False Neutrality: Ensuring Policies and Regulations Benefit Women
At a recent event hosted by the Alliance for Financial Inclusion (AFI) focusing on gender and policy, I heard one Central Banker state that regulations are gender neutral and that to address the gender gap in financial inclusion we needed to look outside of regulations to things that limit a woman’s capacity or confidence to access and use formal financial services. But is this regulatory neutrality real? I see at least 5 types of regulations that, if well crafted, could lead to increased and improved quality of financial inclusion for women because they could potentially take into account the very uneven starting point that define women’s realities in most countries.
1. Tiered Know Your Client (KYC) regulations. Financial Action Task Force (FATF) guidelines require banks to confirm the identity of their customers by using reliable sources of data. These guidelines also offer discretion to countries to apply higher or simplified measures depending on the risk category of the customer and the transaction. Countries that do not follow these tiered-KYC guidelines but enforce one standard are missing an important opportunity to bring in excluded segments into the formal financial system. Women are less likely to have national IDs and less likely to have the necessary documentation, such as a utility bill in her name, that are often required to open accounts. A one-size fits all KYC norm may effectively and possibly unintentionally discriminate against a large segment of the population.
2. Secured transaction regulations and collateral registries. Secured transaction regulations set the rules around what banks can use as security for loans and other financial transactions. These rules in essence determine who is considered credit-worthy. Land and property are the typical forms of collateral used around the world. But inheritance laws, marriage laws and other laws frequently bias women from owning land and property (see Women, Business and the Law for much more on this topic). In the long-term, changing these laws so that women have equal access to assets is necessary. But in the shorter-term, strategies that reduce the inherent biases embedded in traditional secured transaction regulations would greatly benefit women. This means allowing alternative collateral in the regulations, creating collateral registries for moveable assets, which more women are likely to own (things like inventory, jewelry, livestock, etc).
3. Agent banking regulations. Countries without agent banking regulations limit the touch points that clients have with the formal financial sector to brick and mortar branches that are often in urban centers. The location of these branches often represent serious impediments to women who may have culture or family limitations on their ability to walk. Furthermore, these branches present psychological barriers for many poor people, especially women, who are intimidated by these institutions that are perceived to serve only the privileged. Allowing retail agents enables financial institutions to take on a completely different face – one that is much closer to the segments that are unserved. Taking this a step further, female agents offer an even more focused approach to reaching the women’s market. Women are often more likely to feel safer (whether from a physical or cultural perspective) engaging with other women.
4. Mobile banking regulations. In addition to agent regulations noted above, regulations that enable non-banks to issue e-money and offer financial services to the underserved outside of bank branches greatly facilitate access and usage of financial services by groups traditionally excluded, including women. While the actual uptake of these services by women can vary for many reasons: phone ownership being at the forefront, but also depending on the quality and usability of the service itself and whether it is sufficiently friendly to the consumer needs and requirements of women. Nonetheless, the potential for digital financial services to serve women is considered substantial as it addresses many of the barriers that limit their participation in the formal financial sector in the first place (mobility, distances, confidentiality, etc).
5. Consumer protection regulations. With the growth of inclusive financial systems, there is also a need to ensure that protections, particularly for the most vulnerable, are in place to ensure fair treatment by providers. Women, who represent the largest segment of the poor, are also often the least educated and are thus doubly vulnerable. Consumer protection regulations, coupled with consumer education, can help to protect vulnerable consumers who may otherwise fall victim to unscrupulous providers.
More than 1 billion people live in poverty, the great majority of whom are women. The latest Findex reports 2 billion financially excluded, with women representing 1.1 billion of them. To truly create inclusive financial systems that reach the poor requires a deep understanding of women consumers – their profiles, preferences, and socio-economic realities. While regulations are clearly insufficient to solve women’s financial exclusion, ensuring that regulations do not unintentionally discriminate is a basic step toward achieving financial inclusion goals.