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For many years, the United States has played a significant role in advancing the early microfinance revolution and the financial inclusion agenda worldwide. Access to and use of financial services yields many benefits to individuals, companies, and governments. For private citizens, financial services facilitate daily activities and provide ways to make payments, save, and plan for long-term goals and unexpected emergencies. More importantly, financial inclusion is one of the key enablers of women’s economic empowerment and a key factor to their financial independence. When women use financial services, it enhances agency to manage their income and contributes to the development of women’s self-esteem. Including women in the financial sector increases their participation in the formal economy, facilitates GDP growth, and encourages business formalization.
However, in nearly all countries, developed or not, women face significant barriers in accessing and using financial services. Market forces and policy reforms have been unable to close the gender gap in financial services, which has remained just under 10 percentage points for the past decade. With gender inclusion a key priority of the current administration, the United States’ development agencies can help tackle the pressing challenge of women’s financial exclusion in developing countries.
According to the latest statistics from the 2017 Global Findex database, in low- and middle-income countries (LMICs), 67 percent of men own a bank account while only 59 percent of women do. In countries like Bangladesh, Pakistan, and Turkey, the gender gap reaches 30 percentage points, a stark contrast to the near-universal account ownership in developed economies. Part of the reason for this gap is that most financial service providers require prospective clients to show official proof of identity to open an account, yet one out of two women in low-income countries lack access to a formal, government-issued ID. IDs are also are required when purchasing a mobile phone or SIM card in most markets. Hence, women are also 8 percent less likely than men to own a mobile phone and 20 percent less likely to use mobile internet—both necessary tools in an increasingly digitized global economy. At the same time, woman entrepreneurs have less access to credit and financing (or access to typically more expensive credit products) to start their businesses and must rely on self-financing. Per the International Finance Corporation's (IFC) estimation, formal, women-owned small businesses face a $300 billion gap in financing worldwide, and more than 70 percent of women-owned small and medium-sized enterprises (SMEs) have inadequate or no access to financial services.
Aside from having limited access to digital tools, IDs, and financial services, women and girls also face lower digital and financial literacy levels, hindering their ability to participate in the modern economy and make financial decisions. Moreover, cultural and social norms continue to afflict women’s economic participation well into adulthood. For instance, a 2019 Pew survey indicates that at least 70 percent of Indian, Indonesian, Nigerian, Filipino, Tunisian, and Turkish population believe that men should have more rights to a job than women when jobs are scarce. Finally, layered on top of gender norms are various discriminatory laws and regulations against women that hinder financial inclusion. Globally, 167 countries have at least one legal obstacle that restricts women’s economic opportunity.
These gender barriers have been compounded by the Covid-19 pandemic. As the coronavirus continues to ravage the world, its effects are being felt disproportionately among women. Jobs held by women are 1.8 times more vulnerable to the impact of Covid -19 than men’s jobs. Women have been faced with significant increases in household work because of school closures. There also have been widespread bankruptcies of women-led micro, small, and medium-sized enterprises (MSMEs) due to lockdowns, and there has been an overrepresentation of women in sectors negatively affected by the pandemic. In Sub-Saharan Africa, an IFC report demonstrates that 90 percent of women-led MSMEs suffered high economic impact, and 25 percent of them were unable to operate during the pandemic. Moreover, over 90 percent of women-led MSMEs surveyed had not received assistance from financial institutions such as debt restructuring. With an already limited pool of resources, the impact of the pandemic further reduces women’s agency to take economic initiatives, such as financing start-ups.
The dramatic reduction in “in-person” activities has accelerated the adoption of automation and digital technologies on a global scale. Although women appear slightly less likely to be displaced by automation than men, a relatively low level of digital literacy, combined with low affordability and insufficient investments in quality higher education and vocational training programs, might leave women less prepared to fully and equally participate in a rapidly digitalizing economy. While research also shows that the pandemic has spurred some women entrepreneurs to embrace digital platforms for their businesses, the digital gender divide remains.
Since governments imposed lockdowns to combat the spread of Covid-19, countries around the world have also reported a drastic rise in gender-based violence (GBV). The physical and mental health impact of GBV on women and girls causes profound economic damage and exacerbates the existing gender divide.
Notwithstanding the significant barriers faced by women and girls, over the last 10 years, the international community has focused efforts on enhancing gender financial inclusion.
In the 2018 Group of 7 (G7) Charlevoix summit, the Gender Equality Advisory Council (GEAC) was first convened to support the G7 in integrating gender equality throughout its agenda. In the 2019 Group of 20 (G20) Osaka summit, the leaders’ declaration signified the global consensus on the importance of the issue: “Gender equality and women’s empowerment are essential for achieving sustainable and inclusive economic growth.” Global initiatives such as the United Nations Capital Development Fund (UNCDF, 1966), the Alliance for Financial Inclusion (AFI, 2008), Global Partnership in Financial Inclusion (GPFI, 2010), Better Than Cash Alliance (2012), World Bank’s Identification for Development (ID4D, 2014) and Women Entrepreneurs Finance Initiative (We-Fi, 2017), and Consultative Group to Assist the Poor’s (CGAP) Reaching Financial Inclusion - A Call to Action (2021) leverage partnerships with many stakeholders in the shared commitment to gender financial inclusion.
Nonetheless, these endeavors have yielded mixed results, and gender equality has not always been a guaranteed outcome. For instance, while global account ownership is on the rise, a gender gap persists : an overall gap of 7 percentage points in 2017 remains the same as it was back in 2011. The McKinsey Global Institute’s (MGI) 15 world average gender-parity indicators also suggest that the progress has been marginal since 2015.
