CGAP CEO's Women's Economic Empowerment TechSprint Conference Speech
FINANCIAL CONDUCT AUTHORITY
Greta Bull, CGAP CEO
Address to Women's Economic Empowerment TechSprint Conference
March 22, 2021
It is a pleasure to join you today to speak about the impact of the COVID-19 crisis on women in the global south and to consider the ways the financial sector can help turn this crisis into an opportunity to improve women’s economic empowerment. Before I do that, a quick word about CGAP. We are a multi donor supported think tank (including the United Kingdom) housed in the World Bank that focuses on the ways financial services and technology can improve the lives of the poor.
Let’s start with the impact. We know that the COVID crisis is having a devastating impact on emerging markets. The World Bank’s latest estimate is that as many as 163 million people could fall back into extreme poverty by the end of 2021. This is an enormous setback to two decades of steady progress. As you can see here, the impact of COVID-19 will wipe out five years of progress towards ending extreme poverty, which is defined as people living on just under $700 dollars a year.
And this impact is being borne disproportionately by women. Analysis by McKinsey, based on data from the United States and India, suggests that women were 1.8 times more likely to have lost a job due to the pandemic. And that female jobs in general are 19 percent more at risk than male ones simply because women are over-represented in sectors negatively affected by COVID-19. We are also seeing this pattern play out in small business. A recent survey by the World Bank revealed that women were significantly more likely than men to close their business as a result of the crisis. Interestingly, the highest differential was here in North America. But as you can see, both South Asia and sub-Saharan Africa experienced both high levels of firm closure and significant gender gaps. There are many potential reasons for this, but high among them are women’s overrepresentation in sectors more affected by the crisis, disproportionate caregiving responsibilities and social norms that prioritize men as breadwinners over women when work is scarce. Interestingly, the poverty gender gap is at its highest during peak productive and reproductive years for women. Between the ages of 25 and 34, there are 122 women living in extreme poverty for every 100 men.
COVID has exacerbated gender inequality and there is a risk that gender gaps will continue to widen after the pandemic if support for women is de-prioritized in favor of measures that are perceived to be more urgent. What this means in practical terms is that we are at risk of eroding gains in women and girls’ accumulation of human capital, economic empowerment, voice and agency. These gains were painstakingly built over decades and their erosion risks undermining long term economic prospects for us all. McKinsey estimates that taking action now to advance gender equality as part of our crisis response could add $13 trillion to global GDP by 2030. The payoff is potentially huge. In pre-crisis research, McKinsey found that incremental investment of $1.5 to $2 trillion US dollars in just five areas - education, family planning, maternal mortality, digital inclusion, and unpaid care work - would yield a 6 to 8x return on investment in terms of economic growth. It is very much in all our interests to double down on supporting women through this crisis. And to do it NOW.
So - how can the financial sector play a role in increasing the economic empowerment of women in emerging markets? In the simplest terms, financial services – payments, savings, insurance and credit - provide tools that can help women take advantage of economic opportunities and protect themselves from downside risks.
Let me offer you three ways that financial inclusion of women can make a big difference in the lives of the poor:
- First, it facilitates access to financial resources, in both good times and bad;
- Second, it provides an on-ramp to the digital economy, where economic opportunities are increasingly shifting; and
- Third, it can play a big role in giving women greater control over their own lives, which in turn has benefits for poor households.
Let’s look at each of these in turn.
First, access to an account. Getting resources into the hands of people harmed by the crisis has been the main government intervention over the last year – basically, social protection payments to households and liquidity support to keep small and medium sized businesses afloat. In countries that have invested in inclusive financial systems, this task has been made a lot easier. Take India: getting social payments to hundreds of millions of poor people would have been daunting in the best of circumstances, impossible during a pandemic. And yet, the Indian government was able to get social payments, averaging around $20 per payment, into the hands of 428 million recipients of various COVID relief programs. Why? Because India invested in financial inclusion. India created the Aadhaar ID and made it universal, which facilitated access to accounts. It mandated that low value accounts be made available to every household. And it built world class payments infrastructure that enabled payments to be made efficiently and electronically. Because India increased its rate of financial inclusion from 35 to 80 percent between 2011 and 2017, it was able to mobilize that infrastructure to get help to hundreds of millions of people in a matter of months. And women disproportionately benefited from increased inclusion – a gender gap that sat at 9 percentage points in 2011 was reduced to only 3 percentage points by 2017. And although we don’t have exact data, we estimate that around 60 percent of those social payments made in the early days of the pandemic went to women.
