Two Persistent Divides in Financial Inclusion: Gender and Rural

25 April 2012

What percentage of women in South Asia have a formal account compared to those in Latin America? What are the most common self-reported barriers to financial inclusion among women and rural residents worldwide? To what degree has mobile money reached the unbanked in Sub-Saharan Africa? For the first time, we have hard data to evaluate how women and rural residents around the world save, borrow, make payments and manage risk both inside and outside the formal financial sector. With the release of the Global Financial Inclusion (Global Findex) Database we now have a comprehensive, individual-level, and publicly-available database that allows for comparisons across 148 economies. Women and rural residents make up more than 75 percent of the sample of the first round of the Global Findex database, based on more than 150,000 nationally representative adults in 148 economies.

Gender and rural gaps are persistent in all developing economies

With over 40 indicators, and the ability to differentiate each one by gender and rural or urban residence as well as age, education, and income, one can easily get lost in the nuance. But let’s start with the broad strokes. According to the data, in developing economies, 37% of women versus 46% of men are banked.



The gender gap is larger in the developing world and larger still for adults living below the $2 per day poverty line, where women are 28 percent less likely than men to have a formal account. The gender gap persists across relative income groups within economies as well: in the developing world, there is a constant 6-9 percentage point gap in account penetration across within-economy income quintiles.



There are also wide variations in the gender gap across regions and economies. In several economies – like Slovenia, Thailand, and Uruguay – the gender gap in account penetration is essentially nonexistent, while in others – like Jordan, Pakistan, and Guatemala – women are only half as likely as men to have an account. On a regional level, women in South Asia and the Middle East and North Africa are the most excluded from the financial sector compared to their male counterparts.

Rural residents aren’t faring much better. In Sub-Saharan Africa, for example, adults in cities with 1 million or more inhabitants report a rate of account ownership more than double that of adults living in towns/villages with a population under 10,000. And in all developing regions adults living in cities are significantly more likely than those living in rural areas to have a formal account.



And why these gaps?
So why are these groups not participating in the formal financial sector as much as others? For decades, researchers and policymakers have wrestled with pinpointing the specific barriers to financial access facing women and rural residents.

The Global Findex allows us to see how women and rural residents assess their own financial exclusion. Most people interviewed cite “I don’t have enough money to use one,” as the top reason for not having an account (multiple responses were allowed). However, women without an account in the developing world are 6 percentage points more likely than men to say “because someone else in the family already has one.” In South Asia the gender gap in that response is 10 percentage points. This suggests widespread indirect account use among women and highlights the impact that lack of asset ownership may have on empowerment and self-employment opportunities.

Rural residents are more than three times as likely as urban residentsto cite distance to a bank as a barrier to account ownership. In all, 25 percent of rural residents without an account in developing economies say they don’t have an account in part because banks are “too far away.”

Community-based models

Beyond account penetration, the Global Findex reveals interesting patterns in how women and rural residents manage day-to-day financial transactions. In Sub-Saharan Africa, for example, 30 percent of women savers report using an informal community-based saving method (i.e. a ROSCA) and not a formal financial institution to save as compared to 20 percent of men.

Surprisingly, the data suggests that rural residents use short-term formal credit at a rate almost equal to that of their urban counterparts. Worldwide, 9 percent of adults report having originated a loan from a formal financial institution in the past 12 months, and there is no difference in this value between urban and rural residents. In fact, in many economies where community-based formal lending models (such as cooperatives, village banking, credit unions, etc) have been successful, the rate of formal borrowing is surprisingly high among rural residents. In Bangladesh, 25 percent or rural residents report formal borrowing, compared to 16 percent of those living in urban areas. An important caveat is that these loans might be of small value and maturities.

These two examples highlight the importance of both informal and formal community-based models in providing financial services to those that banks may find less profitable or accessible to target with financial products.

All policy discussions should be rooted in sound data and the ongoing debates in the world of financial inclusion – whether about the expansion of rural credit cooperatives, the regulation of mobile technology, or the spread of bank agents – are no exception.

The Global Findex database facilitates a deeper and more nuanced understanding of the financial behavior of women and rural residents worldwide. For example, the widespread use of community-savings clubs speaks to their popularity, but a downside is the risk of fraud and theft. The high use of these “semi-formal” products – where users commit to regular savings –might suggest a missed opportunity to provide safe, affordable financial products to adults without formal accounts. Our data suggests that a key to reducing the gap in financial inclusion is new products and technology, such as mobile banking, that can provide affordable and accessible banking services, particularly to women and rural poor.

The complete database, report, and survey in 15 languages are available at http://www.worldbank.org/globalfindex.

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