This is part of a <a class="fui-Link ___10kug0w f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh fhgqx19 f1olyrje f1p93eir f1nev41a f1h8hb77 f1lqvz6u f10aw75t fsle3fq f17ae5zn" title="https://www.centerforfinancialinclusion.org/series/digital-cash-transfers-for-women" href="https://www.centerforfinancialinclusion.org/series/digital-cash-transfers-for-women" rel="noreferrer noopener" aria-label="Link series">series</a> of work done in partnership with CFI and WFP, with funding from the Bill &amp; Melinda Gates Foundation, that explores how we can improve the design and delivery of digital cash transfers for low-income women.

Cash transfer programs have emerged as a crucial tool in the global effort to combat poverty, overcome shocks and other adversities, and achieve the Sustainable Development Goals (SDGs). Cash transfers provide financial support to vulnerable households, enabling them to meet their basic needs, access essential services, and invest in income-generating activities. However, beyond the immediate economic relief they offer, cash transfer programs also have the potential to <a href="https://cdn.odi.org/media/documents/11316.pdf" target="_blank" rel="noopener noreferrer">address deeper societal issues, including gender inequality</a>. 
<blockquote class="pullquote--right">By putting money directly into the hands of women within households, these programs challenge traditional gender norms and empower women to make decisions about finances, thereby enhancing their control over economic resources.</blockquote>
<a href="https://blogs.worldbank.org/voices/building-back-better-means-designing-cash-transfers-womens-empowerment" target="_blank" rel="noopener noreferrer">Women's economic empowerment</a> is increasingly recognized as a central objective of cash transfer programs. By <a href="https://docs.wfp.org/api/documents/WFP-0000141256/download/" target="_blank" rel="noopener noreferrer">putting money directly into the hands of women within households</a>, these programs challenge traditional gender norms and empower women to make decisions about finances, thereby enhancing their control over economic resources. This not only contributes to reducing gender inequalities but also enhances women's access to formal digital financial services and potentially brings additional benefits such as <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/12/Bridging-the-gap-1.pdf">increasing access to identification documents</a>. 

As we explore the potential benefits of directing funds to women, a critical question arises: could this approach exacerbate the risk of intimate partner violence (IPV)? This question probes the potential shifts in power dynamics within households and the increased vulnerability women might face as they gain control over financial matters. 

Is this concern rooted in perception, or does substantial evidence support these claims? To dig into this question, a <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/09/Sending-Cash-Transfers-to-Women-Report.pdf">comprehensive study</a> conducted by CFI, in partnership with the World Food Programme (WFP) and funded by the Bill &amp; Melinda Gates Foundation, examined existing evidence and sought insights from experts in the field. The study's findings suggest that directing funds into the hands of women on behalf of their households can in fact reduce the risk factors associated with IPV. This positive outcome is primarily attributed to the alleviation of financial stress within households and improvements in emotional well-being. However, it is essential to acknowledge that despite the potential benefits, cash transfers to women may still trigger instances of IPV, especially in contexts where harmful gender norms are deeply ingrained.
<blockquote>Despite the potential benefits, cash transfers to women may still trigger instances of IPV, especially in contexts where harmful gender norms are deeply ingrained.  </blockquote>
Globally, <a href="https://www.who.int/publications/i/item/9789240026681" target="_blank" rel="noopener noreferrer">27 percent</a> of ever-married/partnered women, ages 15 – 49 years, have experienced physical or sexual violence by an intimate partner in their lifetime. Women living in the least developed countries and in countries facing conflicts are disproportionately affected with an even higher prevalence of IPV. Gender inequalities that restrict women’s access to basic services and rigid social norms that support masculinities based on power and control are <a href="https://www.who.int/news/item/09-03-2021-devastatingly-pervasive-1-in-3-women-globally-experience-violence" target="_blank" rel="noopener noreferrer">major risk factors leading to IPV</a>. Cash transfers directed to women on behalf of the household can challenge these norms by putting money in the hands of women. However, simply transferring cash is not enough and must be accompanied by <a href="https://apps.who.int/iris/bitstream/handle/10665/312261/WHO-RHR-18.19-eng.pdf?ua=1" target="_blank" rel="noopener noreferrer">programming to gradually transform gender norms</a>. 

In line with the "do no harm" principle, designing cash transfer programs that effectively minimize the risks of IPV is paramount, particularly in settings where such violence is prevalent. At the same time, it is crucial to consider the impact on IPV beyond the program’s duration and explore how the reduction in IPV can be sustained in the longer term.  
<h1>How to Design Cash Transfer Programs and Send Money to Women While Reducing Risk of Intimate Partner Violence  </h1>
From this research, CFI and WFP developed a <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/09/Sending-Cash-Transfers-to-Women-infographic.pdf">guide</a> that details how to design cash transfer programs that enhance household well-being, increase women’s empowerment, and reduce the risks of IPV. It is important to note that effective design and implementation of cash transfer programs directed to women’s accounts should follow a comprehensive assessment of IPV risks, carefully considering contextual factors including prevailing gender norms, socioeconomic dynamics, and political conditions. 

Several key recommendations emerge from our analysis: 

<img class="wp-image-46448 size-full alignnone" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/09/Screenshot-2023-09-27-at-2.49.17-PM-e1695913799888.png" alt="" width="791" height="607" /> <img class="size-full wp-image-46449 alignnone" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/09/Screenshot-2023-09-27-at-2.49.32-PM.png" alt="" width="791" height="779" />

&nbsp;

The <a href="https://www.centerforfinancialinclusion.org/sending-cash-transfers-to-women-how-to-design-programs-that-enhance-well-being-while-safeguarding-against-intimate-partner-violence">full report</a> from the study details actionable insights backed by lessons and examples from diverse cash transfer programs.

Cash Transfers Directed to Women and the Implications for Intimate Partner Violence: Lessons for Program Design

When cash transfers are safely sent directly to women, they have the potential to address gender inequities by helping women meet basic needs, access essential services, and invest in income-generating activities. But prioritizing women as the primary recipients of cash transfer programs, and thus diverging from traditional practices where men are the heads of households, raises concerns about intimate partner violence (IPV).<span class="EOP SCXW226271306 BCX0" data-ccp-props="{&quot;134233117&quot;:false,&quot;134233118&quot;:false,&quot;201341983&quot;:0,&quot;335559738&quot;:0,&quot;335559739&quot;:160,&quot;335559740&quot;:240}"> This report examines existing evidence on the impact of cash transfers on IPV against women and proposes design approaches to mitigate and minimize those risks. While the report primarily focuses on evidence related to reducing the risk of IPV following cash transfers to women on behalf of households, it also underscores the potential that sending cash to women has for reducing existing IPV. The objective is to foster a constructive dialogue and encourage governments and humanitarian organizations implementing cash transfer programs to prioritize women as the recipients of cash on behalf of their households whenever feasible, while ensuring their safety and adequate support.  

This series, created in partnership with World Food Programme (WFP), the Center for Financial Inclusion (CFI), and the Bill &amp; Melinda Gates Foundation, shares how we can improve the design and delivery of digital cash transfers for low-income women.

Sending Cash Transfers to Women: How to Design Programs that Enhance Well- Being While Safeguarding Against Intimate Partner Violence

On the outskirts of sprawling Delhi, 34-year-old Maya opens her kirana, a small grocery store, for the day. Sleeves of shampoo packets and dry snacks line the walls around the counter where Maya serves up to 80 customers on a good day. She accepts payments in cash as well as digital payments on her smartphone, thanks to India’s successful <a href="https://www.forbes.com/sites/zennonkapron/2023/04/10/is-indias-upi-real-time-payments-system-ready-to-go-global/?sh=298e95e94d14" target="_blank" rel="noopener noreferrer">Unified Payments Interface (UPI) system</a>. However, while Maya’s name is registered as the business and bank account owner, she does not know much about the bank account or the business finances beyond her handwritten ledger book. Instead, her husband manages the banking relationship, and she must ask him for more cash or information about the account balance.
<blockquote>Many registered businesses are owned and managed by women only on paper; their lived realities are much different.</blockquote>
According to the Indian Ministry of Micro, Small &amp; Medium Enterprises (MSMEs), <a href="https://msme.gov.in/msme-annual-report-2022-23" target="_blank" rel="noopener noreferrer">women only own 20 percent of Indian MSMEs</a>. While this is already a small figure, ​​​​<a href="https://www.centerforfinancialinclusion.org/fight-gender-inequality-prioritizing-womens-customer-experience-in-product-design-and-complaint-resolution-processes">interviews conducted in March 2023</a> with 38 women business owners in India suggest that this number may be even lower. Many registered businesses are owned and managed by women only on paper; their lived realities are much different.

<img class="aligncenter wp-image-46289" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/08/Nina-Liew-blog-graphic.png" alt="" width="1009" height="235" />
<h1>Challenging Existing Norms</h1>
Providing financial services to women in low- and middle-income countries <a href="https://www.povertyactionlab.org/policy-insight/designing-financial-services-and-social-protection-programs-enhance-womens-economic" target="_blank" rel="noopener noreferrer">does not necessarily result in economic empowerment</a> if women do not or cannot make the decisions about their finances. Of the Indian women micro- and small-business (MSE) owners interviewed, over one-third relied on a man — typically a husband or brother — to manage or assist in their use of financial services, even if the woman was the registered owner of the business and bank account. When asked why, women said it was because of personal preference, a lack of confidence in operating the account, or that it was the man’s choice. This was true of interviewees with a master’s degree as well as those with lower levels of formal education, illustrating the pervasiveness of gender norms across education levels.