But we can’t always rely on the public sector to meet our every need. We have to turn to other resources, which can also be accessed through an account. Efficient payment systems mean that poor households can draw on wider social networks in times of trouble. M-Pesa, bKash and other mobile money systems have demonstrated that domestic remittances are an important non-governmental safety net for many poor families because they can more easily draw on resources from distant friends and relatives. Savings are another important safety net for poor people, as they provide a resource cushion to get through hard times. But savings accounts are not widely available to the poor: 46 percent of women in low income countries save, but only 9 percent do so in a formal financial institution, where their savings will be more secure.
Another important resource, particularly for households in the informal economy, has been access to credit. Many low-income households operate small shops that benefit from working capital loans, they are small traders who need short term liquidity to purchase supplies for day trading or they’re smallholder farmers who need to buy seed and other inputs at planting season. But most support programs for business in emerging markets have focused on larger enterprises that employ people, not the small ones that sustain the livelihoods of poor people operating in the informal sector. We know from CGAP’s own research that credit to the informal sector contracted sharply in response to the crisis as microfinance institutions preserved liquidity. Monthly disbursements dropped by 80 percent at the peak of the crisis and have still not recovered to pre-crisis levels. We are beginning to see a recovery but it remains shaky and many borrowers have payments coming due that were placed under moratoria, often with interest and fees that accrued over the course of the year. Better access to productive credit on affordable terms will be crucial to rebuilding after the crisis, including in the informal sector.
An account can give you access to financial services, but it can also do so much more. That brings me to my second benefit of women’s financial inclusion. Having a phone and an account acts as an on-ramp to the digital economy, and this opens up many more opportunities for women. In a growing number of markets, digital platforms are delivering new ways for women to generate income by matching supply and demand for goods via social media enabled e-commerce or for services through gig work platforms. They can also provide critical market information directly to smallholder farmers, often bundled with other financial and non-financial services. These new platforms are upending the marketplaces of the past and creating new opportunities for women to earn a living. And platform providers are increasingly embedding financial services like credit and insurance into their offering. One of the reasons they are able to do this is because the online data trails created as women use these services reduce the risk to providers of extending credit or insurance.
Access to digital platforms also offers opportunities for poor households to gain access to essential services and to invest in new skills. Given traditional household roles, improved access to essential services can have a disproportionately positive impact on women, enabling them to deploy their time to more productive use. For example, off-grid electricity helps extend the productive part of the day past darkness, benefitting women and children, who have more time to study. Digitally enabled access to clean water or clean cookstoves can save women long trips to fetch water or cooking fuel every day. Early innovators like M-Kopa in Kenya are increasingly adapting asset financing models pioneered in the off-grid energy space and applying them to other products, increasing access for poor families to lighting, electricity, efficient cook stoves, smartphones, refrigerators and more.
These assets can in turn be leveraged to help families invest in improving their capabilities, creating a virtuous cycle of benefits. 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 and girls is high, and financial services like payments, savings and credit can make it easier for poor households to pay for school fees. CGAP research in Uganda found 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 our partner’s school fee loan program found that these loans led to a 50 percent reduction in the share of children out of school among borrower households.
Finally, the third benefit from financial inclusion of women: privacy and control. Restrictive social norms and household dynamics can have a detrimental impact on women’s economic empowerment because they reduce the control a woman has over household income, including income she earns. A review of financial inclusion and social protection studies by the Poverty Action Lab at MIT found that household outcomes were improved when women had greater control over resources. In fact, in one of the studies, outcomes were better for women when they were able to hide resources from their partners. Greater control over household resources by women is good for poor families, because we also know that women are more likely to invest in the welfare of themselves and their children.
Digital finance, if designed well, can help women gain greater control over resources. Social transfers that are made to women, at locations that are convenient and safe, are more likely to get to women and stay with them. Wage payments made directly to women’s accounts instead of in cash are more likely to be saved or used for productive purposes. Savings that women control are more like to remain savings. And in some contexts, women who are not physically able to leave their homes are able to interact in digital marketplaces to earn income through social commerce. So privacy and control are very important aspects of designing financial products for women, whether provided by the private sector or social protection agencies.
