5 Ways Digital Payments can Bring Women into the Economy
If you have a job, or even if you're just looking for one, you might be better off than about half of women worldwide who are missing from the workforce. With so many women locked out of the economy, development suffers and growth stagnates. That's why the new Sustainable Development Goals call on governments to enact reforms "to give women equal rights to economic resources."
Looking at the Global Findex database, we see that wiping out gender discrimination in financial access is not easy. Since 2011, 700 million adults have signed up for a bank account, with women's account ownership rising in every region except the Middle East. Yet the gap between men and women is stuck: 65 percent of men and 58 percent of women have an account, a 7 percentage point gender gap that also existed when we ran the first Findex survey in 2011.
Financial services – not only accounts, but payments, savings, and credit – give women some basic tools they need to prosper in the formal economy. Without them, women can struggle to start businesses, invest in the future, and provide for their families. We recently co-authored a report with the Better Than Cash Alliance, Bill & Melinda Gates Foundation, and Women’s World Banking, on how to expand women's access to financial services and the formal economy.
Photo Credit: Subradhi Adhikary
Here are five suggestions for governments:
1) Pay workers and distribute social benefits digitally rather than in cash.
Some progress has already been made on this score: In Latin America and the Caribbean as well as Europe and Central Asia, women are roughly twice as likely as men to collect government transfers digitally. But 80 million unbanked women around the world still receive public wages or government transfers in cash, making this a relatively straightforward opportunity to boost women's financial inclusion. In addition to being more efficient than cash, digital payments have a range of specific benefits for women, including privacy and control over their money. A new working paper from the National Bureau of Economic Research confirms the increasingly well-documented fact that targeted cash transfers of government social benefits "have a significant effect on female empowerment" as measured by women's household bargaining power. Governments in the developing world – especially Latin America and the Caribbean (LAC) – have also shown that digital payments can drive up overall account ownership. Among LAC adults who receive government transfers into an account, 58 percent said they opened their first account specifically for that purpose – while the same is true of about a third of recipients in the developing world as whole.
2) Set up digital payments systems to receive routine expenses like school fees and utilities bills.
Globally, 585 million women pay for utilities in cash, while 225 million women do the same for school fees. Paying these expenses digitally could save women untold time and resources. Working women in developing countries often have to miss work and pay transportation fees to pay their children's school fees, resulting in wage and income losses.
3) Promote formal savings.
In the developing world, men and women save money in roughly equal numbers, but women disproportionately rely on less formal methods, such as rotating savings clubs, or simply stuffing cash under a mattress (figure 1). In Sub-Saharan Africa alone, 40 million unbanked women use non-formal savings. These methods not only fail to bear interest – in fact, they often charge fees – but they also leave savings funds vulnerable to crime and profligate relatives. Formal savings methods are safer, more lucrative, and more effective; a sizable body of research shows that women who save at a bank spend more on their businesses and have an easier time meeting unanticipated expenses.
4) Overhaul regulations to encourage wider use of mobile payments.
Today, many mobile payment clearinghouses are not fully integrated into national banking systems, resulting in higher fees for users. Mexico's Central Bank reworked its regulations in 2013 to fully integrate mobile payment systems into its gross settlement system while slashing transfer fees. Decisions like these can encourage financial service providers to experiment with new payment platforms and facilitate their use by consumers. When it’s cheaper and more convenient for women to make digital payments, the financial sector can develop alternative credit-scoring models to address the reality that many women lack a history of formal financial transactions, and can design products and services to meet women’s needs and preferences.
5) Reform rules that prevent women from getting an account.
Globally, 2.4 billion people are without an official identification document, mostly women. Restrictive "know your customer" requirements can make financial access more difficult: Nearly a fifth of unbanked women say a lack of documentation is one reason they don't have an account. One way to deal with this is to create tiered documentation requirements to open small accounts and a digital financial identification system, as has been done in India.
There's much more to be said about how digital payments can boost women's economic participation. For more, be sure to check out our paper.