Managing the business’ day-to-day finances extends to resolving issues with a bank or fintech. Women who rely on their husbands or brothers to operate their bank accounts will often wait for them to contact the agent -- who is usually a man -- to resolve any complaints. This process is time-consuming and causes friction in women’s daily business activities. Consequently, these women may turn away customers if they do not have enough cash or lack information on accessing financial services for business improvement or growth.

For women in India to fully realize their economic contribution to the Indian economy, we must challenge and change existing norms. The current lack of equality represents a missed opportunity as bona fide access to formal financial services enables women to build their assets and wealth, improving their wellbeing and the wellbeing of their families.
<h1>Benefits for Women and Businesses</h1>
The burgeoning fintech sector has the pivotal opportunity to create better outcomes for women. India’s fintech sector is one of the fastest growing in the world, with approximately <a href="https://www.bain.com/insights/india-fintech-report-2022-sailing-through-turbulent-tides/" target="_blank" rel="noopener noreferrer">USD $35 billion invested</a>, more than doubling India’s share of global fintech funding since 2016. However, many fintechs are “gender-neutral” and do not design intentionally for diverse genders, reinforcing discriminatory gender norms. For example, because women tend to have <a href="https://www.centerforfinancialinclusion.org/an-equitable-rebuilding-learnings-from-women-owned-msmes">lower rates of digital transactions or formal financial assets</a>, it can be more challenging for them to meet loan eligibility requirements. When fintechs have a gender-neutral approach, the <a href="https://www.inclusivefintech50.com/2022-insights" target="_blank" rel="noopener noreferrer">gender gap is 28 percent higher</a> than the gap for bank accounts or smartphone ownership.
<blockquote class="pullquote--left">Many fintechs are “gender-neutral” and do not design intentionally for diverse genders, reinforcing discriminatory gender norms.</blockquote>
Advancing gender-intelligent changes and developing strategies to overcome women’s specific constraints can help fintechs tap into the <a href="https://financialallianceforwomen.org/download/how-fintechs-can-profit-from-the-multi-trillion-dollar-female-economy/" target="_blank" rel="noopener noreferrer">$216 trillion global market</a> controlled by women. Research by the Financial Alliance for Women shows that fintechs could see a ​​​​<a href="https://financialallianceforwomen.org/download/how-fintechs-can-capture-the-female-economy/" target="_blank" rel="noopener noreferrer">70 percent increase in revenues</a> by converting new women customers at the same rate as men. While building economic power for women on its own is a compelling reason to inspire change, this financial incentive is an additional driving force for investor-backed and profit-driven fintechs to prioritize gender-inclusive design and compete in an increasingly crowded market.
<h1>Increasing Diversity Is a Crucial Driver of Change</h1>
One fundamental way that fintechs can adapt their strategies to benefit women is by increasing their organizational diversity. From its interviews with the <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">Inclusive Finance 50</a> fintech winners, CFI found that women-led fintechs were <a href="https://www.inclusivefintech50.com/2021-insights" target="_blank" rel="noopener noreferrer">more likely</a> to explicitly target and serve more women customers and report gender segmentation data, which is necessary for gender-intelligent decision making. This staff diversity should extend to customer-facing roles, such as the agents and distributors interacting with women customers, and women business correspondents are critical in <a href="https://www.adb.org/publications/digital-doorstep-banking-female-banking-agents-lead-digital-financial-inclusion-through-the-pandemic-and-beyond" target="_blank" rel="noopener noreferrer">expanding financial inclusion</a>. Interfacing with women staff makes it easier for women business owners to manage financial matters as women place a higher value on building personal relationships with agents and building trust over time.
<blockquote class="pullquote--right">Women-led fintechs were more likely to explicitly target and serve more women customers and report gender segmentation data.</blockquote>
Investors and regulators can also incentivize and require fintechs to make these changes. For example, through <a href="https://www.womensworldbanking.org/what-we-do/gender-lens-investing/" target="_blank" rel="noopener noreferrer">gender lens investing</a>, Women’s World Banking works toward higher social and financial returns. Their in-depth approach uses fintech data to develop customized, strategic Gender Action Plans, and their first fund saw an <a href="https://www.womensworldbanking.org/what-we-do/gender-lens-investing/" target="_blank" rel="noopener noreferrer">83 percent increase in women reached</a> by portfolio companies. 

Although fintechs alone cannot bring about an overnight transformation in societal and gender norms, taking these steps represents a real and immediate opportunity to initiate change for the economic empowerment of women in India and beyond.



<a href="https://www.linkedin.com/in/camilla-nestor-640b70">Camilla Nestor</a>, Advisory Council Member of CFI and CEO of MCE Capital, teaches a financial inclusion course at Columbia’s <a href="https://www.sipa.columbia.edu/">School of International and Public Affairs</a> (SIPA). Each year, the course features a writing competition that gives students an opportunity to write a blog post on a topic of their choice related to inclusive finance. This piece was written by the winner of the 2023 writing competition, Nina Liew.

This work is inspired by a graduate research project conducted by students at Columbia University’s School of International and Public Affairs in consultation with CFI and with support from <a href="https://ifmrlead.org/">LEAD at Krea University</a>. Nina and the team of graduate students focused on digital financial inclusion and consumer protection for women MSE owners in India. They interviewed 38 women MSE owners, bank and fintech agents, and fintech executives in India in March 2023. 

Note: The story in this post was created as an amalgamation of interviewees.

Power in Practice – or Only on Paper? Addressing the Financial Gaps Affecting Women Business Owners in India

Climate events have <a href="https://www.preventionweb.net/files/74124_humancostofdisasters20002019reportu.pdf?_gl=1*1u385s5*_ga*MTg2MTc5OTQ5MC4xNjczNDYxMzMw*_ga_D8G5WXP6YM*MTY3MzQ2MTMzMC4xLjEuMTY3MzQ2MTM2NS4wLjAuMA.." target="_blank" rel="noopener noreferrer">surged</a> in the past decade, and low-income people often feel the <a href="https://link.springer.com/content/pdf/10.1007/s41885-020-00060-5.pdf?pdf=button%20sticky" target="_blank" rel="noopener noreferrer">brunt of the impact</a>. There are three primary reasons for this: their higher exposure to hazards, greater vulnerability to negative impacts from that exposure, and fewer resources to rebuild and recover losses quickly.

Unfortunately, people who are poor often face higher exposure to <a href="https://www.sciencedirect.com/science/article/abs/pii/S092180090900322X" target="_blank" rel="noopener noreferrer">climate-related natural hazards</a> because of who they are or where they live, which determines the quality of their homes and hugely impacts their overall health. They also tend to rely on agriculture as their primary source of income, creating a <a href="https://www.sciencedirect.com/science/article/abs/pii/S0921800913003182?via%3Dihub" target="_blank" rel="noopener noreferrer">double hit</a> of loss of assets and loss of labor productivity and income when a natural disaster strikes.

While we cannot prevent climate-related events from happening -- and poverty itself increases vulnerability -- financial inclusion is a tool that can help people experiencing poverty build resilience to climate shocks.
<blockquote>People often face higher exposure to climate-related natural hazards because of who they are or where they live, which determines the quality of their homes and hugely impacts their overall health.</blockquote>
Comparing <a href="https://www.worldbank.org/en/publication/globalfindex/Report" target="_blank" rel="noopener noreferrer">Global Findex 2021</a> data on financial inclusion with <a href="https://gain.nd.edu/our-work/country-index/" target="_blank" rel="noopener noreferrer">data on climate vulnerability</a> reveals that over 1 billion unbanked adults, more than 80 percent of the world’s unbanked population, reside in the most climate-vulnerable economies.

<a href="https://www.weforum.org/agenda/2022/07/financial-resilience-promote-savings/" target="_blank" rel="noopener noreferrer">Financial resilience</a>, defined by the Global Findex 2021 as the ability to access additional funds of up to 5 percent of GDP per capita within 30 days during emergencies, is also an issue related to financial account access. In climate-vulnerable economies, 58 percent of adults lack financial resilience, compared to 25 percent in less climate-vulnerable countries.

Lack of financial resilience is an issue even when controlling for GDP per capita—wealthier yet climate-vulnerable economies have a higher-than-average share of adults who lack resilience. Adults in climate-vulnerable countries are less likely to depend on social networks for emergency money since many members of the same family or community might lose jobs or income simultaneously, making it difficult to help friends or relatives.
<h1>Two Pathways Toward Resilience</h1>
Research has found a positive correlation between financial inclusion and financial resilience, indicating that increasing access to financial services can benefit people affected by climate change.

There are two primary opportunities to leverage financial inclusion for greater financial resilience:
<h3>1. Increase account ownership among unbanked adults in climate-vulnerable economies.</h3>
According to Global Findex data, adults with bank accounts are likely to make and receive digital payments, save money, access formal credit, and store their money securely. These services can help individuals invest in preventative infrastructure (e.g., better housing), diversify their income sources, and access savings and remittances to recover from disaster-related losses. The COVID-19 pandemic offers many examples of <a href="https://www.gpfi.org/sites/gpfi/files/sites/default/files/5_WB%20Report_The%20impact%20of%20COVID-19%20on%20digital%20financial%20inclusion.pdf" target="_blank" rel="noopener noreferrer">how governments</a> were able to quickly and safely provide relief payments to individuals with bank accounts.
<h3>2. Encourage savings among individuals who already have bank accounts.</h3>
The Global Findex 2021 data consistently shows that individuals who rely on savings to manage financial emergencies are more likely to be financially resilient than those who rely on any other sources, such as friends and family, jobs, or selling personal assets. This finding holds true across all regions.

