Since Muhammed Yunus and his Grameen Bank earned the Nobel Peace Prize in 2006, microfinance has grown in prominence in the developed world. While popular conceptions of microfinance are usually limited to small-scale loans, in the last 40 years, microfinance institutions have expanded worldwide and now offer financial services ranging from loans to insurance to pensions, all aimed at poor populations. And while microfinance can relieve poverty and hunger, it is also an important tool in women's empowerment.
I recently spoke to Mary Ellen Iskenderian, the president and CEO of Women’s World Banking, to explore some of the issues discussed during a BSR March webinar on the role of finance in women’s empowerment. For the past 35 years, Women’s World Banking has improved women’s lives through access to a broad range of financial products, and the organization now comprises a network of 34 financial institutions in 24 countries, with a reach of 14 million women.
You’re in the midst of a project, building on BSR’s HERfinance, that offers financial education to female workforces. Tell us what you have learned so far.
We began a partnership with BSR at the end of 2012, when we went into several factories in India to look at whether financial needs for this population might be different than the typical microfinance population: What do these women understand and not understand about finances, what do they need, what are their saving methods? How could we feed that information about their needs into the development of a financial education curriculum?
This is a segment of the population that Women’s World Banking had never worked with before, and it was fascinating to see that women were less empowered by their earnings than we typically see in microfinance. Getting a regular salary in microfinance is virtually unheard of. And here, you have a population with a regular income, and they seemed to be far less conscious of their value and the value of money, and how that money could be put to use to accomplish life goals. So it seemed particularly urgent that this group get financial education so they could make that connection between the money they were earning and some of the things they longed for—education, a house, or to save up for a dowry.
At several factories, primarily in the north of India, banks had opened up accounts for those salaried workers, who had access to a range of formal financial services. But because they didn’t have financial education, they were taking cash out of the ATM and then performing a whole range of transactions—like savings, or investments for the longer term, or taking a loan—in the informal sector.
It was a revelation then to go back to the south to some of the factories where the BSR [HERfinance] financial education curriculum was in use, and to see, among these women, the dramatically greater financial savvy, of financial literacy, of what these accounts could do in meeting a whole range of financial needs.
What are some of the most practical access challenges that may prevent women from using financial services?
The challenge around financial education is an important one—just because you’ve established access for a person doesn’t necessarily mean they’re going to use the product. It’s critical that they understand how it works, and how they need to be thinking about their finances in the context of their lives.
There are also infrastructure challenges: Too often, there’s a tremendous amount of documentation and information that the regulator requires banks to get from people to open an account—often things that people don’t have, let alone have the willingness to provide to a bank.
Mobility is another big constraint. Women tend to be less mobile in many parts of the world than men, and they’re always time-starved. We almost always hear women say, “I would have had to pay more in bus fare to get to the town with the bank branch than the money I had to deposit.” That’s why we’re so excited about mobile banking technology like deposits and point-of-sale—the possibility of bringing the bank to the customer is chipping away at that proximity challenge.
What would financial products need to look like to appeal to and reach more low-income women?
Wherever we work, we consistently hear about the need for convenience, the need for the product to be easy to access. And with asset-building products [such as products for saving money], the woman wants security and confidentiality. She’s often at very great risk carrying around large amounts of cash, so something that eliminates cash entirely or can be directly deposited is needed by these women.
Confidentiality also always comes up with women. Even in households where there’s a shared responsibility for money management, women and men often have very different roles for their savings and investments, and women may not want their husbands to know that they’re saving or what they’re saving for.
The good news is that if we design a product that’s easy to use, has marketing and financial education embedded in it, takes lower literacy into account, and is streamlined in terms of documentation, these are really popular with men as well.
What progress have you seen so far, and how do you measure progress?
We’re getting a lot savvier about how we measure and track impact. We can easily count accounts opened and the usage of those accounts, but beyond those numbers, we need to be looking at the impact having access to financial services has on peoples’ lives.
Education for women and girls is one of the biggest things we track. It’s an unfortunate but common behavior: When a family falls on hard times, girls get taken out of school first to contribute to family income. So if you can keep girls in school longer, that’s a big impact.
On the institutional level, Women’s World Banking has developed a series of indicators that will allow financial institutions to say, “Am I serving women clients to the extent I think I am, and am I serving them well?” There are 25 indicators we’ve developed, and we’ve rigorously tested five silver-bullet indicators that can give a snapshot of whether an institution does care, and if they care about the number of women they’re serving.
What is the role of men in the work you do?
When we’re working with a financial institution to introduce a new product, the chances are, those institutions’ leaders will mostly be men. So with the leadership development training we do, if we’re not reaching men, we’re not going to be affecting the leadership that can make changes to how this financial institution services these clients.
As we’re building banks’ clientele of women customers, we have strong data showing they’re better repayers; they may save less each time they deposit, but they deposit more frequently, and they leave their money in the bank longer. They’re also more likely to buy multiple financial products from a financial institution, so if you’re going to be cross-selling, then doing it with women is a more lucrative approach.
How do we include more women in the formal financial system without putting them at greater risk of issues like domestic violence?
We always have to be more conscious and careful of this issue. We often see linkages between domestic violence and microfinance in research, and there’s a similar pattern regardless of where the research has been done. You’ll see an immediate spike in domestic violence when a woman becomes a client, and then you see a rapid fall—to even lower than it was before—as time goes on. There’s more money coming in, people are eating better, and so on. And then secondly, when the husband sees that he’s not the only guy in the village who’s allowed his wife to get “more power,” then it’s more of a socialized behavior.
Do you have any parting thoughts for mainstream financial services companies?
Women are a good client base, in particular with products that are designed to meet their needs. They can really represent an important business opportunity. There are about 1 billion unbanked women, and it’s a very aspirational desire on the part of women to have that relationship with a bank; it’s a market opportunity that banks shouldn’t be leaving behind.