How has India surged ahead of its emerging market peers? The government has made financial inclusion and expanding the formal sector a top priority. The Pradhan Mantri Jan Dhan Yojana (PMJDY) programme—launched in 2015 with a mission to provide a basic account to every adult—has enrolled more women than men. Before that, millions of women were deterred from going to banks because of the long distances involved. In general, women have a more restricted “economic geography" than men, making brick-and-mortar banks harder to access.
Under the PMJDY, banks went door-to-door enrolling customers, and held camps in villages. It also increased the number of banks’ business correspondents (BCs or bank mitras), bringing services closer to more households.
The government has also mandated that certain defined benefit schemes, such as Pradhan Mantri Vaya Vandana Yojana (PMVVY), distribute payments to accounts in a woman’s name—with benefits being deposited directly in the recipients’ Aadhaar-linked accounts.
Aadhaar and the India Stack’s biometric eKYC verification capability make it easier for women, who possess the required documents less often than men, to establish their identity to a bank. Until recently, fulfilling know your customer (KYC) requirements was a significant barrier for many women.
Bringing all these initiatives together, the government has made a major policy thrust toward digital payments since demonetization. The widespread rollout of Aadhaar enabled customers to use digital BC payment points in addition to ATMs and service terminals.
With this consistent focus, India has led a massive expansion of financial access. However, as my colleague Tilman Ehrbeck wrote in 2015 upon the release of the last set of Findex data (goo.gl/8JFc5c), closing the gender gap is difficult because the root causes go way beyond access.
PMJDY has opened more than 100 million new bank accounts, but many of them are inactive or carry a zero balance. More women have been enrolled, but a larger gender gap persists in account usage. And beyond account ownership, in terms of credit and insurance usage, the gender gap remains high.
Increasing usage is a complex problem and there are many barriers to overcome. But the achievements of the past few years in banking millions of new customers, and research conducted into the economic, technological and cultural context shows us where to start on the road ahead.
First, we need to put smartphones into the hands of more women. The mobile phone is still the most promising empowerment tool for financial inclusion, and yet, fewer than half of adult women in India own a mobile phone, compared to 73% of men. One reason for this technological divide is that smartphones are not marketed as an empowerment tool, but rather as an entertainment and social media platform. In India, as in other emerging markets, many women have internalized social fears that smartphones will expose them to “bad influences", leading to sexual harassment or broken marriages.
Second, when women gain access to digital financial services over mobile, many face a three-step learning curve at once: becoming familiar with using a smartphone; understanding how credit, insurance, and other financial products work; and, often, using an interface that’s not even written in their native language. It’s long been a goal of inclusion efforts to improve women’s financial literacy, but the second lesson is that these efforts must also improve women’s digital literacy.
Third, financial products are often not structured, distributed, or bundled to meet the needs of women. Financial responsibilities differ between men and women (goo.gl/uVbKUL), who are generally tasked with back-stopping and stretching the family budget. Bundled solutions of savings, credit, and insurance could be designed to be more relevant to women’s financial lives.
In markets with high card penetration, customers often have the option of linking their checking accounts to a credit card account for extra liquidity. In emerging markets, adding microcredit to accounts could help women cover unexpected expenses and emergencies in their day-to-day management of the household finances. Women also go through more life transitions than men, moving in and out of the workforce more frequently, so making it easier to reactivate dormant accounts could increase usage.
Many of these solutions involve re-bundling traditional financial services with new customer experiences, based on innovative business models. In nearly all markets, fintech has led the way on this re-bundling, partnering with incumbent banks and mobile network operators to distribute and scale their offerings. A final lesson is for incumbent providers and governments to leverage the fintech ecosystem to customize products for the needs of specific market segments, such as low income or rural women. These partnerships could make it more viable to market small-ticket, low-cost, large-scale financial services.
As the world nears the long-held goal of universal financial access, we can see the road ahead for eliminating the gender gap in basic access and increasing usage among all customers, by making financial services more digital, flexible, and relevant to both men and women’s lives.
Smita Aggarwal is an investments director at impact investing firm Omidyar Network.
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