For some individuals, having a bank account can provide a secure location to store their money and increase their savings. However, incorporating design features that incentivize savings can provide an additional benefit that helps to boost savings balances and create a personally financed emergency fund, even before disaster strikes. These funds can be used for investments such as disaster-resistant housing and stress-resistant seeds or to diversify income streams. Individuals with readily available funds <a href="https://www.jstor.org/stable/24029292#metadata_info_tab_contents" target="_blank" rel="noopener noreferrer">may also be more willing to migrate</a> to less risky environments.
<blockquote class="pullquote--left">Individuals who rely on savings to manage financial emergencies are more likely to be financially resilient than those who rely on any other sources.</blockquote>
Increased access to credit through formal accounts could also benefit adults in climate-vulnerable economies, though only about 15 percent of adults in low- and middle-income countries use formal credit, on average.

While access to financial services cannot prevent climate-related events nor fully eliminate the factors that make poor adults more vulnerable to the negative impacts of climate change, it can enable them to better anticipate and respond to natural hazards. By coupling access to finance with programs that promote financial resilience, low-income individuals can reduce their exposure to the financial burdens of natural disasters.

The Office of the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), under the leadership of H.M. Queen Máxima of the Netherlands, recently convened a working group on inclusive green finance consisting of members from the Alliance for Financial Inclusion, the Center for Financial Inclusion, and the Sustainable Banking and Finance Network. The group produced a <a id="LPNoLPOWALinkPreview" title="https://www.unsgsa.org/publications/inclusive-green-finance-policy-and-advocacy-approach" href="https://www.unsgsa.org/publications/inclusive-green-finance-policy-and-advocacy-approach" data-loopstyle="link">policy and advocacy note</a> on inclusive green finance, along with an accompanying two-page <a id="LPNoLPOWALinkPreview_1" title="https://www.unsgsa.org/publications/summary-report-inclusive-green-finance-policy-and-advocacy-approach" href="https://www.unsgsa.org/publications/summary-report-inclusive-green-finance-policy-and-advocacy-approach" data-loopstyle="link">summary report</a>, which are available in the publications section at <a href="https://www.unsgsa.org/" target="_blank" rel="noopener noreferrer">www.unsgsa.org</a> and will be presented at the <a href="https://globalrff.org/" target="_blank" rel="noopener noreferrer">Responsible Finance Forum 2023</a> on July 5-7 in Bengaluru, India.

Climate Vulnerability and Financial Exclusion Go Hand in Hand – What Can Be Done?

<h3>“My husband wanted to start a small business but he could not get a big enough loan from the cooperative and did not qualify for a bank loan. The coyote, however, had no problem giving him a large loan to take him to America. My husband sends me money every month and I take the cash to the coyote to repay the loan.”</h3>
<h4 style="text-align: right;">– Anonymous woman from Santa Apolonia, Guatemala</h4>
Immigration to the United States from Guatemala is motivated by a myriad of factors, including rising rates of local violence and climate-change induced impacts on agriculture, but the main accelerant is extreme poverty without prospects for economic mobility. Guatemalans view the enormous potential for economic opportunity abroad as a pull factor, especially in contrast to the limited financial prospects that they face at home. This presents the financial sector in Guatemala with both the opportunity and imperative to support Guatemalans hoping to build and maintain wealth in their home country. This blog shares how the <a href="https://www.usaid.gov/" target="_blank" rel="noopener noreferrer">United States Agency for International Development (USAID)</a> is helping deepen financial access and usage among low-income and marginalized Guatemalans to create more economic opportunities within their communities.

Guatemala has the largest economy in Central America, an achievement fueled primarily by agricultural production, as the nation produces and exports some of the highest quality coffee and spices in the world. Guatemala also has rich cultural diversity, with a <a href="https://www.macrotrends.net/countries/GTM/guatemala/population" target="_blank" rel="noopener noreferrer">population of over 18 million</a>, over 40 percent of whom identify as one of the country’s more than 20 <a href="https://www.pionerophilanthropy.org/guatemalas-indigenous-community-a-struggle-against-poverty-racism-and-exclusion/" target="_blank" rel="noopener noreferrer">Indigenous communities</a>.
<blockquote class="pullquote--right">The financial sector in Guatemala has the opportunity and imperative to support Guatemalans hoping to build and maintain wealth in their home country.</blockquote>
Despite its rich culture and economic standing in the region, Guatemala has high social inequity, including a <a href="https://www.worldbank.org/en/country/guatemala/overview" target="_blank" rel="noopener noreferrer">poverty rate of 52.4 percent</a>, which has been further exacerbated by factors such as climate change and COVID-19-induced economic shocks. The country’s economy benefits from significant remittance inflows—which make up <a href="https://country.eiu.com/article.aspx?articleid=221764805&amp;Country=Guatemala&amp;topic=Economy&amp;subtopic=Forecast&amp;subsubtopic=Economic+growth" target="_blank" rel="noopener noreferrer">18 percent of the country’s GDP</a>—but this has yet to translate into significant reductions in poverty. In terms of financial access, according to the <a href="https://www.worldbank.org/en/publication/globalfindex" target="_blank" rel="noopener noreferrer">latest Findex Data from 2022</a>, only 35 percent of adults have access to formal bank accounts, down nine percent from 2017 when 44 percent of adults had an account. The gender gap is six percent: 34 percent of women had an account in 2022 versus 40 percent of men, a one percent increase in the gender gap from 2017 when it was five percent. Many do not rely on formal lending sources, with only 11 percent of adults borrowing from a financial institution last year. The Center for Financial Inclusion wrote about<a href="https://www.centerforfinancialinclusion.org/rural-poor-and-pressured-by-climate-change-migration-and-financial-inclusion-in-guatemalas-western-highlands"> the potential for financial services to support rural opportunities in Guatemala</a>.

To break the poverty cycle in Guatemala, low-income families need access to financial services that will build and protect their wealth, enabling them to be more resilient in the face of climate-induced economic shocks and other unanticipated crises. Presently, low-income earners primarily interact with formal financial service providers, including banks, in an over-the-counter (OTC) manner, to cash out remittances without accessing the full suite of benefits that digital financial services can offer such as lower costs, higher speed, and security, as well as building a credit history to access loans.

As smartphone ownership rises in countries around the world, digital financial services (DFS) are a more efficient way to support low-income earners in wealth creation and management by offering convenience, cost savings, economic security, and broad accessibility—and removing the need to go to a physical bank or financial institution. Unfortunately, these service offerings are nascent in Guatemala—and even more so in the country’s rural areas. For example, according to the latest Findex, just 26 percent of adults made or received a digital payment in the last year—a low rate even in comparison to neighboring countries such as El Salvador (28%) and Honduras (32%). While DFS are gaining traction in Guatemala, more work needs to be done to make them accessible, practical, and useful to a broader consumer group.
<blockquote>While DFS are gaining traction in Guatemala, more work needs to be done to make them accessible, practical, and useful to a broader consumer group.</blockquote>
In partnership with DAI’s Digital Frontiers and ConsumerCentrix, USAID recently conducted qualitative customer market research to offer the Guatemalan financial sector concrete recommendations on how it might leverage DFS to positively impact the financial security of low-income and marginalized populations in Guatemala. This research, conducted with 112 participants in Guatemala City, Quiché, and Chimaltenango, identified clear segments and sustainable commercial potential, debunking common misunderstandings about the needs and demands of financially underserved Guatemalans. 

Here are a few key findings: 
<h2>While low-income communities are among the clientele of established providers, banks tend not to treat these communities as strategically critical customer segments deserving of tailored services.</h2>
Most banks mainly offer OTC services to low-income populations, failing to transition these customers to full account holders. The few banks that dominate the financial sector provide bank accounts to only four million people out of the country’s over 18 million population. They offer banking OTC to about five million remittance receivers and one million government-to-person (G2P) and humanitarian aid recipients. Tigo Money, the mobile money provider, offers OTC services to about 700,000 people. The main financial account providers are rural cooperatives, which have about three million clients, and microfinance institutions, which serve about half a million primarily urban clients. 
<h2>A widely-held assumption among financial institutions—that low confidence and limited education are the main barriers to access and use among low-income individuals—is not backed by evidence.</h2>
Providers name literacy, confidence, and aversion to formal financial services as the primary reasons why low-income earners are not formally banked. Yet this study demonstrated that poor customer service, including non-transparent banking fees, which is closely related to low trust in the financial sector, is a major issue alongside stringent requirements for accessing credit—a need among those looking to build a better future for themselves. 
<h2>Latent demand for formal finance exists, and there is awareness of and openness to using digital channels for financial transactions.</h2>
Research participants across all age groups and localities have smartphones and sufficient network connectivity to access DFS. Research found that digital financial literacy is present, particularly among younger segments, and that these segments can and are willing to support their older relatives in using technology. While concerns exist around protecting their security and making mistakes online, there is a shared understanding among participants that DFS is the future, and they are open to using DFS where it can save time and money. Most existing users have prior experiences with bank and cooperative mobile banking applications, generally as complementary to an account. There is little to no awareness of other DFS solutions or even how mobile banking applications could be used more broadly—representing a real opportunity for the financial sector.
<blockquote class="pullquote--left">There is little to no awareness of other DFS solutions or even how mobile banking applications could be used more broadly—representing a real opportunity for the financial sector.</blockquote>
Considering the nascent status of digital finance in Guatemala, financial service providers can start by tailoring products to the most viable segments to first create a critical mass before reaching out to those most in need: the lowest income and most rural consumers. Using criteria around population size, aggregation potential, income regularity, and digital readiness, the research identified two consumer segments with the strongest opportunities for DFS with the most potential use cases, regular income flows, and capacity for aggregation: 1) domestic remittance senders (such as domestic workers) and their recipients, and 2) international remittance recipients. 