BUT- and of course there is a but – we are still a long way from women having access to the full benefits of financial inclusion. And there are numerous gaps that prevent women from fully participating in the economy, digital or otherwise. Let me cover just three of these. They relate to Access, Laws and Social Norms, and Data.
First up is the Access Gap. At the most basic level, women require access to three things to engage in the digital economy: an account, a phone and a cash-in cash-out point. Let’s start with accounts. Despite impressive progress on financial inclusion in the last ten years, the gender gap for accounts remains stubbornly fixed at 9 percentage points in emerging markets. There is also a significant gap in phone ownership. In lower- and middle-income countries, women are 8 percentage points less likely to own a phone than men and 20 percentage points less likely to own a smartphone, which is the primary gateway to the internet for most poor people. And social norms mean that cash-in cash-out networks can be a deterrent for many women. If a banking agent is run by a man, in some places women may be uncomfortable using that service. Without access to these digital on-ramps, women’s participation in the digital economy will remain constrained.
Second is Restrictive Laws and Social Norms, which can deeply affect women’s ability to use financial services. I worked with Finca a few years ago to help set up agency banking in the Democratic Republic of Congo. We learned that women made very effective banking agents, outperforming men in certain dimensions. But 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 to own a business without her husband’s permission. A lack of property rights prevents women from obtaining loans or running a business in many markets. In fact, according to the World Bank’s Women, Business And The Law index, on average, women only have three quarters of the legal rights afforded to men. Supporters of financial inclusion need to make common cause with market facilitators and advocacy groups to remove legal barriers for women. Providers of both public and financial services need to design carefully around prevailing social norms. And – in an ideal world – financial inclusion successes would even help to change those social norms by demonstrating the benefits to households and societies of empowering women. It is worth reminding ourselves that we are not actually so far ahead on this ourselves: 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. Rather remarkably, that is well within my own lifetime.
Finally, we have Data. In an economy that is increasingly running on the fuel of data, women are surprisingly invisible. Trying to find good gender disaggregated data at the macro level sometimes feels like looking for a needle in a haystack. And it is hard to make good policy decisions or design products for women when we don’t have any information on them. In so many fields, from medicine to transport to technology and, yes, to financial services, the default user is a man and therefore products and services are designed with men in mind. So they end up not quite fitting women’s needs. But, as we have all learned in the last year, the digital economy makes the gathering of vast quantities of data on individuals cheap and easy to do at scale. So the barriers to entry on data are coming down. But we need to be proactive here. We must start building public data sets that disaggregate by gender so that public policy can be gender intentional. We must harness private data in service of women, by making their credit worthiness visible, so they can gain access to a wider range of financial services. And we must understand the ways the algorithms that power the digital economy potentially bake gender bias into financial services across the board. Data is the new frontier in the digital economy and we have a lot of work to do to make sure that the needs of half of humanity are visible in the data we use. We must also take into account the particular needs of women in having their data remain private. A lack of proper data privacy and protection can have devastating consequences on those least able to bear the cost, from hacking of financial details to threats to physical security for women. The guardrails have not kept up in most markets with the explosive expansion in the use of data and countries need to catch up fast on data privacy and protection.
In closing, we know that women in the global south are being disproportionately affected by the COVID-19 pandemic. We also know that women were already operating at a disadvantage to men in many ways. It is a terrible irony that while we know that investing in women is good for economies and societies, the particular needs of women are often overlooked in the way we design products, services, and policies. We have an opportunity arising from this crisis to accelerate change – to see women, to understand their needs, and to design solutions that empower them. If we take up this opportunity, we will make our societies richer and stronger.
Which brings me to the purpose of this week’s events, which I greatly look forward to attending. We know the financial sector plays an important role in Women’s Economic Empowerment. Tech Sprints like the one taking place this week offer a unique opportunity for fintechs and regulators to come together to design solutions intentionally made for women. By making the invisible visible and focusing our efforts on solutions that solve problems in the lives of poor women, we can make an enormous contribution to the much larger cause of women’s economic empowerment. As Melinda Gates shares in her recent book, The Moment of Life, empowering women – literally half of humanity – is the single most important thing we can do to improve the lives of all human beings. It is simple math. We just need to find the will, the resources and the tools to make it so. Technology can be a game changer in our ability to fundamentally change women’s relationship with the financial sector. To that end, I am very much looking forward to learning what the Tech Sprint teams come up with this week.