A Look Into Women’s Access to Finance

Although women’s access to finance has greatly improved over the years, with a worldwide average of a 4% disparity between men and women’s access to banking in 2021, certain areas remain afflicted by a gender gap that is on one hand harming women, families and communities, and on the other, slowing down their country’s economic growth.

The Situation

Access to Banking

The gender gap as measured by financial institution account ownership in high-income countries is in favour of women, with 96.7% of women owning an account compared to 96% of men. The statistics are most alarming when extending one’s scope to the developing world.

An estimate of 740 million women live today without access to financial services out of 1.4 billion people who are unbanked globally.

Even among those who do own a bank account, women are 31% more likely to have an inactive account than men. The gender gap is much greater than the global average of 4% when looking at specific low-income countries. 

For example, Mozambique has a disparity in financial institution account ownership by gender of 22%, much greater than the regional average of 12% for sub-Saharan Africa. Meanwhile, the Middle East and North Africa have an average gap of 13%, according to the World Bank’s The Global Findex Database 2021.

The Middle East and North Africa have undergone in the past year a number of reforms and have improved greatly on the matter of women’s economic rights. Egypt in particular has outlawed gender discrimination in financial services.

Furthermore, the expansion of the mobile money and digital banking sectors have contributed to make finance more accessible to the unbanked and to bridge the gap between men and women’s account ownership in sub-Saharan Africa, North Africa and beyond. For instance, the financial service gender gap in Mozambique, when accounting for financial institution accounts and mobile money accounts both, falls from 22% to 10%.

Women in the Workforce

Despite these important developments, a significant gender gap still exists in many countries. Part of this comes from the gap in employment between men and women.

Yet, this disparity in access to finance does not always correspond to the number of women active in the labour market.

Indeed, both the poorest and the richest countries have the highest women’s participation rate, with the poorest countries’ labour force participation of women surpassing that of higher-income countries when including the age group of 15 to 25. This is due to the privilege of accessible education people living in higher-income countries benefit from.

Mozambique, for instance, has a female labour force participation rate of 78% in 2023 whereas 61% of Canadian women aged 15 and up participate in the labour force. Men’s labour participation rate in those countries is of 80% and 69% respectively.

This is because Canadian women and men start working later in life. 83.9% of women and 91.5% of men aged 25 to 57 participate in the labour force, whereas in Mozambique, the percentage of teenagers and young adults in education starts to decline significantly past the age of 15. 

Most strikingly, in 2021, 100% of adult Canadian men and women own either a financial institution or a mobile money account. In Mozambique, still, only 49% of men and 39% of women do. In developing countries, on average, 74% of men and 68% of women own an account.

Women in the Informal Economy

According to the International Labour Organization, there are more countries where women are more likely than men to work in the informal economy. This is especially true in sub-Saharan Africa, South Asia and Latin America.

Informal workers as opposed to those who work in the formal economy enjoy little to no job, social and retirement security. Their workplaces and working conditions are not regulated. They are especially vulnerable to crises such as the COVID-19 pandemic, as well as personal emergencies because informal workers, in addition to having lower wages than those who are formally employed, have limited savings to fall back on.

Within the informal economy, women are more likely to occupy the more vulnerable job sectors such as contributing family work, domestic work and supply chain piece-rate work. They are also more likely to have lower wages compared to men in the informal sector.

Impacts of Women’s Access to Finance

Women represent nearly half of the world population and of each country. As pillars of their families, communities and their countries, bridging the financial inclusion gap is not only beneficial to them, but also to their country and to the world at large.

Impacts on Women

The opportunity of entering the workforce and of accessing formal financial services is highly correlated with financial well-being and economic autonomy. Services like savings accounts and loans in particular enable women to plan for their future and pursue business endeavors. This allows for economic mobility and the improvement of living conditions and well-being, both for themselves and for their families.

Indeed, a 2010 study in the Philippines showed contributing to commitment micro-savings accounts empowers women’s decision-making within their households. With access to such a financial service, more durable and household benefitting goods are purchased, including washing machines, kitchen appliances and vehicles.

