Photo by Natalie Brown, CGAP Photo Contest 2017 Photo by Natalie Brown, CGAP Photo Contest 2017

Women and Finance: Enabling Women’s Economic Empowerment

This post is also available in Arabic and French and Spanish on the FinDev Gateway.


“There are two powers in the world; one is the sword and the other is the pen. There is a third power stronger than both, that of women.”
- Malala Yousafzai

In early 2020, CGAP moved beyond the access and usage paradigm in financial inclusion and set its sights on understanding how poor people could use financial services to improve their lives in three ways: generating income, accessing essential services and protecting basic standards of living. At the same time, we updated our vision statement by adding two small words: “A world where poor people, especially women, are empowered to capture opportunities and build resilience through financial services.” Many readers may not have even noticed this change. But it will make a profound difference to how CGAP approaches its work going forward.

Why did we take this step? It was to put women’s financial inclusion at the center of everything we do at CGAP. In the past, gender sat off to the side, either as a project on its own or a “cross-cutting issue” that was everyone's and therefore no one’s responsibility. These outdated approaches will not halve (and eventually eliminate) the persistent 9 percent gender gap in financial inclusion, which CGAP committed to help close in its latest five-year strategy. Reducing the gender gap requires that we put a gender lens on everything we do. Without fully including women, we won’t solve financial inclusion — or, for that matter, end extreme poverty and promote shared prosperity.

So how can the financial inclusion community contribute to this very ambitious goal?

Connecting the dots between women’s financial inclusion and economic empowerment

In her book, “The Moment of Lift,” Melinda Gates reflects on how long it took her to realize that empowering women was the single most powerful lever for improving the lives of all human beings. But eventually, she writes, she came to see that, “…the primary causes of poverty and illness are the cultural, financial, and legal restrictions that block what women can do – and think they can do – for themselves and their children.”

The challenge Melinda Gates describes seems like a pretty daunting one for financial services to solve. Even if we take away tangible barriers to women’s empowerment, what women and the men around them believe to be a woman’s proper role in society is a very real barrier. To create real change in women’s lives, we also have to change the barriers in people’s minds, and that is a more complex undertaking. After all, what good is a bank account or mobile wallet if a woman can’t own a mobile phone or leave the house? The complicated reality is that social norms exert a powerful influence over the roles women are expected to play in society. Women’s economic empowerment is just as entangled in social norms around health, education, family planning and childcare responsibilities as it is around issues of how women earn a living and maintain control over resources.

“Women’s economic empowerment is going to take more than bank accounts. But bank accounts can be powerful tools in the hands of women who are determined to take more control over their lives.”

How can the financial inclusion community use technology and financial services to help solve such complex problems? The not-so-simple answer is that we must connect our work to a wider theory of change that speaks to women’s economic empowerment. We must be clear about the many constraints that hold women back. But we must also be clear about the levers we can pull, both tangible and intangible, to help women find pathways to greater empowerment through financial services that meet their needs. And we must build partnerships with players outside our core areas of expertise who can help shift the levers that don’t directly relate to finance. Women’s economic empowerment is going to take more than bank accounts. But bank accounts can be powerful tools in the hands of women who are determined to take more control over their lives.

Even the most technical aspects of financial inclusion have implications for women’s economic empowerment

In preparation for writing this essay, I looked through a number of theories of change for women’s economic empowerment. The first thing that struck me was how divergent they are. Different organizations have very different visions for how to create change, although most are linked by common themes. The second thing that really struck me was the many ways financial services and digital access can support women’s economic empowerment, even in places that may not seem obvious. Like many technical specialists, I like nothing more than diving into the technical arcana of digital finance. Hard technology questions on topics like interoperability, open banking and open APIs would seem on their face to be gender-neutral, but on digging, it is clear they all have relevant gender aspects that ultimately relate to women’s economic empowerment.

