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Fellow Exec Ed

Blog Post

Last year was a huge milestone in my life. I got a scholarship to study at a prestigious graduate school in the U.S. I earned a promotion from a big four consulting firm in my home country. I felt like nothing could stop me.

Although I’m equipped with skills and knowledge to determine my financial future and work in the financial services field, my spouse managed our finances. We used a single credit card to make household purchases even though I participated in making payments on it. I had an excellent credit in my home country, but delayed establishing my own credit line in the U.S. because it was convenient to use a single credit card with a better APR. When my spouse and I decided to part ways, I realized that I underestimated the impact of not having a credit history in the U.S., so I had no access to affordable credit.

“We absorb a way of perceiving the world from parents and neighbors. We mimic the behavior around us. Only at the end of the process is there self-conscious oversight,” wrote David Brooks in a 2008 New York Times <a href="https://www.nytimes.com/2008/07/22/opinion/22brooks.html">opinion</a> piece. This was the case for me – and likely is for many immigrant women of different cultures – when it came to management of household economics. Contrary to the teachings of my debt-averse and underleveraged family back home, the “pursuit of happiness” in the U.S. is usually linked to one’s ability to borrow to pay for <a href="https://www.cnn.com/2019/04/02/health/health-care-costs-borrowing/index.html">healthcare</a>, education, a mortgage, or building a business. When the system doesn’t “trust” you, rebuilding a life isn’t easy.

So I went back to square one in this new country. It’s not hard to imagine that the impact would've been more dramatic if I had limited financial literacy, education or resources.
<h2>Is Trusting the “Credit Invisible” Possible? Enter Alternative Data.</h2>
The traditional credit scoring system excludes 26 million consumers with non-existent or short credit histories in the U.S. The <a href="https://www.americanbanker.com/news/fintechs-find-another-untapped-market-new-immigrants-needing-credit">gap</a> will likely increase with the growing trend in the demographics of the immigrant population in the United States, so alternative data has emerged as a way to rethink the indicators of credit worthiness to expand credit to the “credit invisible.” As the world becomes more interconnected and migration flows increase, several financial technology startups are seeking innovative solutions to tap into this market. Examples of this are a <a href="https://www.creditstacks.com/">credit card that doesn’t require a credit history</a> in the U.S., and <a href="http://www.novacredit.com">connecting international credit bureaus</a> with domestic institutions that enable expats to apply for products and services as well as helping them build a credit score.

Alternative data mainly includes unorthodox information such as consumer-permissioned financial data, online activities and rental payments. With the evolution of analysis, management and storage of big data, extremely large information sets that can be analyzed to reveal patterns, trends, and associations – especially relating to human behavior and interactions – startups, like the examples above, have started to develop and license automated scoring methodologies based on alternative data.

The use of alternative data considerably expands the universe of information available to lenders and CRAs (credit reporting agencies), enabling them to achieve a <a href="http://images.go.experian.com/Web/ExperianInformationSolutionsInc/%7B15855ffe-926b-4c59-a5a6-52fb5ed79cff%7D_2019StateofCreditData_whitepaper_web_01.pdf">holistic view</a> of their current and future customers, identify and prevent fraud, and assess a customer’s repayment capacity more efficiently. But is this always good for the consumer?

The promise to increase underserved individuals’ access to credit comes at a cost. The <a href="https://www.internetsociety.org/tutorials/your-digital-footprint-matters/">Internet Society</a> notes that every day, whether we mean to or not, we “contribute to a growing portrait of who we are online; a portrait that is probably more public than we assume” without knowing what kind of trail we’re leaving, and what the possible effects can be.

