What Excludes Women from Formal Finance in the Arab States?

When it comes to Findex data, the developing countries in the Arab world are best known for having the lowest level proportion of adults with accounts as compared to other regions of the world. In 2014, this figure was 14%.

What gets less attention, but is of fairly significant concern, is the fact that women are less than half as likely as men to have an account in the Arab world (see table below). Because levels are fairly low overall, this gender gap seems to take second order priority. But looking at the data more closely reveals that even in the more advanced financial sectors in the region, the gap is significant and warrants attention.

Why such a dismal record?

One potential answer lies in the laws which not only discriminate against women, but also serve to codify cultural norms that reinforce a lower status for women in all realms of life. According to Women, Business and the Law, of the 26 countries with the highest number of discriminatory laws against women, 19 are located in the Arab region. Not surprisingly, Saudi Arabia tops the list, but other Gulf Cooperation Council (GCC) and developing Arab countries are not too far behind.

Discrimination in treatment between men and women takes many forms. Some of the laws directly infringe on a woman’s ability to open a bank account (such as obtaining a national ID), while others influence her ability to work, acquire assets or otherwise make independent life choices which often have long-term implications for lifetime earning potential and the quality of life for herself and her children. Table 2 lists some of the most common issues where women are legally treated differently from men.

What is interesting is that few countries in the region recognize this gender gap as a problem. Mostly it is seen as a form of “protection” for women – a paternalistic and patriarchal approach to development. Yet, the benefits of women’s financial inclusion, and economic participation more generally, has been well researched and documented. To name just two of the many sources:

• The IMF’s publication on gender and labor force participation estimates that in a country like Egypt, raising the female labor force participation rate to equivalent male levels would increase GDP by 34%. Access to financial services is clearly one path to enable women to start and grow their own businesses. This is an important route to economic participation in a region where public sector employment, the sector in which most women have been historically employed, is decreasing significantly.
• Women-controlled finances are more likely spent on household expenditures, such as food and water, as well as child welfare including school fees and health care . Spending on education and child welfare is an important predictor of future growth and development, a lesson the world has witnessed in many of the fast growing Asian economies.

Perhaps what holds countries back is an overall lack of belief in the data. In addition, no country in the region has conducted nationally representative studies of demand related to financial services. As a partner to the Arab Monetary Fund’s financial inclusion task force, CGAP has seen first-hand the overarching disbelief by regional financial sector regulators in any global data sources.

Three first steps to closing the gender gap

More needs to be done to engage with policy makers and regulators to raise awareness of the global data sources. Much more can also happen at the country level to improve data and the capacity to analyze the results and how they should inform financial sector policy-making.

Beyond data, there is a need to strengthen the voices and the capacity of domestic institutions that can influence country-level reform. In other words, we need to build women’s leadership and agency in the region. While attending a recent general assembly meeting of a regional institution, it was noticeable that only two women ran for office among a group of 10 candidates. One of these women was also among the first to offer to step down when discussion ensued around the number of representatives from each country of the region.

Finally, the donor community which continues to take on an important role in advising government and funding financial inclusion initiatives in the region should reflect on the kind of advice it is providing and how these programs are executed on the ground. From my own experience, I have seen too many programs which claim to take a “gendered approach” only to support parallel institutions that are on the fringe of the financial sector rather than addressing the core root causes of the problem . Women’s financial exclusion will not be solved with more band-aids. We need to get down to real and transformational change.