To what extent do laws and regulations systematically constrain women from accessing financial services and participating in the formal economy? In a recent post on this blog, Mayada El-Zoghbi of CGAP provided an overview of five ways in which seemingly gender-neutral regulations could operate differentially with regard to men and women, creating barriers to (as well as opportunities for) the increased use of financial services by unbanked women in developing countries. The recently released "Women, Business and the Law 2016: Getting to Equal" report by the World Bank provides new data that can extend this analysis by quantifying barriers that women may face in proving their identity, travelling to a bank, opening an account and building a credit score.
The report is based on a global dataset created by the World Bank in 2009 that tracks common indicators across countries and over time to measure women’s access to institutions, use of property, ease in getting a job, incentives to work, ability to build credit, and power to obtain legal remedies and protection against violence. The headline finding of the report is that 155 of the 173 countries surveyed have at least one law that differentiates between the sexes in a way that affects women’s economic prospects, with 943 instances of discrimination documented globally.
There is some hope for optimists amid this gloomy result: over the past two years, 65 economies together carried out 94 reforms increasing women’s economic opportunities and the majority of these were in developing countries. However, the pace of reform is not uniform across regions: of these 94 reforms, only three were in South Asia, the region where the Global Findex tells us the largest gender gap exists in terms of access to financial services.
What does the data tell us about barriers to access for women?
The good news? The Women, Business and the Law dataset indicates that direct legal barriers to women accessing financial services are rare. One hundred and forty five years after the Married Women’s Property Act in Australia made it possible for a women to open a bank account without her husband’s permission, there are now only two remaining countries in which married women are legally unable to open an account without spousal consent: Niger and DRC. However, Global Findex has documented a persistent gender gap in account ownership and usage of financial services such as insurance and credit. The new World Bank data suggests three potential reasons for this ongoing disparity.
1. Women face more hurdles than men in proving their identity. The report finds that married women need to provide additional documentation to get a national ID card—a requirement to which married men are not subject – in ten countries (Afghanistan, Algeria, Benin, Cameroon, Egypt, Mauritius, Oman, Pakistan, Saudi Arabia and Senegal). Further, they face additional barriers in obtaining a passport in 32 countries. Using the Global Findex data, the researchers found that in countries where women face greater difficulty obtaining a national ID card, they are on average less likely to borrow from a financial institution. While this is a non-causal statistical association, it helps strengthen the case for tiered know-your-customer (KYC) requirements as a measure that can boost women’s financial inclusion. This would enable banks to open basic accounts with low deposit and balance limits for women who are unable to obtain formal proof of identification for legal, cultural or other reasons.
2. Women may have reduced physical access to financial services. The World Bank report finds married women may face restrictions on travelling outside the home in 17 countries. Measures which bring financial services to women where they live and work, such as agent banking regulations, may potentially enable women who otherwise face cultural, distance and safety impediments to visit bank branches in urban centers to transact via retail agents.
3. Women may find it more difficult to build a financial history and demonstrate creditworthiness. When credit recording institutions do not include small loans or transactional histories, such as those from microfinance institutions, retailers, mobile network providers and utility companies, there is less information available for customers to build up a credit score. This may disproportionately affect women who are often the predominant client base of MFIs and transact in small but frequent amounts. The Women, Business and the Law researchers find that 30 countries in their sample of 173 economies do not have credit reporting institutions that cover more than 5% of the population and a further 14 have minimum loan thresholds higher than 1% of income per capita. However they also document multiple reforms in this area: countries including Belarus, Mongolia, Lao PDR, United Arab Emirates, West Bank and Gaza, and Zambia have taken steps to collect information on small-value loans or repayment data from utility companies, retailers and mobile phone companies for credit reporting.
A role for digital financial services?
Given that the pace of legislative reform can be slow, The World Bank’s dataset suggests a potential interim role for digital financial services in reaching unbanked women. Where women are unable to physically travel to bank branches, being able to receive and send funds using a mobile phone provides them with a means to be able to transact. If women lack the ability to build a credit score through the formal financial system but have a history of transacting digitally, products like M-Shwari are able to use a customer’s Safaricom phone and M-PESA usage patterns to demonstrate creditworthiness for small loans. Digital products also provide some privacy and control over personal finances – the lack of which may partially explain why women are unwilling to sign up for bank accounts at financial institutions, even when they are legally entitled to do so.
Clearly, digital finance is no substitute for the 943 reforms the World Bank researchers find are needed to equalize men and women’s position before the law. And even if gender parity is achieved in terms of legislated entitlements and protections, we know that cultural norms, intra-household dynamics and inequities in economic and educational opportunities are likely to still pose hurdles in the quest for full financial inclusion of the poorest women. But the World Bank’s report, which seeks to rigorously and exhaustively document the institutional barriers to women’s participation in the economic and political life, is an important start to understand better some of the underlying causes of financial exclusion of women.