Recently, various consumer advocacy groups and the United States Government Accountability Office (GAO) have expressed concerns about data accuracy and privacy issues arising from the <a href="https://www.gao.gov/assets/700/696149.pdf">amount and sensitivity of the alternative data</a> collected and used by financial technology companies. The lack of transparency in the models, data sources and data analytics technologies are also criticized. Credit scoring companies treat their <a href="https://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=1122&amp;context=yjolt">data sources as proprietary trade secrets</a>. If consumers are not aware of what specific information the credit scoring systems use and how it impacts their credit score, their ability to dispute unfavorable credit decisions, identify inaccuracies in the lender’s files and take remedial steps to improve their credit score is significantly limited.
<blockquote>How can consumers dispute credit scores if they don't know what data is in them?</blockquote>
Furthermore, credit scoring models are based on class attributes and underlying assumptions built into them by the developers, which remain undisclosed, and failure to use <a href="https://www.nytimes.com/2016/06/26/opinion/sunday/artificial-intelligences-white-guy-problem.html?mcubz=1">inclusive datasets</a> to facilitate the machine learning process may <a href="https://www.consumercomplianceoutlook.org/2017/second-issue/keeping-fintech-fair-thinking-about-fair-lending-and-udap-risks/">amplify and perpetuate existing social inequalities</a>.

In order to achieve meaningful access to financial services using alternative data, industry stakeholders need more guidance and regulations on data privacy, transparency and clarification of the scope of data that may be used for credit scoring purposes. Currently, <a href="https://www.federalreserve.gov/boarddocs/supmanual/cch/fair_lend_over.pdf">fair lending laws and regulations</a> prohibit the use of certain information such as race, color, religion and national origin that may result in lending discrimination. However, it’s unclear to what extent these regulations capture alternative data, as discrimination may occur indirectly or even in an unintended way depending on the type of data is being used and how the scoring model works. For example, even though data initially collected from consumers doesn’t infringe upon protected classes, aggregation of data may be <a href="https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=404003">used as a proxy</a> for a given protected class a consumer may fall under. This also increases the risk of vulnerable populations, such as the elderly in financial distress, being targeted for <a href="https://www.govinfo.gov/content/pkg/CHRG-113shrg95838/pdf/CHRG-113shrg95838.pdf">predatory marketing pitches</a> to sell financial products with unfavorable terms.
<h2>Current Legislative and Policy Efforts on Alternative Data</h2>
Although federal agencies have taken some <a href="https://files.consumerfinance.gov/f/documents/cfpb_interagency-statement_alternative-data.pdf">steps</a> to monitor the use of alternative data and encourage well-designed compliance management programs, existing guidance remains to be limited, according to the GOA. In 2019, there have been a few legislative efforts in Congress for regulating the use of alternative data in lending. However, the programmatic focus and the scope of alternative data that may be used in credit scoring were criticized to be narrow given the variety of use cases and the types of alternative data available to credit scorers and lenders.
Recently, Rep. Josh Gottheimer of New Jersey introduced a bill titled “<a href="https://financialservices.house.gov/uploadedfiles/bills-116hr____ih-accesstocredit.pdf">Accurate Access to Credit Information Act of 2019</a>” which amends the <a href="https://www.consumer.ftc.gov/articles/pdf-0096-fair-credit-reporting-act.pdf">Fair Credit Reporting Act</a> to ensure that CRAs are providing fair and accurate information reporting in consumer reports, and for other purposes. Similar to the previous bills that sought to expand access to credit through alternative data, the proposed amendments permit the CRAs to use rent or utility payment information, subject to certain limitations. The proposed legislation emphasizes on finding a better way to create a big picture view of a consumer’s creditworthiness and new consumer habits. That makes sense in 2020: millennials, for example, are prone to being credit invisible because they prefer to rent instead of owning a house, use mobile ride hailing apps rather than leasing a car, and use mobile payment apps.

This isn’t just a pressing topic in the U.S., of course. The World Bank and CGAP have published a detailed <a href="https://www.gpfi.org/sites/gpfi/files/documents/Data_Protection_and_Privacy_for_Alternative_Data_WBG.pdf">discussion paper</a> on data protection and privacy for alternative data, identifying transparency, data privacy and discrimination risks to be addressed through policy guidance. Looking across our southern border, similar risks were spelled out by Banco de Mexico, who emphasized the potential reliance of lenders on reports obtained from alternative data providers as a substitute of credit reports. Mexico, which adopted a <a href="https://www.acc.com/resource-library/fintech-regulation-mexico-1">landmark piece of legislation</a> regarding financial technology, requires alternative data providers to comply with <a href="https://www.dlapiperdataprotection.com/index.html?t=law&amp;c=MX">data protection regulations</a>.