For example, one technical topic that’s captured my attention of late is central bank digital currencies. The debate around how to implement digital currency gets to the heart of the role money plays in our society. In standard economic discourse, money has three main functions: it is a store of value, a unit of account and a medium of exchange. But the role of money goes far beyond this. It influences our relationships with each other, particularly within family units. It can define power dynamics in a household and an economy. And it can define how much agency we have over our own lives and personal choices. Often, these relationships and dynamics play out in gendered ways. As such, in addition to figuring out the macroeconomic implications or how digital currencies will be distributed, the architects of these new schemes must think about the potential exclusionary effects of replacing cash with digital currency. Otherwise, they could end up reinforcing existing social norms that disempower women. And the evidence base is quite clear that if a woman has no control over resources, she really has very little control over her life and choices — a core aspect of women’s economic empowerment. That is why everyone in the financial inclusion community needs to pay attention to gender, no matter their area of expertise or focus.

While there are many different theories of change for women’s economic empowerment, most of them involve three broad elements: access to income and assets, control of and benefit from economic gains, and the power to make decisions. These themes link in many ways to financial inclusion and to CGAP’s own theory of change, which is framed around opportunities and resilience. If women are empowered to take chances, aspire to greater opportunities, and manage downside risk for themselves and their families, then they can take more control over their lives. And if they can access essential services that help increase their capabilities or make better use of their time, then they are better able to invest in productive, income-generating activities that can benefit the entire family and community. But there is also a cultural aspect. If women have been conditioned their entire lives to believe they have no agency, then how can they seize opportunities and build resilience? Only when women can see these pathways for themselves — and have the material and legal supports in place to walk down them — are they able to take control over their own fates.

At a basic level, the way I think about all this is that to overcome barriers and reach for new opportunities, it is helpful to have metaphorical ladders to climb. The rungs of the ladder might be resources, skills or networks — things that help us seize opportunities. But we also need a firm floor to stand that ladder on, which is where resilience tools like social safety nets, savings and insurance come in. They help us keep our balance when we hit obstacles and bolster our confidence as we climb toward opportunity. But knowing that the ladder is steady also helps us climb. In this respect, social solidarity groups and role models can play an important role. If you’ve been told your entire life that you can’t do certain things, it can be very powerful to see someone like you achieving goals that seem out of reach.

Four areas where the financial inclusion community can contribute to women’s economic empowerment

So how can financial services level the playing field for women and lead to equitable impact? There are a number of areas where financial services strengthen the floor, ladder and social support that assist women in achieving economic empowerment. I think of these in four broad areas:

1. Digital access and data. The digital economy is becoming a bigger part of all our lives. To take advantage of economic opportunities in the digital economy, women need to be able to make and receive payments. At the most basic level, women require access to a simple trinity of factors to engage in the digital economy: an account, a phone and a cash-in cash-out (CICO) network. The financial inclusion community tends to focus on the gender gap for accounts, but there is also a significant gap around phone ownership. In lower- and middle-income countries, women are 8 percent less likely to own a phone than men and 20 percent less likely to own a smartphone, the primary gateway to the internet for most poor people.

The digital economy presents many opportunities for women. In a growing number of markets, digital platforms enable women to generate income by matching supply and demand — as in social commerce or gig work — or getting timely market information into their hands — as is the case with an emerging group of agricultural platforms. Providers are now embedding financial services like credit and insurance into these platforms. The online data trails women are generating can reveal the extent to which women are equally participating in the digital economy and how they might use digital tools and finance to capture new opportunities. Sex-disaggregated data on women can help inform policies and products that facilitate greater empowerment.

But we also need to understand the risks that the digital economy and its underlying financial services pose to women. For example, digital platforms and credit raise new risks around algorithm bias, over-indebtedness and fair treatment. Additionally, social norms in many contexts mean that women are likely to have distinct privacy needs in their digital interactions and dealings with CICO agents.

2. Laws and social norms. Laws and social norms deeply affect women’s ability to use financial services to improve their lives. I worked with Finca a number of years ago to help set up agency banking in the Democratic Republic of Congo (DRC). We learned that women made very effective banking agents, but that their ability to play this role was limited because, at the time, it was illegal for a woman to have a bank account in her own name or own a business without her husband’s permission. A lack of property rights prevents women from obtaining loans in many markets. And a lack of ID makes it difficult for women to access accounts; in a number of markets, women still face legal barriers to obtaining an ID. According to the World Bank’s Women, Business And The Law index, on average, women have only three quarters of the legal rights afforded to men, despite recent progress in closing the gender gap.