Research showed opportunities in digitizing domestic remittance transfers and receipt of international remittances to an account that can be used for a broader set of financial needs including utility payments, savings, and credit facilities based on remittance flows to be used for a microbusiness or household needs. 

Low-income and vulnerable Guatemalans need financial products that help them manage their variable cash flows and to manage risks, including those arising from climate change, and to help them access more economic opportunities. Prototype testing of a potential solution is underway, and the team will produce a full Digital Financial Services Market Assessment Report that outlines these DFS opportunities in greater detail. Stay tuned for the full report—expected in spring 2023.

Letting the Consumer Speak: The Reality of Access to Finance in Guatemala

Financial inclusion plays a strong role in a country’s economic and social development by reducing poverty, supporting sustainable and inclusive development, and enhancing shared prosperity. It is an enabler of 40 percent of the UN’s Sustainable Development Goals (SDGs) and is a useful measure of financial development. There is also ample empirical evidence tying financial inclusion with financially empowering behavior, including but not limited to a higher propensity to save.

Two recent surveys, the <a href="https://karandaazmain.wpenginepowered.com/wp-content/uploads/2023/02/Karandaaz-Financial-Inclusion-Survey-2.pdf" target="_blank" rel="noopener noreferrer">Karandaaz Financial Inclusion Survey 2022 (KFIS)</a> in Pakistan and the <a href="https://www.worldbank.org/en/publication/globalfindex/Report" target="_blank" rel="noopener noreferrer">Global Findex Survey (2021)</a>, and an examination of real-world examples provide some evidence that bank account ownership and access might be helpful in this regard. However, the overall impact of those indicators on improving people’s lives – especially women’s lives -- appears to be nominal. Therefore, to help us understand the goals and principles of inclusive finance, we must reconsider which measurements are useful and appropriate for policymakers to use.
<h1>What really is Financial Inclusion? Measuring Usage over Access</h1>
There have been multiple definitions of financial inclusion over the years, but the underlying focus has been on the following key aspects:
<ul>
 	<li>Access to financial services</li>
 	<li>The degree of usage</li>
 	<li>Quality of services</li>
 	<li>Associated costs</li>
</ul>
These aspects are interrelated, but from a measurement perspective, regular usage of financial services and products should take precedence over account ownership because holding a bank account does not necessarily translate into regular usage. For example, after adjusting for inactive accounts, the percentage of globally banked individuals in 2021 decreased from 76 percent to 66 percent; in Pakistan, after adjusting for inactive accounts, the number of banked individuals in 2021 decreased from 21 percent to 13 percent according to the Global Findex. Data from KFIS in 2022 shows that 30 percent of banked individuals decreases to 27 percent after adjusting for inactive accounts. These discrepancies reflect the reality that access outpaces usage, which is not the desired outcome.

<img class=" wp-image-45915 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/04/Screenshot-2023-04-06-at-11.51.55-AM.png" alt="" width="955" height="543" />

The data on savings as an indicator of consistent use of financial services and products also cements that the industry should not consider bank account ownership as the primary way of measuring holistic financial inclusion. However, around the world, countries and regions have prioritized bank account ownership in different ways. Figure 1 aptly depicts the outcome of these varying efforts. While a significant number of people own bank accounts, it appears that far fewer use them in ways that would offer direct benefits, such as savings.

Even in countries with higher levels of bank account ownership, like India and the UAE, only a fraction of these account owners saves money through a financial institution. In South Asia, where social safety nets are relatively weak, increasing the number of bank account owners does not seem to have much effect on people saving for their golden years -- a meager average of 9 percent of the surveyed individuals saved for old age. Considering this data may explain why, on average, 60 percent of South Asians are ‘very worried’ about not having enough money for old age, according to the Global Findex. As indicated in KFIS 2022, data from Pakistan also depicts a similar pattern: only 16 percent of bank account holders and 10 percent of mobile money wallet holders saved money through their financial institutions.

<img class=" wp-image-45917 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/04/Screenshot-2023-04-06-at-11.52.59-AM.png" alt="" width="882" height="683" />

These numbers are more worrisome when we look at them from a gender financial inclusion gap perspective, as shown in Figure 2. Even in places like India, where women’s account ownership is as high as 78 percent, only 13 percent have saved at a financial institution or used a mobile money account. Furthermore, while only 8 percent saved for old age, 68 percent of women reported being ‘very worried’ about not having enough money for old age. With 13 percent account ownership in Pakistan, less than a half percent of women saved at a financial institution or used a mobile money account.
<h1>Involuntary Exclusion: a Better Target?</h1>
When data from KFIS 2022 shows that 81 percent of Pakistani adults are financially excluded (i.e., non-bank account holders), does that mean the policy agenda should include efforts to close this gap because more financial inclusion is necessarily better?

In a 2020 working paper published by IMF, “<a href="https://www.imf.org/en/Publications/WP/Issues/2020/08/07/Financial-Inclusion-What-Have-We-Learned-So-Far-What-Do-We-Have-to-Learn-49660" target="_blank" rel="noopener noreferrer">Financial Inclusion: What Have We Learned So Far? What Do We Have to Learn?</a>,” authors Adolfo Barajas, Thorsten Beck, Mohammad Belhaj, and Sami Ben Naceur note that policymakers do not need to eliminate all the gaps because more financial inclusion is not necessarily better. The authors refer to the Financial Possibilities Frontier (FPF) as a framework to gauge an optimal level of financial inclusion in a country, given its structural conditions. As an illustration, there can be an instance of excessive financial inclusion, exemplified by the U.S. mortgage market before the subprime crises of 2008. Excessive financial inclusion is neither desirable nor sustainable in the long run. All households and firms do not need financial services, so it is paramount for policymakers to understand voluntary and involuntary financial exclusion factors.

<img class=" wp-image-45918 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2023/04/Screenshot-2023-04-06-at-11.54.50-AM.png" alt="" width="1101" height="701" />

In the Global Findex 2021 survey, there were seven cited reasons by non-account holders for not having an account (Figure 3). One of the core reasons for voluntary financial exclusion is that someone else in the family has an account to access financial services. Even in countries where account ownership is significantly higher (i.e., 78 percent in India, 89 percent in Sri Lanka, and 86 percent in the UAE), one of the highest cited reasons by non-account holders was a family member having an account. In addition, not holding an account for religious reasons is another voluntary reason for financial exclusion. The other reasons cited for non-account ownership could be designated as involuntary reasons based on the minimum amount, cost, risk, and physical access.

Hence, as argued in the <a href="https://www.imf.org/en/Publications/WP/Issues/2020/08/07/Financial-Inclusion-What-Have-We-Learned-So-Far-What-Do-We-Have-to-Learn-49660" target="_blank" rel="noopener noreferrer">2020 IMF working paper</a>, there is a strong case for policymakers to target involuntary financial exclusion, which is driven by market frictions, instead of financial inclusion directly. However, even for involuntary exclusion, there is a clear argument for not targeting zero exclusion because some borrowers will always be too risky in the credit markets. Furthermore, based on the guidance from the FPF, specific individuals and firms would be excluded due to the high costs of provisioning financial services to them.
<blockquote class="pullquote--right">When financial inclusion is solely measured based on owning a bank account, the outcome does not truly reflect what it means to be financially included.</blockquote>
In Pakistan, the leading reason cited by non-account holders for not owning an account was that they “do not need one or have never thought of using one” (as shown in Figure 3). This explanation is vague at best and does not provide any opportunity to distinguish between voluntary and involuntary reasons. For example, some people might think they do not need a bank account because their family members already have one; others may have personal beliefs, such as religious beliefs, that make them not want to use a bank account. However, “not considering or thinking about” using a bank account can be addressed through financial education. Therefore, categorizing these individuals into one category does not offer any meaningful insight for policymakers or other stakeholders.

Moving forward, in light of the empirical evidence and literature, one can say that when financial inclusion is solely measured based on owning a bank account, the outcome does not truly reflect what it means to be financially included. Therefore, we need to adopt a more accurate measure of financial inclusion, especially in Pakistan. Involuntary financial exclusion may well prove a more useful guide for policy action.  Otherwise, any positive change we celebrate would not hold much value because the actual effective increase in financial inclusion would remain relatively small.

Financial Inclusion: Is More Really Better?

FIW Recap: Women’s Financial Inclusion Remains Key Global Focus

As each year comes to a close, it’s natural to reflect on the key moments and events that shaped the year. Beyond the political and economic events and trends – the war in Ukraine, the rise in inflation globally, the floods in Pakistan, and COP27 – the field of inclusive finance itself is reshaping its contours to meet the moment. We saw this very visibly in this year’s <a href="https://financialinclusionweek.org/">Financial Inclusion Week (FIW)</a>, the largest event we have hosted to date – with virtual participants from 2,000 organizations across 146 countries. The topics covered reflect the priorities of global actors in inclusive finance, pointing to the direction the field is going.

<img class="wp-image-45545 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/12/Screenshot-2022-12-12-at-11.27.19-AM.png" alt="" width="967" height="429" />

To me, the scale of this year’s FIW and the coming together of the minds of stakeholders worldwide during this difficult time signals an urgent need and momentum to accelerate our understanding of how inclusive finance must evolve to address global challenges. With over <a href="https://financialinclusionweek.org/2022" target="_blank" rel="noopener noreferrer">50 hours of live content and 70 on-demand sessions</a>, FIW has something for everyone. While it would be amazing to watch the hours of rich live and on-demand content oneself, we know few people have this luxury. We have been reflecting on this at CFI and will launch a blog series that highlights takeaways on key topics covered during FIW 2022.

