by Kim Croucher, WAM UK Steering Committee
It’s a question that has occurred to many of us who work in women’s financial inclusion and increasingly pertinent as the industry has developed and changed; whilst data and research has oftentimes been disappointing in providing a clear link, we ask, is microfinance – as a tool to empower women – really working?
In June, Ernst & Young hosted WAM and the Microfinance Club UK to debate this hot topic – aided by three highly qualified speakers on the subject:
- Mary Ellen Iskenderian, President and CEO of Women’s World Banking, the global nonprofit devoted to giving more low-income women access to the financial tools and resources they require to achieve security and prosperity.
- Sevi Simavi, Chief Executive Officer of the Cherie Blair Foundation for Women,a charitable foundation that develops programmes to provide women with the skills, technology, networks and access to capital that they need to become successful small business owners.
- Justina Alders-Sheya, Senior Manager, EY, specializing in Financial Inclusion & Microfinance and Wealth & Asset Management.
Justina showcased the work that EY has been doing to investigate this topic, to offer better advice to its clients in this space (microfinance institutions and investors). According to her, there are various broad themes that may help the microfinance industry to understand its impact on women better, but more importantly may help the industry serve women more effectively.
The first is technology, which has the potential to boost financial inclusion for women in a way that was not possible before. Some of the basic barriers that used to exist for poor women to access finance – safety of carrying cash in public, the ability to travel long distances to reach a bank branch, confidence to walk into a bank and speak to a male member of staff – all this is blown away with mobile banking. Of the 2 billion unbanked individuals in the world today, 1 billion have mobile phones and mobile accounts are now available in 61% of developing markets. The potential to reach the previously unreachable is huge.
Mainstream financial institutions are entering the space faster than ever and this could enable microfinance to further extend its reach. With this entry may also come increasing regulation, which could mean better customer protection and potentially harmonizing standards across countries and regions.
Impact measurement has been a focus for years, but is still key to understanding whether microfinance is helping women. Measuring the impact of having access to finance is important, but the answers rely on long-term research. Leading on from this is a topic that is relatively new – but receiving a lot of attention – and that is looking at behavioural insights when lending.
The understanding of psychological, social and cultural influences on decision making and behaviour can really help providers in delivering a service that leads to the best outcomes. But the very reason why it is attracting attention, might lead to the mainstreaming of microfinance – since behavioural insights would make it easier for commercial financial institutions to know how they can offer services to this segment of the market and still make a profit.
Sevi Simavi presented how the Cherie Blair Foundation realized very quickly when they set-up that access to capital was key to empowering female entrepreneurs. When the organisation first started, a lot of women they worked with still kept their cash under the mattress. Having a bank account is critical from an empowerment perspective, without this, a woman rarely has control over her money – the cash ends up going to husbands or fathers.
In a recent report by the World Bank on Financial Inclusion, it quotes findings that the number of unbanked individuals has fallen by 20% between 2011 and 2014 (that amounts to 62% of adults who have a bank account vs. 51% in 2011) – which reveals some improvement in access to banking services. However, there continues to be a gender gap in account ownership – the gap varied depending on the region, but overall only 58% of women worldwide are banked vs. 65% of men.
So while there may not yet be the hard evidence to point to the empowerment effect that microfinance is having on women around the world – there is most certainly a need for increasing financial services made available and accessible to women. But to benefit from these services, Sevi made the interesting point that female entrepreneurs also needed to be given knowledge and capabilities (the ability to manage an account, to know the difference between profit and loss, basic book-keeping skills). Financial literacy training is therefore key. Here technology can also have a part to play – delivery of training through a mobile phone can be fast, efficient and can reach those who were previously unreachable.
Our main takeaway from Mary Ellen’s speech was the idea that to serve the poor most efficiently, one has to address women, and this means thinking about the services that women need, because they will be different to men’s.
Empowering women is crucial to serving the poor and developing economies, because women make up a far larger proportion of the poor, because a woman is far more likely to make investments back into her community and her children if she earns money – and one aspect of empowerment is through financial inclusion, so that women are increasingly in control of their money and their own decision making and futures. Yet women are facing greater financial exclusion in every geography and across every income level.
The key to Mary Ellen’s message was that in order to support women’s empowerment – we need to make financial services better tailored to women. Her point was that it was becoming clear that women wanted different things to men when it came to financial services.
For example, women want convenience, they greatly value confidentiality, they want more security, they want to trust the organization they are dealing with. Technology can go some way towards addressing these needs – but building trust may mean offering a lot more information to potential female customers because that is what they require to make a decision, it may mean explaining things in a more transparent way and it may mean having female agents.
In Tanzania for example, women are opening bank accounts at the same rate as men, but the main feedback from women there is that it is too easy to spend the money in the accounts – instead they would like restrictions on withdrawing money and incentives to save towards a goal – again a different way of thinking and different needs.
Mary Ellen was also optimistic about digital banking due to the convenience it offers women, the new markets it represents for banks and customer stickiness it offers the mobile operators – many reasons why she thinks digital banking may be a game-changer for financial inclusion.
Given all the talk over the evening about the coming revolution of digital/mobile banking, a question from the audience was put to the panel on whether mobile phones would destroy the support dynamic that can come from more traditional group savings and loan arrangements. The panel felt there was a way to use mobile phones in microfinance (distributing loans, repayments) that would work either on an individual or group level – so it did not necessarily threaten the group model. But they added that eventually individuals, especially entrepreneurs, needed loans that were specific to their own needs and so having this ability to tailor a product to individuals is advantageous to all involved.
If the conclusion the room was coming to during the evening was that financial inclusion is really key to women’s economic empowerment – even if the evidence isn’t there to directly link this progression yet – why then is there still a gap? What about discrimination in this space – did the panel think that this was a more serious hurdle than the microfinance community are currently expressing and does the language around discrimination need to be ramped up in order to change the attitude of providers? The panel felt there certainly is discrimination – but not always on the part of the players in the industry – it is a wider issue involving governments and communities. The fact that women can’t open a bank account in many countries, or face significantly more hurdles than men do when trying. In Bangladesh, women need a birth certificate to open a bank account, but many poor women weren’t registered at birth – ID issues are a huge challenge for the poor. Ownership of property that can act as collateral is another common problem for women, which also makes it more difficult to access capital.
Summing up – do all these developments mean that microfinance can help increase gender equality? The panel were optimistic. Sevi put it so well when she said that for all those who work tirelessly in this space and who care about women’s empowerment – it should be about progress and not perfection.