In Europe, information used by credit scorers such as social media data, app usage data and location intelligence will likely be captured by the General Data Protection Regulation, which regulates data permissions and lawfulness of the use as well as requiring robust IT security and safeguards, to the extent an individual can be identified based on alternative data (including identification with reverse engineering and the combination of various datasets).
<blockquote>Without data integrity, alternative data may not expand access to credit.</blockquote>
In the United States, efforts to regulate use of alternative data promise to increase consumer protection and facilitate financial inclusion. Because people develop technology and algorithms, they may also learn and reflect biases of their makers. To minimize the risk of discrimination and unfair outcomes, more transparency is needed from the credit scorers. Furthermore, without ensuring data integrity, it’s not realistic to expect alternative data to miraculously expand access to credit. In the absence of sound and uniform regulations on data privacy and laws on the fair use of alternative data, consumer protection risks outweigh benefits.

Alternative Data in America: Policy and Concerns

With the deadline for the 2020 <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/hbs-accion-program-on-strategic-leadership-in-inclusive-finance">HBS-Accion Program on Strategic Leadership in Inclusive Finance</a> rapidly approaching -- applications are due Tuesday, January 21 -- we thought it would be helpful for the admissions team to offer some insights on crafting the best possible program and scholarship application to raise your chances of acceptance.
<h2>1   Be specific</h2>
A lot of times, applicants answer the questions generally, which makes it hard for us to judge their application against other candidates or how useful the program would be to them in their work. A few of our prompts ask for an example or to list three challenges they face, and often people just list one challenge, or don’t answer the entire question, which is a pretty easy way to eliminate applicants right away.
<h2>2   Stay on topic</h2>
This is similar to the above. Applicants to the HBS-Accion Program have unique and deep experiences, and we look forward to learning more about them in reading their applications. However, this program is fairly specific – both in terms of the course content and the profile of applicants and their respective institutions – so to level the playing field, we encourage you to review the questions/prompts closely to make sure you answer them directly. This will help us better equally compare the merits of each application.
<h2>3   Be concise</h2>
We also have word limits on the short answer questions, and they are often ignored, or applicants use the additional information box to write an entire essay when, often, it’s not necessary. When there’s too much information, it’s sometimes challenging for us to decipher what’s the actual answer to the question and what’s just extra information.
<h2>4   Reach out with questions</h2>
In general, most of the people who have emailed us with questions this year have ended up submitting stronger applications. Clarifying is a good way to make sure you provide a relevant answer to a question that otherwise might be confusing. This happens a lot with the scholarship question in particular.
<h2>5   Answer all the questions</h2>
We understand the application is long (we want to be thorough!), but each required question must have a response associated with it. We think your application is a reflection of how you might perform during the course, so please take the time to complete it in full and with special care.
<h2>6   Answer in complete sentences and check spelling and grammar</h2>
We understand that English isn’t the first language of a sizable percentage of our applicants. We don’t expect applicants to be world-class writers in English – after all, this isn’t a scholarly degree program. But there is a fair amount of reading and writing involved, and being able to share your unique perspectives in a clear and cogent manner is important to getting the most out of the program. This is why we encourage you or a friend to proofread your application and use your word processor’s spelling and grammar check function.

6 Tips for a Stronger Application: HBS-Accion Program on Strategic Leadership in Inclusive Finance

As more people are connecting to more financial services digitally, we’re seeing growing calls for individuals to have greater control over how their data is being used and by whom. At the heart of consumers’ ability to control their data is the notion of consent, but what consent means in practice can vary considerably and can often be difficult for providers to ascertain in a meaningful way from a consumer standpoint.