<img class="wp-image-45546 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/12/4_Closing_Plenary-2-1.jpg" alt="" width="960" height="761" />

FIW 2022 left me with several reflections on the state of the inclusive finance sector and what needs to be prioritized. While FIW covered many sub-topics, the overall theme for the week was “Inclusive Growth in a Digital Era,” exploring how our community can harness digital innovation to expand inclusive financial services and contribute to inclusive economic growth.

In hindsight, as I reflect on the content, I would revise the theme and say that this year’s FIW was really about: “How we can create shared prosperity in our digital era.” Many of the sessions at FIW highlighted that, despite digital financial services’ promise to create inclusive solutions, there are serious shortfalls in how the digital economy is evolving, and new risks and gaps are emerging. We learned that while access and usage continue to rise, indicators linked to resilience have worsened. Even more concerningly, numerous examples of fraud and online harassment were spotlighted during the sessions indicating that the digital economy has yet to pan out as the equalizer that we thought it would be.

Some key messages I took away from FIW 2022 include:
<h3>The future of micro and small enterprises (MSE) on digital platforms needs attention.</h3>
In a joint <a href="https://www.youtube.com/watch?v=0FCpTM0TAac" target="_blank" rel="noopener noreferrer">session</a> hosted by CFI and Mastercard Center for Inclusive Growth, panelists discussed the status quo – where platforms retain substantial bargaining power and most MSEs lack the skills or power to benefit fully from the economies of scale offered through platforms. While alternative business models, such as platform cooperatives or open networks, may be options worth exploring, integrating elements of these emerging models into today’s established business models is likely to produce the greatest benefits to MSEs and platforms alike. Sessions by CGAP on <a href="https://www.youtube.com/watch?v=8VlU8U3DOdI" target="_blank" rel="noopener noreferrer">digital platforms</a> and <a href="https://www.youtube.com/watch?v=iGzlBKRK-PU" target="_blank" rel="noopener noreferrer">fintechs</a> surfaced regulatory fragmentation, payment rails, and e-KYC norms as pressing issues limiting workers and MSEs from fully benefitting from the digital economy. Regulators, donors, investors, and other industry stakeholders should invest more explicitly to enable a rebalancing of power to favor MSEs.
<h3>Trust needs to be earned; regulators, providers, and consumer organizations each have a role in making that happen.</h3>
A <a href="https://www.youtube.com/watch?v=yXw-r70lLXc" target="_blank" rel="noopener noreferrer">session by Consumers International</a> shared evidence on both existing and emerging consumer risks. These included significant increases in consumer complaints in Fiji and major issues around trust in digital finance in India, where 60 percent of digital finance users surveyed stated that they stopped usage because of trust issues. While several digital financial services users sought redressal through customer care channels, 20 percent of respondents in India never had their issue resolved.

Regulators can play a critical role in shaping market conduct. Another <a href="https://www.youtube.com/watch?v=CJ9_P7bGOvA" target="_blank" rel="noopener noreferrer">session hosted by SPTF</a> provided compelling evidence of fraud and abuse in markets like Kenya and discussed what provider practices could help mitigate these risks. Fair Finance’s session brought up an example of how a regulator can step in to enable greater trust in the financial system for low-income consumers and businesses: they mentioned the Central Bank of Rwanda's approach, where they are working to build trust via a consumer protection law, retaining oversight of financial consumer protection, creating tools to compare providers, and establishing instant complaints systems that allow consumers to submit complaints through email and social media.

These sessions reinforced the need for rigorous research, progressive regulation, and market conduct supervision that incentivize providers to be responsible and strong consumer organizations who can advocate on behalf of the silent majority in most developing markets. Donors and investors working to support market development must ensure that these fundamental guardrails are in place before they scale innovations.
<h3>Regulation and regulators are important in addressing gender inequity and creating trust.</h3>
Gender inequity is perhaps the gap that received the greatest attention during FIW 2022. Toronto Centre’s panel on <a href="https://www.youtube.com/watch?v=ISoRGWNdaQQ&amp;list=PL30fMMRd3G_7IGUKLWAQm_Z3zDVIu6LCB&amp;index=28" target="_blank" rel="noopener noreferrer">Advancing Cybersecurity and Financial Inclusion</a> highlighted the large gender gaps – such as access to technology – and the greater vulnerability, whether harassment, gender-based violence, or outright discrimination, and looked at what regulators are doing to counterbalance the system that is stacked against women.

<a href="https://www.youtube.com/watch?v=FFIFIvuVo0U" target="_blank" rel="noopener noreferrer">CFI’s Edoardo Totolo</a> delivered one of the four keynotes and highlighted both the opportunities and the risks posed by new embedded finance players. He emphasized the increasingly important role unregulated non-financial actors play in the design and delivery of financial services and the regulatory ambiguity around who is responsible for what. His keynote ends with a cautionary note to regulators and policymakers to clearly define the regulatory perimeters, articulate the role of third-party actors, promote interoperability and open architecture, and above all, create a level playing field.
<h3>One-size fits all solutions are insufficient; segmentation is necessary.</h3>
Several panelists emphasized that low-income customers are not a monolith and recognized that low-income consumers occupy different societal groups, each with its unique strengths, challenges, and starting points. A key takeaway from these sessions is that when we design without understanding the specific segment we are trying to reach, we will de facto design products and services for men. Instead, we must be intentional and create solutions that address specific consumer needs.

<a href="https://www.youtube.com/watch?v=-jz8tnEuAIQ" target="_blank" rel="noopener noreferrer">AXA’s session</a> on developed markets, including Japan, the US, and France, provided a unique look at excluded segments and approaches providers were taking to be inclusive in these highly competitive and highly regulated markets. For example, French provider <a href="https://nickel.eu/fr" target="_blank" rel="noopener noreferrer">Nickel</a> noted their rapid trajectory of delivering a simple product with very clear and fair terms and relying on distribution systems that leverage existing points of sale used by low-income consumers. In another <a href="https://www.youtube.com/watch?v=jC2AmET0HXI" target="_blank" rel="noopener noreferrer">session by Mastercard Strive</a>, a panelist from <a href="https://www.withboost.co/" target="_blank" rel="noopener noreferrer">Boost</a> Nigeria noted that women-owned small businesses are not a homogenous retail segment. Recognizing that women business owners had varying levels of digital and financial capabilities, Boost adopted a range of strategies that tried to meet women where they were in their journeys. A <a href="https://www.youtube.com/watch?v=Yp5yhELqTqI&amp;t=12s" target="_blank" rel="noopener noreferrer">session hosted by the Kashf Foundation</a> noted that despite the progress prompted by the pandemic, the digital divide is a nuanced issue that merits attention. Affordability to broadband is perhaps the next frontier, particularly when women don’t always have full control of household income or phone ownership.
<h3>We need to focus on climate adaptation; prioritizing mitigation is not enough.</h3>
In his keynote, USAID’s <a href="https://www.youtube.com/watch?v=_hUipQztGXs" target="_blank" rel="noopener noreferrer">Songabae Lee</a> provided a realistic and sobering view of the limitations of development finance, noting that mobilizing capital is the current priority at the global level. Recognizing that private sector capital is best geared toward mitigation, while adaptation still requires grant funding, Lee urges the audience to take advantage of what’s currently open rather than beating on a closed door. The open door is to start by leveraging capital for mitigation and then work to advocate for and shift attention to adaptation.

A <a href="https://www.youtube.com/watch?v=IyUlwUPPY40" target="_blank" rel="noopener noreferrer">session hosted by BFA Global</a> on the business case for climate resilience adopts a more optimistic lens, where investors start recognizing the need to move faster toward adaptation. The session delved into the experiences of multilateral development banks (MDBs) in financing climate initiatives that can be leveraged for earlier-stage ventures, highlighted the creation of the <a href="https://gca.org/news/collaborating-to-accelerate-investment-in-climate-adaptation-and-resilience/" target="_blank" rel="noopener noreferrer">adaptation and resilience collaboration</a> with 18 organizations, and the importance of data and measurement to help move this agenda forward. The urgency of scaling climate adaptation finance was also highlighted in a <a href="https://www.youtube.com/watch?v=2qENaGgm_4k&amp;t=1s" target="_blank" rel="noopener noreferrer">session</a> organized by CFI, where panelists from SEWA, FSD Mozambique, and UNHCR unequivocally emphasized the threats and income shocks low-income communities and refugees were exposed to in the absence of solutions tailored to support adaptation and resilience building at the community level.

My colleagues will go deeper into some of these messages in the blogs to follow in this series. If you are interested in revisiting the recordings, all sessions from FIW 2022 are available online. Check out the full playlist <a href="https://financialinclusionweek.org/2022" target="_blank" rel="noopener noreferrer">here</a>.