Being able to save money in their own account as opposed to their husbands’ also protects women by giving them the funds necessary to survive an unexpected domestic crisis situation. In addition, the privacy of both men and women is protected when women are able to save, invest and make transactions in an account that is their own.

Access to finance also empowers women politically. They are more likely to vote and get involved in politics by running in elections, which translates into policy-making that better reflects the composition of society.

Impacts on Families and Communities

When women have access to financial services like savings accounts and loans, they are able to provide for their families and contribute in improving their living conditions, uplifting themselves and their dependents within their communities. This reduces gender taboo and encourages other women to become economically autonomous.

They are also able to contribute in strengthening their communities as entrepreneurs. According to the Global Entrepreneurship Monitor, 28% of women in low-income countries have expressed the desire to start a business – more than anywhere else in the world. The World Economic Forum cites access to finance as one of many gender-specific obstacles to female entrepreneurship. 

With financial services, entrepreneurs are able to thrive, in effect, creating job opportunities for locals and fostering social innovation. As the living conditions of members of the community improve, the living conditions of the community also improve. Areas underserved by different types of service can benefit from increased local entrepreneurship catering to community needs.

Impacts on Economies

Increased female entrepreneurship leads to accelerated economic growth for the country. Bridging the $1.7 trillion finance gap that exists between men and women in micro, small and medium enterprises would bolster economies and enhance overall productivity.

Growing savings and investments is not only beneficial for individuals, it also contributes to overall economic stability and growth. Improving both women’s access to financial services and the way financial services cater to women could generate more than $700 billion in global revenue. This is especially significant for developing and emerging economies. As women’s finance follows women’s labour, the GDP growth of the region of the Middle East and North Africa could more than double if the gender gap in the workforce is addressed.

The financial inclusion of those living in areas underserved by financial institutions is known to promote their economic and social well-being. Women being singularly underserved within these areas, attempting to bridge the accessibility gender gap is primordial in development projects around the world. In recent years, a leading factor in increased financial inclusion, both overall and among women, has been financial technology.

How Mobile Banking Improves Accessibility

Smartphones are becoming more prevalent today than fixed-lined telecommunications and financial institutions. In countries like India where survey respondents most commonly cite distance to financial institutions and lack of trust as reasons for their account inactivity, mobile financial services can bridge the accessibility gap.

Indeed, mobile financial services have the unique capacity to be flexible to users’ needs, both in services and in location. Mobile technology makes financial services and products accessible to those who are underserved by current limitations. Although mobile money accounts have significantly contributed to increasing overall access to finance in sub-Saharan countries, women trail behind in most low-income countries.

The gender gap in mobile phone ownership and financial literacy play a part in this. Worldwide, women are 7% less likely to own a phone than men and 19% less likely to use mobile internet. Furthermore, an Allianz Research report evaluating developed economies found that 30% of their female respondents have low financial literacy compared to 21% of their male counterparts. Similarly, in major emerging economies, women are more likely to answer that they don’t know when asked about topics of financial literacy.

Despite these persisting gaps, women, especially of a younger age, are as likely as men to have a mobile money account only in developing economies. The accessibility smartphone services offer is equally attractive to both men and women. They provide a unique opportunity to bridge the gender gap, both in access to finance and in financial literacy, at lower costs of operation than would necessitate financial institutions and lower costs for users’ learning. This is especially true as smartphone global penetration rises steadily.

On the other hand, a study done by Mastercard reports consumers and enterprises of South Africa’s informal economy are increasingly seeking to use payments other than cash for their transactions, citing the lack of safety inherent to carrying cash as a reason to make the transition. 

As mobile financial services become normalized in the informal economy, vulnerable workers will gain access to the ability to better save and invest, including many women. This will also contribute to the growth of the digital economy.

Access to finance for all allows for the improvement of the lives of all, including the growth of individuals, communities, enterprises, financial institutions and countries.

EZO

At EZO,  we believe access to finance is empowering and we value financial inclusion regardless of geographical location, income-level, circumstances and gender. EZO aims to bring financial technology to local banks and together reach underserved smartphone and other internet users around the world.

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