Guidance for Regulators: Applying Gender-Intentional Approaches

Why care about women’s financial inclusion?

Despite the advancements in financial inclusion in recent decades, there is still inequality between men and women in accessing, using, and gaining value from financial services. While many civil servants and regulators in the financial sector are carrying the mantle of promoting gender equity in financial inclusion, more regulators need to follow suit if we hope to close the gender gap.

When asked about the absence of policies targeted at including women, we often hear regulators take stances like, “We don’t look at gender because we want our policies to benefit everyone” and “Gender equality is not our mandate.” Not perpetuating discrimination is everyone’s business – enshrined in many constitutions and laws. In addition, approaches that fail to consider gender can be counter-productive and, in some instances, quite harmful. Women, who comprise half of the population, are often marginalized across various demographics: rural, self-employed, youth, and so forth – ignoring women’s unique needs makes it impossible to help everyone. When it comes to potential harm, failure to address an economy-wide gender gap in credit can undermine the financial sector’s stability.

After high-level policy commitments, what comes next?

Though an explicit policy mandate is often necessary to motivate action on greater women’s financial inclusion, it is insufficient. While 43 out of 52 National Financial Inclusion strategies mention women’s inclusion as part of their objectives, in many instances, women are referenced fleetingly or called out with other vulnerable groups as under-served. High-level policies also often lack guidance on solutions or fail to provide a mandate for accountability in taking action.

It is becoming evident that most financial sector regulations do not sufficiently support women’s financial inclusion. Financial needs, constraints, engagement, and preferences differ by gender. Thus, there is a need for financial sector regulators to be gender-intentional, and to actively consider how their regulations influence outcomes for women customers so that women do not continue to fare worse than men.

How does gender-blind regulation impact women?

In its most obvious form, gender discrimination in regulation calls out particular requirements by gender, creating additional requirements or prohibiting specific actions. While financial sector regulators do not usually engage in such practices, being ‘gender-blind,’ can still drive different outcomes for men and women. Gender-blind regulations do not take into account the different roles and diverse needs of people based on their gender.

A regulation can fail to protect against a gender-biased practice widely exhibited in the market. In Mexico, data made it clear to regulators that providers discriminated against women in issuing credit because women’s loans had a higher spread and a lower average credit amount than men’s after controlling for credit characteristics, even though they also have a smaller non-performing ratio. To correct this, the Banking and Securities Commission of Mexico introduced a regulatory reform to reduce the loan loss provisions required for loans granted to women in Mexico, thereby incentivizing providers to look past their biases.

De-facto discrimination can occur in several ways. For example, regulations may fail to consider differing gender-based endowments due to gender norms and perpetuate systems that cater to particular endowments, thereby excluding women. A common example is the over-reliance on land as collateral for credit when assessing risk portfolios of financial institutions: women have lower rates of land ownership compared with men, making it more difficult for them to access credit. Similarly, regulations may fail to consider the behaviors of women engaging with financial services due to constraints deriving from gendered social norms. In Egypt, many women are active in savings groups rather than having individual financial accounts. While men could easily open digital wallets due to the individualized and formal nature of their engagement with the financial sector, digitization of women’s savings groups proved challenging, since Egyptian regulations did not provide for group wallets. In response, the government enacted regulations to allow for new types of digital financial products that enabled women to obtain digital accounts through savings groups. This led to increased mobile phone ownership among women and higher levels of financial literacy. Saving digitally also meant participating women could obtain more credit from financial institutions.

Figure 1 presents the tiers beneath the policy level that also require gender-intentional approaches for greater gender equality in financial inclusion.

Figure 1: Tiers of Financial Sector Policy and Regulation

Figure 1: Tiers of Financial Sector Policy and Regulation

Where do we go from here?

CGAP has previously detailed some of these dynamics in consideration for how to add a gender lens to the four regulatory enablers of digital financial services. For Pakistan and Ghana, CGAP cataloged the degree to which regulations under the regulatory enablers of DFS account for how customer experiences are likely to differ based on gender. CGAP also included tools for gender-based approaches in market monitoring for consumer protection. Recently, AFI published a brief on regulators' role in closing the gender gap. In Kenya, the government commissioned a review of financial sector regulations to determine how they enhance gender inclusion and perpetuate gender exclusion.

What is needed now is to build out the evidence base for gender bias in areas for financial sector regulation identified as ripe for review and also push the envelope on new areas of financial sector regulatory inquiry. CGAP intends to construct a framework for linking financial sector regulation and supervisory practices with outcomes in women’s financial inclusion. CGAP hopes that in partnership with regulators at the forefront of gender intentional regulation and supervision, we can sensitize a broader range of regulators and motivate them to take action. This endeavor will incorporate insights into how individual and institutional gender biases affect financial sector regulation and supervision approaches.