As BSR’s recent report on the topic highlights, the world’s working poor need access to a range of formal financial products and services—including credit, savings, insurance, and remittances—in order to invest in economic opportunities, manage their money more effectively, and reduce risks related to illness or loss of employment.
This is especially true for women, who stand to gain disproportionately from participating in the formal financial sector. Financial independence leads to greater bargaining power and influence over family decisions and greater self confidence. Women also invest their money in ways that benefit their families, which creates a virtuous cycle of long-term prosperity. This is the primary reason that microfinance institutions (MFI), which started out with a largely gender-neutral approach, have shifted to providing support primarily for women. In some countries, as many as 80 percent of MFI clients are women.
In fact, women need access to more than just credit. Consider the following:
- Women make up the majority of the agricultural workforce in the world. Given the highly cyclical nature of agriculture, these women need access to insurance and savings products that allow them to manage risk and maintain their basic consumption levels in times of extreme weather or major crop failure.
- Women make up the majority of the manufacturing workforce. Having a safe place to store their earnings gives them greater control over their income. Formal remittance services help women support their families while avoiding the excessive fees and risks they face from the use of informal services.
- Women control more than 65 percent of consumer purchases in the developed world and will have an estimated global earning power of about US$18 trillion by the year 2014. This represents a tremendous market opportunity. Yet, as a recent report by Boston Consulting Group highlights, companies are not adequately serving the needs of women and the worst offenders are financial services companies.
Clearly, it’s time to make women a priority when designing financial products and services. This includes thinking about how women interact with financial services, but also thinking about the unique constraints they face. In much of the world, a woman’s legal, social, and even cultural position is very different from a man’s. In some countries women are not granted legal rights to assets that can be used as collateral. Women cannot travel alone to areas where they can conduct a financial transaction. They may even lack basic financial literacy and numeracy skills.
The solution requires a cross-sector approach, including regulatory interventions. Financial services providers, and even telecommunications providers, can also take advantage of technology and innovate around product design and delivery. Direct access to financial services for women is critical for overcoming physical and social barriers. This can be achieved through the use of prepaid cards, direct-deposit payroll systems, and mobile-banking services. Of course this can only work if there is adequate training and education for women that is delivered in culturally relevant ways.
In the same way that microfinance turned traditional banking on its head by targeting clients with fewer assets, the opportunity (and need) exists for doing the same with a broader range of financial services. Financial services companies must innovate and target their products and services at those that are currently using them the least—women. They are the next billion.
If you are aware of an innovative financial product or service that targets women, tell us about it here.