In the EU, the GDPR has <a href="https://gdpr.eu/gdpr-consent-requirements/">defined consent</a> as being free, informed, specific and unambiguous. It also necessitates an opt-out option for data subjects, allowing for the partial or complete withdrawal of any previously given consent, and for the removal of all gathered personal data. But while these requirements may be good for consumers, they’re also tough for providers to implement. Just ask Google, which was <a href="https://www.reuters.com/article/us-google-privacy-france/france-fines-google-57-million-for-european-privacy-rule-breach-idUSKCN1PF208">fined 50 million euros</a> last year after the French data protection authority concluded that it “lacked transparency and clarity in the way it informs users about its handling of personal data and failed to properly obtain their consent for personalized ads.”
<h2>Flexibility Needed for Smaller Providers</h2>
So, if a tech giant, operating in Europe with all the resources and expertise at their disposal, can run afoul of these new consent requirements, does it make sense for governments in developing countries to try to adopt similar rules? India’s response for now has been yes. The current version of its pending data protection bill incorporates the same consent principles as GDPR. However, one legal observer we spoke to expressed concerns that the bill says nothing about what this consent architecture will look like and the ways in which consent will be sought. For smaller providers like microfinance institutions, fintechs and small finance banks that are trying to reach underserved segments with higher levels of illiteracy, obtaining consent as currently defined in the bill would pose a significant challenge, as elaborated below. Moreover, providers leveraging digital technologies to serve customers who might not be that digitally literate or understand the ways their data can be used may find it nearly impossible to meet such high standards of consent. The likes of Google might be able to figure it out over time, but smaller providers would need more flexible rules and support to comply.
<blockquote>Google might be able to figure out high-standard consent, but smaller providers would need more flexible rules and support.</blockquote>
For further evidence on how providers are already coming up short on consent, a recent <a href="http://documents.worldbank.org/curated/en/677281542207403561/Financial-Consumer-Protection-and-New-Forms-of-Data-Processing-Beyond-Credit-Reporting">World Bank report on new forms of data processing</a> laid out many limitations of practices around consent, such as lengthy and complex consent forms, incomplete information, and standardized, inflexible terms offered on a “take it or leave it” basis. As a result, providers are often seen to be doing the bare minimum to comply with existing data protection requirements. In recounting the deficiencies identified in a study by the Centre for Internet and Society on fintech privacy policies in India, a <a href="https://cis-india.org/internet-governance/blog/the-wire-shweta-mohandas-july-30-2019-in-india-privacy-policies-of-fintech-companies-pay-lip-service-to-user-rights">recent article</a> noted that one rule “requires a fintech company to provide an option to withdraw consent. Twenty-three percent of the companies allowed the user to opt out or withdraw from certain services such as mailing list, direct marketing and in app public forums, but they did not allow the user to withdraw their consent completely.” Such findings have led various observers to rightly question <a href="https://www.cgap.org/blog/data-protection-and-financial-inclusion-why-consent-not-enough">how effective consent really is</a> in practice and to propose <a href="https://www.cgap.org/research/publication/making-data-work-poor">other approaches</a> to give consumers more meaningful control over their data.
<h2>The Futility of Trying to Keep Up with New Approaches to Consent</h2>
This all stands to reason, but it again begs the question as to how providers who are already having a hard time complying at a minimal level could ever keep up with these new approaches. Indeed, in discussing the variety of data protection principles and standards that already exist around the world, the previously mentioned World Bank report also hastened to point out that “such principles may often be difficult to implement, particularly in low-capacity environments and/or where changes in the financial sector are fast paced.” As our interviewees attested, low-capacity environments and fast-paced changes are very much the rule, not the exception, and the path from principles to implementation is littered with landmines.
<blockquote>Low-capacity environments and fast-paced changes are very much the rule, not the exception.</blockquote>
One case we encountered centered around the issue of informed consent. Last year, the Reserve Bank of India <a href="https://economictimes.indiatimes.com/industry/banking/finance/banking/rbi-slaps-rs-5-crore-penalty-on-airtel-payments-bank-for-violation-of-norms/articleshow/63235308.cms">fined Airtel Payments Bank</a> the equivalent of roughly $700,000 for “contravening the Operating Guidelines for Payments Banks and directions issued by RBI on Know Your Customer (KYC) norms.” Airtel Payments Bank is majority owned by Bharti Airtel, one of the largest mobile operators in India, and in 2017 complaints started to emerge among mobile subscribers that Airtel Payments Bank had opened new bank accounts without their consent. According to <a href="https://www.financialexpress.com/economy/uidai-airtel-payments-bank-case-company-claims-no-wrongdoing-heres-how-you-can-avoid-the-trap/979401/">reports</a>, when new Airtel mobile subscribers first opened their Airtel mobile app, a pre-ticked consent box would appear on the welcome screen which, unless unchecked, would authorize the use of the same <a href="https://uidai.gov.in/what-is-aadhaar.html">Aadhaar</a>-based eKYC verification required to open the mobile account to also open an Airtel Payments Bank account. Over 2.3 million customers reportedly had new bank accounts created that they did not realize had been opened. Further complicating the matter was the fact that government subsidies would automatically be sent as direct benefit transfers to each beneficiary’s most recent Aadhaar-linked bank account, resulting in the equivalent of about $6.6 million in subsidies being deposited into these accounts. Airtel Payments Bank maintained that it had properly obtained consent to open these accounts but committed to working with the government to ensure compliance. We spoke with Akhil Verma, the current Chief Information Security Officer of Airtel Payments Bank, and he said the bank’s failure to notify customers of this caveat and obtain their explicit permission before allowing this was considered grounds for insufficient consent.
<h2>Out of Step With Modern Digital Reality</h2>
Another concern we heard from the other side of the globe was that some consent requirements are out of step with modern realities. According to Mariano Fuentes, Legal Advisor with ASBANC, the banking association in Peru, its data protection law (which was originally passed in 2011) is outdated for the digital times we now live in and does not do a thorough job of clarifying the ways consent can be obtained. Banks in Peru can obtain consent for personal data digitally, but “sensitive” personal data, which not only includes data on things like race or health, but also biometric data and data pertaining to “personal habits” that could come from things like mobile phone usage patterns, still requires written consent. Since Peru’s data protection law was passed in 2011, it would not have been able to fully anticipate the ways in which people’s lives have been digitized and the new types of data that would emerge, so it’s not surprising that it was reported last June that the National Authority for the Protection of Personal Data in Peru had issued <a href="https://elcomercio.pe/economia/negocios/tres-anos-han-puesto-1-246-sanciones-faltas-proteger-datos-noticia-646513-noticia/">1,246 sanctions within three years</a> (across all sectors).  A scan of the sanctions imposed by the data protection authority also reveals that a significant share of these violations resulted from failures to properly obtain consent.

