That is, while there has been significant progress in financial inclusion for men and women, there is a persistent gender gap that remained at 7%.

This gap is even greater in developing countries (low and middle-income economies). There, the difference between men and women with a bank account in 2011 was 9% (37% of women compared to 46% of men). Three years later the gap was still 9%, with 50% of women compared to 59% of men. Progress in financial inclusion does not seem to be able to overcome this gap and millions of women are still excluded from the benefits of greater financial inclusion.

The causes of financial exclusion in women are diverse. For example, studies carried out by AFI and Women's World Banking reported lack of financial literacy and knowledge as a key constraint on women's access to and use of financial services. OECD surveys show that, in many countries, women in fact demonstrate less financial literacy than men and also have less confidence in their financial knowledge and skills.

The challenge of improving women's financial capability is reinforced by the fact that two thirds of the world's illiterate people are women. Financial institutions speak an already complicated language that makes it even more difficult for women to access financial products and services according to their needs. But this "demand" approach is only one side of the problem, many other structural and normative inequalities deepen gender exclusion in finance.

For instance, it is well known that banks may be reluctant to provide services (mainly financing) to customers without traditional collateral. Globally, only a small fraction of the land is owned by women, making it increasingly difficult for them to provide collateral. Thus, the expansion of co-titling and individual titling for women is a critical but often not discussed issue in gender debate.

In addition, there is a particular lack of formal identification in women, which is greater than in men. That is, according to research, women are less likely than men to have a formal identification, a minimum requirement for opening accounts in formal financial institutions.

Looking ahead, the limited ownership of mobile phones and SIM cards should be highlighted. Of 2.9 billion mobile-owners in low and middle income economies, only 1.2 billion are women. This will certainly have its consequences in the financial exclusion of women, especially since most financial institutions have begun to offer their products through digital banking channels.

Several public policies may promote women financial inclusion. For example, the collection and research of gender-disaggregated data; a greater focus on explicit policy objectives and quantitative targets; reforms of legal and regulatory frameworks; more refined and strengthened financial consumer protection regulation that addresses women concerns and issues; women-specific financial literacy and education programs; legislation and regulations that address social norms that restrict women's financial inclusion.

There is a broad consensus that women's financial inclusion is not only beneficial for them, but leads to significant benefits in terms of economic growth, equality and social welfare. Thus, agencies such as the World Bank and OECD have emphasized greater financial inclusion for women as a priority.  

For example, women may take longer to adopt financial services, but various studies have shown that they do transactions more frequently and save more than men. In line with the latest hypothesis, the data reflect that in developing countries the gender gap in formal savings (account in a financial institution where the client intends to save) is smaller than the gender gap in overall account ownership.

In addition, providing access to formal savings instruments would enable women to increase their consumption, which in turn would benefit their families and increase productive household investment. Research also shows that female-controlled finances are more likely to be spent on needs such as food for the home or the well-being of children, including school fees and health care.

Despite overall progress in global financial inclusion, women remain disproportionately excluded from the formal financial system. Sustainable growth that promotes more fair and equitable economic development will invariably require a more inclusive financial sector that meets the needs of men and women alike. Finance must give an answer to this problem.

Note: The opinions expressed are those of the authors and do not compromise those of the institutions they represent.

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