Supporters of financial inclusion need to make common cause with market facilitators and advocacy groups to remove legal barriers in the markets where they work, while providers of both public and financial services need to design carefully around prevailing social norms. In an ideal world, financial inclusion successes would eventually help to change social norms by demonstrating the benefits to households and societies of empowering women. Let’s not forget that it was only in 1974, with the passage of the Equal Credit Opportunity Act, that it became legal for a woman in the United States to apply for a credit card in her own name.

3. Capabilities and essential services. Education and skills are foundational to building a better future for women and families. According to the Global Partnership for Education at the World Bank, an additional year of school for women can result in a 20 percent increase in income and a child whose mother can read is 50 percent more likely to live past the age of five. The return on investment from educating women is high and financial services like payments, savings and credit can make it easier for poor households to pay for school fees and other essential services.

In addition to helping women acquire knowledge and skills, financial services can help women spend more time in the workforce. Off-grid electric helps extend the day past darkness, and digitally enabled access to clean water or clean cookstoves can save women long trips to fetch water or cooking fuel every day. These savings have can real payoffs in terms of workforce participation and productivity. In the United States, the average household in 1900 spent 58 hours a week on housework, including meal preparation, laundry and cleaning. This figure dropped to 18 hours by 1975. At the same time, women entered the workforce in droves. In 1900, only 5 percent of married women worked. By 2020, this figure was 61 percent. There were other factors driving this change, but I have to believe that labor-saving devices played a role in enabling women to participate in the workforce.

Financial services also help women access essential services. Early innovators like M-Kopa are increasingly taking asset financing models pioneered in the off-grid energy space and applying them to other products, offering poor families access to lighting, electricity, efficient cook stoves, smartphones and refrigerators. And yet, the effects of these new business models on women’s empowerment remain relatively underexplored. There is evidence, however, that when financial services help women to save time and increase their access to useful products, they can help create virtuous circles in which women invest resources in enhancing household capabilities. CGAP research with Engie Energy Access (formerly Fenix Intl) in Uganda suggests that solar home systems, once paid off, can be used as collateral to obtain credit for other opportunity-enhancing services like school fees. A recent impact evaluation of the company’s school fee loan program found that the loans led to a 50 percent reduction in the share of children out of school among borrower households.

4. Social safety nets and networks. Safety nets give women the security they need to take advantage of opportunities that come their way. As Jack and Suri’s work in Kenya demonstrated, having access to a distributed social network through proximity to an agent network meant that women could more productively deploy their time, thereby increasing household welfare. Formal safety nets are an important part of ensuring that poor households can cope with adversity: making sure that government-to-person (G2P) payments get into women’s accounts and that women are able to access the funds at an outlet of their choice have been important factors in ensuring households have the resources to get through the COVID-19 crisis. Work in Bangladesh by my colleague Leora Klapper has demonstrated how empowering it is for women to receive wages via mobile accounts that are readily accessible. And there is extensive evidence that savings accounts help create resilience.

At the same time, I am struck by the very real barriers that social norms create for women that go well beyond simply gaining access to the tools of financial inclusion, and that is why analogue social networks are also important. In “The Moment of Lift,” Melinda Gates speaks very personally about how support from other professional women helped her to build her career. Why should it be any different for poor women, who face barriers far beyond what most professional women have had to face? Social networks like savings groups in Africa and self-help groups in India can be important channels for helping women gain access to opportunities, both analogue and digital. Microfinance has long been a female friendly industry: 80 percent of microfinance clients are female, and many microfinance institutions provide social support and training in their programs.

