Good News for Young Women’s Financial Inclusion in East Africa

Despite an overall positive trend, the gender gap in financial inclusion remains stubbornly persistent in some parts of the world. To understand what gives rise to this gender gap and how it evolves over time, CGAP and the Bill & Melinda Gates Foundation have been independently analyzing Global Findex data to identify drivers, patterns, and trends. This blog series presents the results of those analyses – first, with an overview of factors associated with financial inclusion for young women and men across low-income economies, then with a deep-dive into three East African countries, and finally by reviewing our findings on the dynamics of young women’s financial exclusion. Together, these analyses show that the period between 15 and 24 years of age is a pivotal time for financial services adoption – potentially presenting a high-impact opportunity to close the gender gap.

Two million more young women and men turn 18 every year in Kenya, Tanzania, and Uganda than did thirty years ago. We know that young adulthood is a pivotal time for financial services adoption, and so today’s market growth comes from a segment that cannot afford to wait to adopt and use formal financial services. This is even more critical for young women, who face a pervasive gender gap in financial inclusion, beginning in young adulthood.

The first blog in this series discussed the drivers that keep many young women from accessing and using financial services. However, in at least one corner of the world, there is good news on this front. Analysis from tracking two cohorts of young women via Global Findex micro-data from 2011-2021 in Kenya, Tanzania, and Uganda shows most transitions toward full use of financial services are now happening in the middle teens. This suggests that young women and men in these three countries are using financial services much earlier and their financial inclusion is improving at a faster rate today than a decade ago, with young women now almost keeping up with their male peers. 

Segmenting levels of financial inclusion 

Following the Bill & Melinda Gates Foundation’s work with Mathematica, we categorized (or segmented) the full spectrum of financial inclusion. These four segments captured the journey  from deep exclusion to active use of financial services:

Segment 1 – the deeply excluded: only operate in cash within a very tight domestic circle – i.e., at home, friends, family, and maybe as a shopkeeper.

Segment 2 – high potential peripherals: engage with financial services indirectly, including informal village groups and/or other people’s formal access to move money, but have no account or mobile wallet of their own. 

Segment 3 – limited engagement types: have accounts or mobile wallets but are not using them or only use them to perform entry-level transactions (deposit/withdrawal or person-to-person transactions).

Segment 4 – fully active users: use an account/mobile wallet of their own for a mix of payments, savings, borrowing, and remittance purposes. 

We applied these four segments to the Findex microdata to demonstrate how progress has been made from segment 1 up to segment 4 between 2011 and 2021. 

Chart 1: Distribution of women and men aged 15+ across segments in Kenya, Tanzania, and Uganda: 2011 vs. 2021

From exclusion to engagement

Comparing the first Findex survey in 2011 with the most recent in 2021 (Chart 1), the proportion of women and men in segment 1 (deep exclusion) has more than halved for those over 15, and the proportion in segment 4 (fully active use) has more than doubled. However, men had better financial inclusion than women across segments and over time, and although the relative gender gap for segment 4 had almost halved by 2021, it was virtually unchanged for deep exclusion (segment 1). 

Zooming in on developments for young people between 2011-2021, we determined rough estimates of how fast they escaped deep exclusion and moved toward fully active use of formal financial services. Chart 2 (A and B) below focuses on their movement between Segments 1 and 4, as the two middle segments (2 and 3) are the ever-changing difference between them. 

Chart 2: Progress by age from deep exclusion to fully active use for financial service users in Kenya, Tanzania, and Uganda

In 2021, both young men and women were far less likely to still be stuck in deep exclusion (23% for women and 19% for men aged 18-20) than in 2011 (64% for women and 55% for men aged 18-20 back then). Likewise, fully active users increased significantly from 21% for women and 18% for men aged 18-20 in 2011 to 58% for women and 62% for men of the same age in 2021.  

By 2021 it was also clear that young women aged 18-20 had been exiting deep exclusion even earlier and faster. Four years prior, in 2017, 80% of young women (then aged 14-16) were deeply excluded but by 2021 only 23% of them were still deeply excluded by the time they had reached 18-20 (a major stride compared to the earlier cohort). 

Young women aged 18-20 in 2011 took a decade (to 2021) to progress less towards being fully active users of financial services as young men of the same age. However, women and men aged 18-20 in 2021 had, within just four years, reached active use earlier and faster and done so at broadly matching speeds.

This is encouraging news. Young women in East Africa seem now to be escaping deep exclusion faster, actively using financial services sooner, and largely keeping up with men of the same age. Further analysis is required to understand whether there may be urban/rural, educational, or digital connectivity divides that impact the progression from segments 1 to 4, and what economic, policy, or technological changes may have facilitated this shift. But if this trend continues or even accelerates further, over time it should be reflected in improved overall levels of financial inclusion in Kenya, Tanzania, and Uganda and further reduce gender gaps in financial inclusion.