Whether these cases amount to violations is often a matter of interpretation. Mariano Fuentes of ASBANC underscored this by pointing out that five member banks are currently appealing their penalties because they disagree with the arguments made by the data protection authority. “The complete idea of consent is not represented by any technology, which is damaging in today’s times and is used against us to levy sanctions,” he added. Despite these challenges, Peru consistently ranks as one of the top country-wide regulatory environments for financial inclusion in the Economist Intelligence Unit’s <a href="https://www.centerforfinancialinclusion.org/global-microscope-2019">Global Microscope</a> assessment. In the 2019 version, it came in second partly because it “showed the greatest improvement in the consumer protection domain—specifically, for its data protection framework for financial customers.”
<h2>So How Are Consumers Supposed to Understand?</h2>
Given all the shortcomings with current consent practices around the world, it’s simply unfair to expect consumers to be able to fully understand what can and cannot happen with their data right at the point when they are about to access a new service or download an app. But at the same time, placing the burden on providers, especially those that are on the frontlines of underserved areas, to understand and apply high standards of consent is also proving to be a challenge. The reality is that this is a burden that both consumers and providers need to share, but not on their own. They need the right mix of policy and technology to help them get there. There are some emerging regulatory technology – or “regtech” – solutions providers in developed markets (like <a href="https://www.trunomi.com/">Trunomi</a>) that enable consent-based data sharing, for example.
<blockquote>This is a burden that both consumers and providers need to share, but not on their own.</blockquote>
As these solutions continue to advance, perhaps governments in developing countries could seek to attract such providers to adapt these solutions for their markets. It’s this type of innovation and collaboration that is needed to make consent work. The burden should be broadly shared.