But we also need to create more examples of successful female role models so that girls can see where the opportunity horizon lies. Female fintech founders are few and far between, and women-led start-ups receive a tiny fraction of venture capital funding. Why don’t we see accelerators and other entrepreneurship support mechanisms that focus on women? Why don’t we see more initiatives in emerging markets that support girls who want to study science, technology, engineering and mathematics (STEM)? And let’s not forget that men also have a critical role to play in advancing equality and women’s rights.

Of course, these are not the only factors in women’s economic empowerment. But they are topics that relate directly to financial inclusion, so it is imperative that the financial inclusion community incorporate them into its work. The fact of the matter is that women still lag behind men in their access to financial services by a huge margin. We have the tools to create ladders of opportunity for women to enter the digital economy, enhance their capabilities and find more time to work. We can create floors through social safety nets, savings accounts and digital access to social networks. And through the wider microfinance industry, we have a long history of engaging with social support groups that provide both role models and peer support that can steady the ladder for women as they climb higher.

“By shifting all the levers within our reach, we can improve the chances that we will collectively level the playing field in ways that improve the lives of women.”

But we need to think in market systems terms about how to bring these factors together in a way that unlocks change for women, where the whole can be greater than the sum of the parts. By moving the needle in these four areas, the financial inclusion community could make an immense contribution to women’s economic empowerment, while the larger development community contends with related challenges in health care, family planning, affordable childcare and girls’ access to education. By shifting all the levers within our reach, we can improve the chances that we will collectively level the playing field in ways that improve the lives of women.

CGAPs work on women’s financial inclusion

All of this brings me back to how CGAP can help advance women’s economic empowerment through women’s financial inclusion. We clearly have many levers at our disposal, but we don’t have all of them. For that reason, we need to work closely with the many other organizations active in women’s economic empowerment. We can contribute based on our deep knowledge of finance and technology, but we will have to work together. Here is how CGAP plans to contribute in the coming years:

Sharing insights. For several years, we have been sharing insights on specific segments of people living in poverty and how they interact with financial services and the digital economy. In 2020, we decided to focus our segments work more fully on women. To that end, we are creating diagnostic tools that help funders understand social norms in specific contexts to inform program design. We are also researching the ways poor women interact with the platform economy and are working to better understand how financial services meet women’s needs by analyzing the Findex data through a gender lens. We will continue to share gender-specific insights that can inform our work and the work of the financial inclusion community.

Mainstreaming. In addition to ramping up our gender insight work, we are mainstreaming gender across CGAP’s existing work program in a more systematic way. Our work on off-grid energy and other essential services, CICO, fintech, livelihoods, data and protecting basic standards of living all have important gender aspects. We are now building a gender lens into all our new project work, generating gender insights that sit squarely within CGAP’s broader work agenda. This is, in part, a response to strong demand from CGAP’s members. In a survey of 30 funder organizations conducted in the summer of 2020, all but one indicated they are prioritizing women's financial inclusion. Their most commonly reported needs are for richer sex-disaggregated data and a clearer impact narrative that connects financial services to women’s financial inclusion. Look out for more outputs from us on these topics in the coming year.

Building community and partnership. Our biggest foray into the gender space in the last four years has been hosting the FinEquity community of practice. At the latest count, FinEquity has over 1,500 members from 450 organizations, operating in 75 countries around the world. It is focused on three learning themes: gender transformative solutions, digitally enabled financial inclusion and impact pathways. More importantly, FinEquity links us to a wide network of partners who are interested in both women’s financial inclusion and women’s economic empowerment, helping us to connect the dots between these two distinct but overlapping communities. These connections have been important for informing our own learning and enabling us to connect with the work of many other development partners. We will be collaborating more proactively with the FinEquity team as we explore ways to mainstream gender in CGAP’s own work.

As you can see, adding those two small words – especially women – at the top of our theory of change has changed the way CGAP looks at gender across its work. We are excited at the possibilities of seriously exploring how to improve women’s financial inclusion and, through that, making a positive contribution to the broader goal of women’s economic empowerment. As Nicholas Kristof and Sheryl WuDunn observed in their book “Half the Sky,” “Women aren't the problem but the solution. The plight of girls is no more a tragedy than an opportunity.” Let it be an opportunity for us all.

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