These persistent issues present an opportunity for the United States to step in and demonstrate leadership in bridging the global gender gap. Recognizing these challenges, on March 8, 2021, President Joe Biden signed an executive order to establish the White House Gender Policy Council (GPC) to advance gender equality and equity in both domestic and foreign policymaking. The move reiterates an indisputable reality: gender equity remains critical for strong post-pandemic economic recovery and inclusive, sustainable long-term growth. Given the importance of gender and inclusion placed by the Biden administration, there are several areas where the U.S. government should focus its efforts to enhance financial inclusion for women, at home and abroad.
First, the U.S. government should continue to scale and strengthen actions that aim to promote gender equality across its agencies. This includes in areas such as talent acquisition, staff training, adoption of gender-inclusive design in programming, and ensuring and expanding women’s presence in leadership and decisionmaking positions. Department of State and Treasury can educate on, advocate for, and pursue global financial sector policy conducive to an enabling environment for women’s financial inclusion. The administration should also encourage all branches of the government to review their gender policies, with an exemplary initiative being the U.S. Agency for International Development’s (USAID) revision of its Gender Equality and Women’s Empowerment 2020 Policy. Interagency cooperation that goes beyond development finance agencies, such as USAID, U.S. International Development Finance Corporation (DFC), and Millennium Challenge Corporation (MCC), can significantly increase the U.S. government’s leverage and impact on global gender financial inclusion. Interagency efforts ensure the consistency of U.S. messaging and engagement has been most successful when the solution of a specific agency is scaled by other agencies.
Second, U.S. development projects and programs should be more gender intentional. Since gender equality is not a guaranteed outcome of either stand-alone financial inclusion or digital transformation, it is crucial that policies and programs be more gender intentional. A CGAP Funders Survey 2018 indicates that only 13 out of 256 projects on gender financial inclusion from private and public funders focused exclusively on women. The gender element is usually packaged into overarching themes such as SME development. This approach sometimes leaves the gender component neglected, and far too often, innovators are unaware of the gender-transformative potential of their innovations.
Inclusivity should also be applied on the ground. A policy initiative from Washington D.C. is often too prescriptive to adapt to the changing circumstances in a specific country or area. Contextualization requires the U.S. government to engage, consult, and co-create with all relevant stakeholders, including local women, women with special needs (e.g., indigenous women and women with disabilities), community representatives, legislators and regulators, activists and rights organizations, and actors from the private sector. Engagement with local men is also necessary to induce structural behavior change since women’s empowerment demands systemic efforts that involve men’s participation.
Third, the United States could work with multilateral institutions and its own development agencies to collect sex-disaggregated data. There are still significant data and information gaps across countries in this respect which leads to inadequate policy responses to tackle gender inequalities. Sex disaggregated data on the usage of financial services has been collected since 2014 in the case of the Global Findex, but data in other sectors is needed if women are to participate fully in the economy. Building the capacity of national statistics agencies to collect yearly data would assist the policymaking process and track any progress made in order to take corrective action. Funding should focus on different data collection methods such as surveys, interviews, reviews, opinion polls, and benchmarking, as well as household interviews and focus group discussions. An example is the United Kingdom’s Investing in Women Code, a voluntary system that propelled 80 percent of financial actors in the country to collect sex-disaggregated data in their business finance in one year. This provides a potential model for U.S. agencies to replicate in the rest of the world.
Finally, the U.S. government needs to partner with the private sector where the untapped financial firepower resides. There are already many firms and philanthropies contributing to financial inclusion, such as PayPal and Facebook’s digital payment campaign, Microsoft’s 4Afrika initiative, MasterCard’s Center for Inclusive Growth, the Visa Foundation, and other impact investors. Agencies such as USAID and the DFC should combine and deploy traditional and non-traditional financing methods to forge public-private partnerships (PPP) and mobilize capital into developing countries. One important funding stream should be basic infrastructure (i.e., water, energy, transport), which has severely impacted women and girls’ physical and financial well-being long with digital infrastructure such as telecommunication towers and fiber-optic cables. Internet penetration in South Asia and Sub-Saharan Africa is lagging, especially in rural and remote areas. Robust, resilient, and sustainable information and communications technology (ICT) infrastructure that adhere to international standards serves as the foundation for digital ID and digital payments systems, which are the necessary tools for financial inclusion in a digitized economy. This administration can start by scaling and leading the G7’s latest Build Back Better World (B3W) partnership that targets digital technologies and gender equity and equality as two of the four primary areas of private sector capital flows.
Many women continue to lack access to financial services and are unable to participate fully in the economy due to complex and persistent cultural, legal, and socioeconomic barriers they face. The issue has long been noticed and acknowledged by the international community, but progress has been slow and uneven in recent years—with the Covid-19 pandemic exacerbating existing inequities. With gender equality a top policy priority, the Biden administration should grasp this opportunity and leverage every diplomatic and economic tool to promote gender financial inclusion. From the 2X Women’s Initiative to Women’s Global Development and Prosperity (W-GDP), there are many important initiatives that this administration should build on, with already enough political will garnered for a new, whole-of-government campaign to tackle the pressing challenge of global gender financial inclusion. If there is a right time to take action and lead, it is now.
Romina Bandura is a senior fellow with the Project on Prosperity and Development and the Project on U.S. Leadership in Development at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Hiromitsu Higashi is a research intern with the Project on Prosperity and Development at CSIS.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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