Data Consent: Let’s Share the Burden for Effective Consumer Protection

In response to the seemingly <a href="https://www.centerforfinancialinclusion.org/infographic-75-records-compromised-every-second">endless flow</a> of data breaches and misuses of personal data, governments are increasingly responding with <a href="https://www.ironmountain.com/resources/general-articles/t/the-legal-ramifications-of-a-data-breach">penalties</a>, hearings and new laws and regulations. Perhaps the most widely known is the European Union’s General Data Protection Regulation (GDPR), which <a href="https://www.wired.co.uk/article/what-is-gdpr-uk-eu-legislation-compliance-summary-fines-2018">went into effect</a> in May 2018 and has quickly become a global benchmark, as many of the data protection regimes emerging around the world appear to embrace the same <a href="https://gdpr-info.eu/art-5-gdpr/">basic principles</a> that are at the core of GDPR.

As the growth of the digital economy continues to fuel the expansion of consumers’ data footprints, we’re also hearing calls for new approaches to data protection that advances in digital technologies should be making increasingly possible, at least in theory. But in the recent research and interviews we conducted on the current state of data protection in India, Ghana and Peru (thanks to a collaboration made possible through the <a href="https://www.credit-suisse.com/careers/en/articles/careers/sharing-expertise-201712.html">Credit Suisse Global Citizens</a> volunteer program), we encountered a divide between governments and providers that surfaces when you get beyond principles and into the specifics of their application.

As usual, the devil is in the details.

For example, in responding to a question about how data protection laws and regulations in Ghana may be impacting the extent of data sharing among providers seeking to reach underserved segments, Clarissa Kudowor, Deputy Chief Manager of the Payment Systems Department, Bank of Ghana, wrote, “Whatever the arrangements/partnerships, we expect them to apply the universally accepted principles of data protection under Section 17 through to Section 34 of the Data Protection Act, 2012.” But achieving alignment between policymakers and providers on how best to apply these principles may be easier said than done.
<blockquote>Achieving alignment between policymakers and providers may be easier said than done.</blockquote>
For instance, in talking about data protection seminars offered by the Ghanaian government, Elorm Allavi, the CEO of <a href="https://syecomp.com/">SyeComp</a>, a fintech which uses data from smallholder farmers for its mfarmPay credit product, said, “Seminars are for awareness creation, but in terms of the technical side, they’re not there yet. They don’t understand how we use data.” This is but one example of the gap that exists between governments and providers in advancing data protection in their countries. But where there are problems, there are also opportunities.

Recognizing how vast of a topic this is, we have chosen to focus on three key aspects of data protection that surfaced during our research.
<ul>
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<h4><strong>Consent</strong></h4>
</li>
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<h4><strong>Localization</strong></h4>
</li>
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<h4><strong>Regulatory capacity and fragmentation</strong></h4>
</li>
</ul>
We will dedicate one blog post to each of these issues, starting next week with consent. Over the coming weeks, we will explore these topics – plus <strong>alternative data</strong> legislation and vulnerable populations in the U.S. – in a CFI Blog series, “Data Protection and Financial Inclusion: Why It Matters Now.” Join us as we dive in to these issues from a financial inclusion perspective and our unique position as an industry engager.

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Data Protection and Financial Inclusion: Why It Matters (Introduction)

The Economist Intelligence Unit’s (EIU) <a href="https://www.centerforfinancialinclusion.org/global-microscope-2019">Global Microscope 2019</a> was updated with 11 indicators that shed light on a country’s likelihood to create a more enabling environment for women’s financial inclusion. While the Microscope doesn’t rank the countries on these indicators, the premise is that countries with gender-oriented policies or infrastructure in place are more likely to be enabling for women’s financial inclusion. These indicators can be subcategorized into four buckets: policy,  constraints, discrimination, and infrastructure:

<a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/01/Screen-Shot-2020-01-06-at-12.42.42-PM-1.png"><img class="aligncenter size-full wp-image-37569" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/01/Screen-Shot-2020-01-06-at-12.42.42-PM-1.png" alt="gender indicators global microscope 2019" width="800" height="574" /></a>

Country-level data reveals that the index doesn’t actually help us get closer to understanding which policies drive financial inclusion for women, however.