For curated session lists by topic, please see the links below for the playlists we’ve developed thus far.
<ul>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_7YYIjKT10xi4v5vjOKbuLl" target="_blank" rel="noopener noreferrer">Women’s financial inclusion</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_4ysbJRWLiVICDCCHEKSTMY" target="_blank" rel="noopener noreferrer">Consumer protection</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_434ImijU6wxmZro4JHG7vu" target="_blank" rel="noopener noreferrer">Climate and inclusive finance</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_5l8T1UH24TIm7H-EM7gydP" target="_blank" rel="noopener noreferrer">Micro and small enterprises</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_5Mn-Gm3O2hgxyaSo9ajB7a" target="_blank" rel="noopener noreferrer">Digital assets and digital currencies</a></li>
 	<li><a href="https://www.youtube.com/watch?v=-jz8tnEuAIQ" target="_blank" rel="noopener noreferrer">Developed markets and inclusive finance</a></li>
 	<li><a href="https://www.youtube.com/playlist?list=PL30fMMRd3G_4yq2Ugx050YBIt4wwN5rMs" target="_blank" rel="noopener noreferrer">Impact measurement</a></li>
</ul>

End-of-Year Reflections

A woman's world changes when payments are designed to suit her needs, digitized, and directed into her own account. During the pandemic, however, women were often excluded from receiving humanitarian cash transfers because of a lack of access to basic identification documents. Humanitarian organizations have become key advocates to allow functional IDS – ration cards, refugee ID cards, cards provided by cash transfer programs from organizations like World Food Programme (WFP) – to be recognized as proof of identity. The ability to register a bank or mobile money account has enabled access to humanitarian payments for millions.

This report highlights the benefits of having an ID, the barriers for women in obtaining an ID, and how we can leverage cash transfers to facilitate women's access.

&nbsp;

This resource was developed in partnership with the World Food Programme (WFP) and the Bill &amp; Melinda Gates Foundation.

Bridging the Gap: How Humanitarian Cash Transfers Can Facilitate Women’s Access to IDs

The recent results from the <a href="https://worldbankgroup-my.sharepoint.com/personal/sansar1_worldbank_org/Documents/Findex%20report%202021/Dissemination/globalfindex.worldbank.org" target="_blank" rel="noopener noreferrer">Global Findex 2021</a> show global gains in account ownership and in account usage in 2017—good news given the widespread financial impact of the pandemic. Today, 71 percent of adults in developing economies have a financial account. Yet the findings on financial well-being show that there is more work to do. 
<blockquote class="pullquote--left">71% of adults in developing economies have a financial account, yet the findings on financial well-being show that there is more work to do. </blockquote>
As the type of risks facing low-income consumers evolve, including rising food and fuel prices, and climate shocks increasing in frequency and intensity, we need an expanded definition of responsible finance in which all stakeholders – providers, policymakers, investors, donors, and more – are not just reacting to client protection risks but also anticipate and proactively work to build resilience, mitigate risks, and improve the financial well-being of consumers for the long term. 

Improving how we measure consumer outcomes is critical for an expanded definition of responsible finance. A sway of new research – recently discussed in the <a href="https://globalrff.org/events/june-2022" target="_blank" rel="noopener noreferrer">Responsible Finance Forum</a> – has shown that while access to finance is growing globally, financial health and well-being are stagnating or even declining.   

The Global Findex 2021 introduced a new set of metrics on <a href="https://www.worldbank.org/en/publication/globalfindex/brief/the-global-findex-database-2021-chapter-3-financial-resilience" target="_blank" rel="noopener noreferrer">financial well-being</a>. The data measures three dimensions of financial well-being: (a) managing unexpected financial events (financial resilience); (b) experiencing limited financial stress; and (c) having the confidence and capability to independently use financial products. The data suggests that while there have been gains in account ownership and in account usage since 2017, there is a need for more emphasis on all three components.  
<h1 aria-level="2">55 Percent of Adults in Developing Economies Are Resilient to Financial Shocks </h1>
The Global Findex survey measures “resilience” as the ability to access money equal to 5 percent of gross national income—or about $3500 in the US and 350 Rupees in India-- within 30 days without much difficulty when faced with an unexpected expense. In developing economies, only 55 percent of adults could do so. For comparison, that share is 79 percent in high-income economies. Resilience is an increasingly important dimension of responsible finance as extreme natural disasters are estimated to <a href="https://www.worldbank.org/en/news/press-release/2016/11/14/natural-disasters-force-26-million-people-into-poverty-and-cost-520bn-in-losses-every-year-new-world-bank-analysis-finds" target="_blank" rel="noopener noreferrer">push 26 million people into poverty</a> each year, and the financial sector industry has a role to play in promoting <a href="https://www.centerforfinancialinclusion.org/green-inclusive-finance-a-framework-for-understanding-how-financial-services-can-help-low-income-people-weather-climate-related-risks">adaptation, resilience,  mitigation, and transition</a> of livelihoods affected by climate change.  
<blockquote class="pullquote--right">Women and the poor are less likely than men and richer individuals to be resilient.</blockquote>
Women and the poor are less likely than men and richer individuals to be resilient. One reason is that both women and adults living in poorer households are more likely to rely on family/friends as their front-line source of emergency money. Yet friends and family are among the least reliable sources of money in every developing economy region. There are a number of reasons for this. One is that family and friends may be confronting the same sources of financial stress at the same time, as is the case during the COVID-19 pandemic, or with a natural disaster such as a drought, flood, fire, or earthquake, or in a systemic economic downturn. In contrast, the Global Findex finds that <a href="https://www.weforum.org/agenda/2022/07/financial-resilience-promote-savings/" target="_blank" rel="noopener noreferrer">personal savings</a> are the most reliable source of emergency money. 

&nbsp;
<h4>Adults in developing countries identifying the source of, and assessing how difficult it would be to access, emergency money (%), 2021</h4>
&nbsp;

<img class="size-full wp-image-45211 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2022/10/Findex-blog-pic1.png" alt="" width="744" height="396" /> 

&nbsp;
<h1 aria-level="2">The Majority of Adults in Developing Economies Worry About Finances </h1>
The objective reality of not having enough money—or not being able to obtain necessary funds in time to address emergencies—contributes to the more subjective sense of feeling financially worried. In developing economies, more than two-thirds of adults say they are very worried about one or more common sources of financial stress: living expenses for old age; medical costs from a serious illness/accident; monthly bills and expenses; and school or education fees. Twenty-two percent of developing economy adults are very worried about all four of the specified issues.  

In high-income economies, in contrast, only a fifth of adults say they are very worried about one of those four issues, and the share of adults who are very worried about all four is only 4 percent.  

Medical expenses were the biggest financial worry for both men and women in every world region. The financial impacts of COVID-19 likewise register as a significant source of worry, particularly in low- and low-middle-income economies. 
<h1 aria-level="2">Limited Financial Experience and Ability Can Expose Consumers to Financial Abuse </h1>
Beyond resilience and stress, low financial ability makes it difficult for adults to navigate the marketplace for retail financial services. Both account holders and the unbanked display low ability in certain markets. The Global Findex 2021 found, for example, that 31 percent of mobile money account owners in Sub-Saharan Africa couldn’t use their account without help from a family member or a mobile money agent. About two-thirds of unbanked adults similarly said that if they opened an account (excluding mobile money) at a financial institution, they could not use it without help. This lack of financial ability makes current and prospective account holders vulnerable to bad information and to exploitation.  
<blockquote>Low financial ability makes current and prospective account holders vulnerable to bad information and to exploitation.  </blockquote>
Financial service providers can exacerbate that challenge—sometimes unintentionally—when their fees or terms of service are unclear; when they use aggressive marketing; and when they have poor dispute resolution processes.  

One way in which low financial ability can affect account holders can be seen in the Global Findex 2021 finding that about 20 percent of wage recipients in developing economies paid higher fees than expected in order to receive wages directly into their account. In certain economies, that share is as high as 40 percent of wage recipients. We cannot know if the account holder simply didn’t understand the disclosed fee schedule, or if the fee terms were never disclosed. Either way, the fact that account holders are paying more than they expect to use services offers one example of how having an account and using it do not inevitably lead to well-being.  
<h1>Encouraging Responsible Finance and Improving Financial Well-being </h1>
Economies tend to put the burden of financial well-being on the consumers themselves. Making progress will require instead that policymakers and the financial sector industry treat consumer well-being as a shared responsibility. The policy environment also needs to prioritize both consumer protection and attention to the shifting nature of consumer risks. As the nature of these risks evolve, responsible finance has an important role to play in improving resilience and reducing financial stress. This includes, for example:  
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Encourage the design of high-quality products that help consumers build resilience and their capacity to prepare for, navigate through, and recover from financial shocks.  </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1"><a href="https://www.unsgsa.org/publications/measuring-financial-health-concepts-and-considerations" target="_blank" rel="noopener noreferrer">Measure</a> and evaluate how these solutions are resulting in changes in well-being. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Ensure financial service providers clearly disclose product features and fees so that consumers understand what products are most suited for their needs, how to responsibly use these products, and when and how much they will be charged. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="4" data-aria-level="1">Inform consumers about the risks of predatory financial practices and what they look like, in plain language and in a format that users can easily understand.</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="1" data-list-defn-props="{&quot;335552541&quot;:1,&quot;335559684&quot;:-2,&quot;335559685&quot;:720,&quot;335559991&quot;:360,&quot;469769226&quot;:&quot;Symbol&quot;,&quot;469769242&quot;:[8226],&quot;469777803&quot;:&quot;left&quot;,&quot;469777804&quot;:&quot;&quot;,&quot;469777815&quot;:&quot;hybridMultilevel&quot;}" aria-setsize="-1" data-aria-posinset="4" data-aria-level="1">Incentivize financial institutions to incorporate <a href="https://www.poverty-action.org/program-area/financial-inclusion/consumer-protection-initiative" target="_blank" rel="noopener noreferrer">behavioral insights</a> and design research into their products and services. For example, product design features that help people act on pre-established intentions (like building savings for an emergency or for a specific goal) </li>
</ul>
The vast progress of the past decade on increasing account ownership should be lauded. But these gains also mean that the remaining unbanked consumers are among the hardest to reach and the most vulnerable to financial exploitation. Taking steps now to reduce the barriers to financial well-being can improve the financial lives of existing account holders and prepare the financial ecosystem to benefit some of the most vulnerable in our economies.

