Imagine it is the end of the month and your domestic help is to be paid. If you look beyond the mundane nature of such transactions, you will immediately see the gender divide in financial choices and dealings. To give an idea of how problematic this difference is, I share a recent anecdote.
Before the pandemic struck, I used to pay my domestic help, Asha, in cash. He has a savings account with a nationalized bank and sometimes receives cash transfers from the government in that account. Over the past year, the lockdown restricted our ATM visits, so I asked Asha if we could transfer her salary directly to her bank account through the payments app. She refused and asked me to send money to my son’s or husband’s account because they have smartphones and actively use payment apps, whereas they don’t. She is also afraid to go to the bank or ATM without any male relative. On inquiry I found that this was a common story in most of the houses in my housing society. The thing they are most comfortable with is cash.
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The statistics also tell a similar story. The All India Credit and Investment Survey (AIDIS) administered by the National Statistical Office provides an important measure of financial inclusion in India. The most recent survey (2019) includes gender-segregated data, which is a useful measure of how women own and use different financial instruments. According to the survey, 80.7% of women in rural areas and 81% in urban areas had bank deposits. As reported by the previous Global Findex Report (2017), which surveyed a similar demographic cross-section, 77 percent of women in India are estimated to own bank accounts. The male-female gap in bank account ownership has narrowed over the years due to the roll-out of Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts. Currently, a little over half of Jan Dhan account holders are women. But access to financial services is not financial inclusion in itself.
According to various research reports, 55% of women still do not actively use their PMJDY accounts. Women from low-income families usually save small amounts in chit-funds/bishis at one or several places in their household and in cash with their employers, friends and relatives. Moreover, India has the lowest female labor force participation rate in the world at less than 20%, which has fallen to around 16% in the pandemic-hit second quarter of 2020-21. The low use of financial services can be attributed to low labor force participation and low income.
When it comes to the adoption of digital financial products such as credit cards, debit cards and payment wallets, the disparity between men and women is evident. According to the Edis survey, 20% of rural women reported having a debit or credit card, compared to 64% of men. There is a 17% gender gap in card ownership even in urban areas. This is interesting, as all PMJDY account owners must have a RuPay debit card.
The reason for the gradual adoption of digital financial services by Indian women is the gender gap in mobile ownership and mobile internet usage. In India, mobile phone ownership by women is 20% less than that of men, and mobile internet usage is 50% less. Furthermore, only 14% of women in India own a smartphone. This significantly limits women’s access to and use of mobile-based digital financial services.
On the credit front, the loan rejection rate for women-owned businesses is 2.5 times higher than that for men. Lack of collateral, difficult access to guarantors, weak property rights and various cultural barriers collectively prevent them from taking loans for productive purposes. The sheer anticipation of rejection also discourages women from applying for loans. For providers of financial services, the perceived risk of lending to women often outweighs the actual risk. Additionally, certain cultural norms exclude some women from using formal financial services. Women in low-income households often leave their phones at home on their way to work, have low digital literacy, and do not have full autonomy in using their phones. Such adverse practices make phone-based transactions, transfers and loan repayments a formidable challenge for them.
It can have far-reaching effects on the economy of the country as well as their households financially, including women. Women in emerging economies reinvest 90% of their earnings in human resources such as education, nutrition and health.
There are three approaches we can take to effectively bridge the gender divide in achieving financial inclusion: designing gender-sensitive products, building a network of female banking correspondents, and publishing gender-segregated data on financial inclusion.
Designing better products for women requires a customer-centered approach, where providers begin by identifying and understanding how women use and interact with money, financial products and technology. Design elements such as vernacular communication and voice and video enabled can reduce friction for women in the use of digital financial products.
To mobilize small savings, we should create awareness about banking products and extend these to the last mile women users, for which a strong network of Women Banking Correspondents (BCs) will be a big help. They are believed to be largely accessible by female customers, who would be willing to hand over sensitive financial information to them.
Finally, periodic publication of gender-skewed data on various parameters of financial inclusion can help track gender divide and also make a clear case for gender-sensitive products.
Monami Dasgupta heads research initiatives at D91 Labs
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