Gender Norms and Financial Regulation: The Case for Gender Lens Regulatory Analysis

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Executive Summary

To advance women's financial inclusion, financial sector regulators must recognize that women and men face different lived realities when they engage with the financial sector. In many countries, large gender gaps persist in access to formal accounts. Other countries have narrowed gender gaps in access to financial accounts, yet usage of these accounts, access to credit, and leveraging digital payment mechanisms remain unequal. Gender-based patterns also emerge when comparing the use of formal vs. informal financial institutions (Klapper, Singer, and Ansar 2021). Treating women and men equally under the law and according to regulation does not equally benefit them in terms of outcomes because their experiences in engaging with the financial sector differ. Women and men have unequal access to and control over material and nonmaterial resources and assets, as well as differentiated access to various locations and institutions. Gender-neutral regulation is often gender blind.

This Working Paper provides a framework to assess the nexus of gender norms and financial regulation, outlining how regulatory frameworks and supervisory practices can impact women and men differently. It aims to motivate financial sector regulatory authorities to move from gender blind to gender intentional approaches.

Gender norms are collectively held expectations about how people should behave based on their gender (Koning, Ledgerwood, and Singh 2021). They influence whether women should have financial decision making authority, what roles should be assigned in the household and in professional spheres, who should retain control and title over large household assets, and, among other examples of gender norms, whether and how women should have access to digital tools. Consequently, gender norms play a big part in shaping behaviors. They can influence the behaviors of individuals, such as women who travel only short distances to financial access points or women who maintain small and informal businesses in order to balance work with household responsibilities. Gender norms can also influence behaviors of institutions, such as financial services providers (FSPs) systematically rejecting women’s loan applications due to perceived risks associated with their gender, or targeting men for credit based on a preference for providing credit securitized by titled land.

A framework for gender lens regulatory analysis rests on three types of constraints on women’s financial inclusion, shaped in part by gender norms and the attendant behaviors of market actors:

• Prerequisites. Women often do not meet prerequisites for access to financial services as often or as easily as men. In some instances, financial sector regulators may be able to adapt or remove preconditions.
• Financial needs. Women’s and men’s financial needs differ due to the nature of their gender norms driven roles, and markets are often not set up to sufficiently address women’s needs. Financial sector regulators may be able to enable and/or incentivize FSPs to better serve women’s needs.
• Patterns of engagement. When the behaviors of women and institutions are misaligned at the point of service, the patterns of engagement created can lead to women’s financial exclusion. Providers often exhibit bias or discriminate under such circumstances. Regulators play an important role in correcting biased or discriminatory provider behaviors toward women and in helping to influence or accommodate the ways in which women prefer to be served.

Financial sector regulators can best apply a framework for gender lens regulatory analysis to regulations affecting provider business models and customer engagement. For example, regulators can tailor agent network regulations to better accommodate women’s preferences and needs. More diverse agents—including female agents and people women trust, located in areas women frequent—can be enabled via proportionate agent qualification requirements across different agent operational tiers. Because agents are a point of contact for FSPs, regulatory requirements and/or guidance on how FSPs can sensitize agents to gender issues during onboarding and training can help ensure their touchpoints are customer-centric in their engagement patterns with women. Finally, agent business models must be responsive to women’s financial needs; here, also, regulators play an enabling role. For example, allowing agents to have multiple lines of business can help to ensure that business models can accommodate the high volume and low value transactions many women require, adding to the likelihood of viable agent businesses.

Prerequisites to women engaging with financial institutions can include requirements for multiple forms of documentation to prove their identity and the need to present themselves at branch offices—both of which can prove difficult as gender norms may limit women’s access to identification documents and make demands of their time and sphere of movement. When it comes to know-your-customer (KYC) regulation tiered KYC can ensure that women who do not have the requisite forms of identification documentation can still open accounts. Electronic KYC (e-KYC) and remote onboarding can also facilitate account opening as they require less documentation and can be completed from more accessible locations.

Beyond basic account access, closing the gender gap in credit starts by prohibiting and monitoring discriminatory engagement patterns by FSPs, whether intentional or not, that result in women receiving worse credit terms and less or no credit at all despite eligibility and strong performance patterns. Prerequisites for credit often skew toward collateral typically held by men and formalized businesses. Regulators can spur reforms to enable new credit business models, such as moving away from land as collateral and instead relying more on movable collateral, which women may be more likely to own. Credit scoring could also use alternative data, which women could generate by receiving digital payments from clients, for example. Where FSPs leverage credit scoring and alternative data to provide credit, regulators must backstop to prevent gender bias in algorithms via measures such as requirements for regular outcome monitoring or greater algorithmic transparency. Credit guarantee funds can also incentivize providers to reach out to women customers with credit, as these funds reduce the lending risk for women. In addition, regulatory treatment of credit guarantees that follows best practices helps to enable and incentivize usage, where available.

There are myriad ways to reach women across many types of financial products and services in ways that are accessible, meet their distinct financial needs, and build on gender sensitive patterns of engagement. This is why a diversity of licensing types and licensed institutions can help boost women’s financial inclusion. Regulatory approaches in this area include proportionate capital and other requirements for banks, depending on their tier, as well as licensing a diverse array of nonbank financial institutions (NBFIs) such as microfinance providers and cooperatives while enabling fintechs to provide or facilitate payments, digital credit, and e-money. Regulators can guide pathways of transformation from one type of institution to another or allow institutions to gain additional licenses as they establish themselves and expand their client bases over time.

Beyond regulation itself, financial sector regulatory authorities play an important role in effecting changes in practices and behaviors through supervisory oversight and in collecting and analyzing gender data to surface gender-based constraints, market opportunities, and progress in advancing women’s financial inclusion. Based on site visits and reporting, supervisors can identify where providers may require help to better engage with women customers and thereby issue guidance or apply moral suasion. Where clear regulatory actions are mandated, such as women focused initiatives or quotas, financial sector regulatory authorities can provide close oversight.

To help advance women’s financial inclusion, regulators can take the following steps:

1. Determine their institution’s readiness to advance women’s financial inclusion based on incentives and capabilities already in place that enable gender lens regulatory analysis and subsequent action.
2. Identify and link with an existing vision of national importance, such as a set of economic targets, development goal, or national strategy, that will help to ensure political buy-in, willing partnerships, and/or stronger arguments for effecting change.
3. Conduct or leverage an existing gender norms diagnostic to surface gender norms, behaviors, and constraints as they pertain to women’s financial inclusion.
4. Identify an appropriate regulatory area and apply a gender lens regulatory analysis to assess its interplay with gender norms, resulting behaviors, and how they affect constraints on women’s financial inclusion.
5. Identify possible interventions to modify prerequisites, reshape engagement patterns, incentivize fulfillment of women’s financial needs, and assess the feasibility of potential interventions.

Once a financial sector regulatory authority takes action, it is important to monitor how financial inclusion trends progress and, to the greatest possible extent, observe whether changes have their intended effects. In the ever-shifting landscape of gender norms and market developments, new constraints may arise at any time. Hence, gender lens regulatory analysis should be performed regularly.