Responsible Finance and its Role in Improving Financial Resilience and Well-Being

Swati Mehta

Mayada El-Zoghbi

Nina Liew

Leora Klapper

Peter McConaghy

Peer Stein

Diana Boncheva-Gooley

Veronica Karpoich

Mohsen Siddiqui

Evelyn Stark

Nina Holle

Pia  Roman Tayag

Lucciana Alvarez Ruiz

Edoardo Totolo

José Morell-Ducós

Alex Kessler

Isabelle Carboni

Elisabeth Rhyne

India

South Asia

Guatemala

Latin America and The Caribbean

Pakistan

Rwanda

Sierra Leone

Sub-Saharan Africa

Zambia

Bangladesh

Colombia

Mexico

Nigeria

Access Usage Gap

Digital Payments

Responsible Product Design and Delivery

Women

Enabling Environment

Fintechs

Small Business Owners

Underserved Groups

Challenges and Crises

Financial Health

Resilience

Savings

Consumer Protection

Data Transparency

Digital Financial Services

Financial Inclusion Strategy

Policy, Regulation and Government Initiatives

Digital Transformation

Financial Capability

Mobile Banking

Responsible Digital Finance

Fintech

Personal Financial Management

Blog Post

Report

Webinar

India is a global leader in financial inclusion. For over a decade, Accion has worked with and learned from India’s innovators, investors, and policymakers to expand economic opportunity for its people and businesses.

Global Findex 2021: Growth, Stagnation, and (Relative) Decline in Global Financial Inclusion

Nearly two billion people across the globe lack access to formal financial services and approximately 90 percent of these people live in developing countries. They are excluded mainly due to four predominant barriers preventing accessibility:
<ul>
 	<li>Living in rural areas</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="6" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Reduced access to digital technology </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="6" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Distrust in banks </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="6" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Lack of financial and digital literacy.
</li>
</ul>
Over the last four years, Comic Relief and Jersey Overseas Aid have been working together to tackle financial exclusion to make sure no one gets left behind. In 2017, Comic Relief and Jersey Overseas Aid launched a joint program, <a href="https://www.joa.je/branching-out-with-comic-relief/" target="_blank" rel="noopener noreferrer">Branching Out: Financial Inclusion at the Margins</a>, that supports eight organizations through 19 different grants working towards financial inclusion in Zambia, Rwanda, and Sierra Leone. Since the launch of the program, hundreds of savings groups have been created, helping more than 124,000 people gain practical tools to better plan for the future, achieve long-term goals, and prepare for emergencies. Things were looking up.

Then the unexpected occurred in early 2020. COVID-19 presented – and still presents – a real danger to those who were already at the margins of society. 
<blockquote>The challenges created by COVID-19 had a catalytic effect on accelerating FSPs' shift to digital delivery of financial services.</blockquote>
In light of the pandemic, the Branching Out program commissioned a study, <a href="https://res.torontocentre.org/guidedocs/Resilient%20and%20Inclusive%20Financial%20Services%20Delivery%20During%20COVID-19.pdf" target="_blank" rel="noopener noreferrer">Resilient and Inclusive Financial Services Delivery During COVID-19,</a> through the Toronto Centre. The study examines crucial lessons learned in responding to the pandemic in 2020-21. The program interviewed organizations striving to support vulnerable people to gain access to financial services during this trying time to prevent vital progress from being undone.

The study revealed two major findings:
<ul>
 	<li>Digitalization is key for resilience.</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="11" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1">Providing practical tools and guidance to financial services is needed now more than ever.</li>
</ul>
The report also shows that the challenges created by COVID-19 had a catalytic effect on accelerating financial service providers’ (FSPs) shift to digital delivery of financial services. When face-to-face service delivery was significantly reduced due to COVID-19 health protocols, resilient FSPs and countries (those experiencing little to no contraction in business) were those that were able to implement new measures to reduce in-person contact.

The table below illustrates the changes in delivery channels used by FSPs. The y-axis indicates the percentage of FSPs surveyed (the total respondents also included a smaller number of supervisors and associations). Respondents are based in Zambia, Rwanda, and Sierra Leone.
<h4 style="text-align: center;"><span class="NormalTextRun SCXW151714652 BCX0" data-ccp-charstyle="normaltextrun" data-ccp-charstyle-defn="{&quot;ObjectId&quot;:&quot;e1c145c7-e2cb-47f2-9ba6-6c688a134605|117&quot;,&quot;ClassId&quot;:1073872969,&quot;Properties&quot;:[134233614,&quot;true&quot;,201340122,&quot;1&quot;,469775450,&quot;normaltextrun&quot;,469778129,&quot;normaltextrun&quot;,469778324,&quot;Default Paragraph Font&quot;]}">Percentage of FSP Respondents Using the Delivery Channel Type<span class="EOP SCXW151714652 BCX0" data-ccp-props="{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:2,&quot;335551620&quot;:2,&quot;335559740&quot;:240}"> </h4>
<img class="wp-image-43599 aligncenter" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/12/Screen-Shot-2021-12-07-at-2.04.01-PM.png" alt="" width="965" height="480" />
(Credit: Toronto Centre)
The uptake of digitalization in each of the countries we surveyed was slow before the pandemic. This could be due to the barriers individuals face, such as:  
<ul>
 	<li data-leveltext="" data-font="Symbol" data-listid="10" aria-setsize="-1" data-aria-posinset="1" data-aria-level="1">Limited access to the technology needed for digital access, especially for women and those in rural areas</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="10" aria-setsize="-1" data-aria-posinset="2" data-aria-level="1">The level of digital literacy, low before COVID-19 in all three countries, presented a barrier for some groups, especially for women and rural populations</li>
 	<li data-leveltext="" data-font="Symbol" data-listid="10" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Issues of trust and concerns around data privacy and transparency were hindrances to quick adoption of digital delivery channels.</li>
</ul>
<blockquote class="pullquote--right">Progress of digitalization and infrastructure at the country level seemed to influence which delivery channels were emphasized during the pandemic.</blockquote>
During the pandemic, progress of digitalization and infrastructure at the country level seemed to influence which delivery channels were emphasized. For example, FSPs in Zambia saw a rise in usage of mobile banking services from 26 percent pre-pandemic to 36 percent during the pandemic. In addition to this, Zambia FSPs used agents more to navigate the social distancing restrictions and to reach localized communities – as it was deemed more effective than bank branches.

In Rwanda, the uptake of mobile banking before the pandemic was similar to that of Zambia, though Rwandan usage was bolstered by government efforts towards creating a “cashless society,” which further promoted non-face-to-face services. Rwanda FSPs, therefore, focused their efforts on mobile and internet banking.

In Sierra Leone, internet banking rose from 7 percent to 17 percent during the pandemic – the largest increase seen in the report. However, because the country had faced similar challenges during the outbreak of Ebola, FSPs also managed to maintain a high level of face-to-face delivery, due to having the existing infrastructure to adhere to COVID-19 restrictions, such as social distancing and strict health and safety protocols. The experience that health authorities in Sierra Leone gained from the Ebola outbreak helped them prepare for COVID-19 even when little information was available.
<h2>What Does the Digitalization of Financial Services Mean for Those at Risk of Financial Exclusion?</h2>
The report found that in many cases the digitalization of financial services, accompanied by greater digital literacy and accessibility, has been a promising development in inclusive finance. Consumer associations revealed that one of the greatest impacts of this transition has been in access to repayment modalities which would otherwise have been impossible and could affect customer access to future credit as well as FSPs’ willingness to lend to affected groups.
<blockquote class="pullquote--left">There is a real danger that more people could be left behind if these barriers aren’t addressed.</blockquote>
However, while digitalization can be seen as a natural progression that has been bolstered by the conditions created by the pandemic, barriers persist, including a lack of internet access and low financial and digital literacy. There is a real danger that more people could be left behind if these aren’t addressed. 
<h2>Steps Needed for Continued Progress in Financial Inclusion</h2>
Comic Relief and Jersey Overseas Aid identified the following steps FSPs and regulatory bodies should take to continue making progress in financial inclusion:
<ul>
 	<li>Support the shift to increased digitalization to ensure it expands the reach of financial inclusion.  </li>
 	<li>Increase communication at the policy level and share risk assessments with FSPs to allow for proper planning and strategy.
</li>
 	<li>Set supervisory expectations for FSPs, through best practice guidelines, on the enhanced risk management measures that FSPs should take in ramping up non-face-to-face delivery. </li>
 	<li data-leveltext="" data-font="Symbol" data-listid="5" aria-setsize="-1" data-aria-posinset="3" data-aria-level="1">Enhance information-gathering for effective supervision of these delivery channels as FSPs try out innovative approaches.  </li>
</ul>
Comic Relief and Jersey Overseas Aid’s aim has always been to ensure that those in the most rural communities don’t get left behind when it comes to accessing financial services. As a result of <a href="https://res.torontocentre.org/guidedocs/Resilient%20and%20Inclusive%20Financial%20Services%20Delivery%20During%20COVID-19.pdf" target="_blank" rel="noopener noreferrer">this report</a> and its findings, the Branching Out program will continue its vital work to support more people to understand and take control of their finances, get back on their feet, and plan for their future.

Furthering Digitalization’s Potential for Financial Inclusion: Insights from Sub-Saharan FSPs, Supervisors, and Associations

Discriminatory norms and practices are embedded in the financial system and, even when policies, regulations, and delivery channels are thought to be gender-neutral, it is difficult for women -- particularly low-income and marginalized populations -- to navigate available products and services. As a result, progress toward women’s economic empowerment has stagnated.