Let’s use the Philippines and Bangladesh as examples. Both countries have three of the Microscope indicators in place. Yet the Philippines is one of the few countries in the world where women’s access to financial services exceeds that of men (39 percent for women versus 30 percent for men, according to the <a href="https://globalfindex.worldbank.org/">Global Findex 2017</a>). On the other hand, Bangladesh has one of the largest gender gaps in access in the world at over 28 percent (64 percent for men versus 36 percent for women). The fact that such different outcomes are measured equally using Microscope’s index signals that women’s financial inclusion requires much more than what is captured by these indicators.

The reality is that what may appear to be a barrier in one country for women’s financial inclusion may not be a barrier in another. Let’s look at one of the indicators: diversity programs for non-banking or correspondent agents. This indicator is highly relevant for countries where norms may limit women’s ability to engage with male agents but this issue wouldn’t be a direct barrier in cultures where women have freedom to move and engage with whomever they choose. Thus, its existence or lack thereof may or may not have an affect on women’s financial inclusion in that particular country.
<blockquote>What may appear to be a barrier in one country for women’s financial inclusion may not be a barrier in another.</blockquote>
Conversely, policy enablers that may exist in one country may be missing from another and may not be captured by these 11 indicators. Many countries, for example, have begun to shift G2P payments into women’s accounts (<a href="https://www.centerforfinancialinclusion.org/g2p-in-colombia-where-to-next-for-the-familias-en-accion-program">Colombia</a> is a successful example of this). This approach has created incentives for women to open formal bank accounts and gives them reasons to use them. This specific policy enabler isn’t identified as one of the indicators but clearly its existence in a market would facilitate women’s financial inclusion.

Many other factors that would influence the differences in results between countries such as the Philippines and Bangladesh include women’s labor force participation, women’s level of literacy and women’s roles as migrant workers. All of these factors would increase the demand side reasons for women to engage with the formal financial system. Labor force participation translates into receipt of a salary and often workers need a place to store those salaries and to make payments. The same is true for migrant laborers who often need the means to remit money to their families. Literacy is also associated with higher demand for financial services: the more education one has the more likely one will use formal financial channels. This is borne out in the academic literature; see, for example, this <a href="http://people.bu.edu/kajayi/AjayiRoss_EducationFinancialInclusion.pdf">study</a> and this <a href="https://www.hbs.edu/faculty/Publication Files/cps-smart money 2013 august_d4fb3555-e078-415a-8b20-aa50dc878205.pdf">study</a>. In the case of the Philippines, women’s labor force participation averages around 47 percent, whereas women’s participation in Bangladesh is only 36 percent. In the Philippines, literacy is essentially universal at <a href="https://psa.gov.ph/content/literacy-men-and-women-philippines-results-2008-functional-literacy-education-and-mass-media">96 percent for women and 95 percent for men</a>. In Bangladesh, women’s literacy is 70 percent as compared to 75 percent for men. Finally, in the Philippines, in 2018 there were over <a href="https://psa.gov.ph/content/statistical-tables-overseas-filipino-workers-ofw-2018">1.2 million migrant female workers as compared to 1 million men</a>, while in Bangladesh, women make up a very small share of the migrant labor force at only <a href="https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---ilo-dhaka/documents/publication/wcms_310411.pdf">13 percent as of 2013</a>. In light of these very different demand-side issues, it’s striking that financial access for women in Bangladesh is nearly the same as that in the Philippines: 36 percent compared to 39 percent. What’s Bangladesh doing right despite these headwinds, and what can the Philippines do more to encourage usage of the formal financial system by both men and women?
<blockquote>Each country will need to define the conditions that will improve women’s financial inclusion.</blockquote>
Being able to identify a narrow set of policies or access to infrastructure that would promote women’s financial inclusion is appealing, and the EIU should be commended for making the effort to identify a set of potential policies. But the reality is that each country will need to define the conditions that will improve women’s financial inclusion based on barriers and opportunities unique to each country-wide market.

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