Financial inclusion must intentionally understand women’s needs and constraints. Designing financial products and services without a thorough <a href="https://www.centerforfinancialinclusion.org/normative-constraints-to-womens-financial-inclusion-what-we-know-and-what-we-need-to-know">examination of social norms</a> that impact women’s behaviors may in fact reinforce restrictive gender roles and permanently relegate women to the informal sector.

Although gender-aware financial products and services are increasingly available, they often stop at “workarounds” that, while meeting women’s immediate needs, still fail to provide holistic solutions to address and transform the norms that limit women’s broader economic livelihoods.
<h2>Gender Aware or Gender Siloed Services and Policies?</h2>
The microfinance sector – despite good intentions– often is designed to accommodate, rather than address, discriminatory norms.
<blockquote class="pullquote--left">The microfinance sector often is designed to accommodate, rather than address, discriminatory norms.</blockquote>
Women’s mobility is one discriminatory norm that the sector historically has accommodated and even perpetuated. Often, women face limited mobility due to unequal care responsibilities, such as caring for children or other family members, or the cultural expectation that she be accompanied by a male relative when leaving her home. Because of these expectations, it is difficult for women to engage in income-generating activities in public spaces, ultimately increasing the appeal for local microcredit or savings groups. Group lending was designed to account for women’s mobility and collateral constraints by building an accountability mechanism out of the <a href="https://www.sciencedirect.com/science/article/abs/pii/S0305750X04000750" target="_blank" rel="noopener noreferrer">social and community consequences of non-repayment</a>.

Furthermore, although many women have gained access to financial services through MFIs and savings groups, policies that restrict women’s ability to own property or accumulate assets <a href="https://wbl.worldbank.org/content/dam/sites/wbl/documents/2021/02/WBL2021_ENG_v2.pdf" target="_blank" rel="noopener noreferrer">remain intact</a> in many markets. MFIs and savings groups often operate in parallel to the formal economy with less or separate regulatory oversight and, as a result, women are not afforded the same legal protections.

Evaluations of the impact of microcredit have been mixed, many showing <a href="https://www.cgap.org/sites/default/files/publications/2019_07_FocusNote_Emerging_Evidence.pdf" target="_blank" rel="noopener noreferrer">inconclusive</a> impact on women’s economic empowerment <a href="https://econpapers.repec.org/article/eeewdevel/v_3a36_3ay_3a2008_3ai_3a12_3ap_3a2620-2642.htm" target="_blank" rel="noopener noreferrer">outcomes</a>. While many factors are at play, the lack of a norms-transformative approach undercuts empowerment gains. Creating parallel, informal systems for women’s financial activities can be an unintended consequence of gender-aware financial inclusion efforts that try to go around rather than address restrictive gender norms.
<h2>Cementing Digital Divides</h2>
Similarly, digital financial services (DFS) risk bypassing social norms and implementing workarounds in order to merely reach women, without focusing on the outcome of women’s economic empowerment in a digital era.

At first glance, DFS presents a remedy to women’s financial exclusion, making financial services <a href="https://www.icrw.org/wp-content/uploads/2017/11/Gender-and-digital-financial-inclusion.pdf" target="_blank" rel="noopener noreferrer">more accessible</a> by reducing the time and risk of traveling to a physical branch to make transfers or payments, and by enhancing the privacy of transactions. In Niger, women that received digital transfers <a href="https://sites.tufts.edu/jennyaker/files/2010/02/Zap_it_to_Me_26feb2012.pdf" target="_blank" rel="noopener noreferrer">increased their control over household resources</a> compared to those that received cash, since the digital transfer was less observable by their spouses and family members. And a recent study in Zambia revealed that women were willing to <a href="https://www.nottingham.ac.uk/cedex/news/papers/2020-06.aspx" target="_blank" rel="noopener noreferrer">give up household income to maintain privacy</a> over earnings from their husbands.

However, while these are promising mechanisms, there are several assumptions at play. One assumption is that women users wholly own and operate their phones. For digital transactions to enhance control through privacy, women must have access to their own phone or a phone that is not monitored or controlled by other family members. In developing economies, women are still eight percent less likely than men to own a phone (the gap is even larger for smartphone ownership) and <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2020/05/GSMA-The-Mobile-Gender-Gap-Report-2020.pdf" target="_blank" rel="noopener noreferrer">20 percent less likely to use mobile internet</a> than men. Sharing phones is also common for many low-income women, and gendered expectations can <a href="http://epod.cid.harvard.edu/sites/default/files/2018-10/A_Tough_Call.pdf" target="_blank" rel="noopener noreferrer">constrain the duration and purpose of women’s phone use</a>.

Additionally, enabling factors such as <a href="https://www.centerforfinancialinclusion.org/building-womens-financial-capability-a-path-toward-transformation">digital capability</a>, confidence in using digital financial services or platforms, and trust in technology also have significant gender gaps. Few providers are designing appropriate digital onramps that account for specific skill levels and the different needs of women.
<blockquote class="pullquote--right">Digital platforms must consider how gender norms are baked into the design of these systems.</blockquote>
Digital platforms – whether social, e-commerce, or gig work -- also must consider how gender norms can act as barriers to entry or are baked into the design of these systems. An examination of <a href="https://theswaddle.com/apps-like-uber-ola-make-driving-a-flexible-profession-why-cant-more-women-tap-into-it/" target="_blank" rel="noopener noreferrer">ride-hailing services in India</a> shows that women are unable to meet the incentives set by the platform and earn less for not being able to drive at peak times or complete longer journeys or airport pickups, often due to care responsibilities or safety concerns.

In examining the nuances of broader digital inclusion for women, we see yet again that social norms are at play. Lack of education or gender roles that limit women to caretakers rather than earners or entrepreneurs can limit women’s use of mobile internet even if they have access to a phone in their household. Neither DFS nor <a href="https://www.cgap.org/blog/forging-her-own-path-women-and-informal-online-commerce" target="_blank" rel="noopener noreferrer">platforms and social or e-commerce</a> can successfully include women without first addressing norms.
<h2>Opportunities to Shift Directions</h2>
The same challenges women face in accessing and using traditional financial services are equally present for digital financial inclusion. Rather than build a system that accommodates the barriers and constraints faced by women, we have an opportunity to make DFS catalyze women’s financial inclusion and economic empowerment.
<blockquote class="pullquote--left">We have an opportunity to make DFS catalyze women’s financial inclusion and economic empowerment.</blockquote>
Donors have the opportunity to invest in innovative research and test solutions that build women’s financial and digital capability or <a href="https://www.careevaluations.org/evaluation/digital-subwallets-and-household-dialogues/" target="_blank" rel="noopener noreferrer">build solutions specifically for women</a>. Governments can guide financial service providers and offer technical support and research capabilities to improve products and services for women. Market facilitators, including international non-governmental organizations like CARE and FSD Africa, can broker partnerships between community-based organizations and providers to create better informed and equitable systems and processes.

We can do more than create gender-aware financial products and services. By embedding women’s needs and understanding their constraints, particularly discriminatory gender norms, we can advance women’s inclusion by creating a financial system that works for them by design.

Workarounds Don’t Work: Gender-Aware Financial Services Must Help Address Discriminatory Norms

The Economist Intelligence Unit’s <a href="https://centerforfinancialinclusion.org/global-microscope-2019/">Global Microscope</a> is a robust data set that offers a deep dive into the policies and regulations that are considered important for financial inclusion in 55 countries. The indicators are derived from an expert-based consultation process to identify the most likely policy and regulatory conditions under which financial access and usage is likely to thrive.

The Microscope’s approach is to bundle the indicators into an index so that performance across countries can be compared easily. It also allows the EIU to simplify a set of complex conditions in which no one indicator can sufficiently signal a country’s environment for financial inclusion. Using an index approach to aggregate the indicators has both positive and negative implications. On the positive side, it simplifies a complex set of variables into a score than can easily be understood: a low score is bad and a high score is good. An index also creates a certain level of competition among countries that are covered in the index. Like with other indices that use this approach, such as <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf">Doing Business</a>, many countries put resources behind improving their score year in and year out. The ranking serves as motivation for action.
<blockquote>An index allows the EIU to simplify complex conditions in which no one indicator can signal the environment for financial inclusion.</blockquote>
On the other hand, there are several drawbacks with the use of indices for something as complex as the policy and regulatory environment in a country for financial inclusion. The first drawback is squaring the results with the evidence on the ground. According to the EIU’s Microscope, Colombia has the highest score, 82, in the enabling policy and infrastructure index, yet Colombia’s access figures from the <a href="https://globalfindex.worldbank.org/">2017 Global Findex</a> shows that the country’s financial access is only 46 percent for adults over 15. This is significantly lower than the global average of 69 percent and lower than the 63 percent average in developing countries. A country like Bangladesh is ranked very low in the Microscope (38), but has higher access figures than Colombia, reaching 50 percent in the latest Findex round.

So why is there such a disconnect between a country’s ranking in the Microscope with its access and usage data from Findex? It shouldn’t surprise anyone that the reality on the ground can lag behind regulations. For example, while the US has equal-rights legislation on the books, experience among minorities in the US confirms frequent and continued discrimination in practice. So it isn’t a surprise that even though some countries have favorable policy and regulatory conditions for financial inclusion, there may be cultural issues or social norms that aren’t in line with the regulatory change and may require time and additional effort to change. Change may also require enforcement or supervisory capacity to ensure that there’s compliance with policies and regulations.

But perhaps more importantly, policies and regulations are only part of the financial system, and financial service providers and the users of the financial system have many other influences on their choices and behaviors. If we’re only looking at the policy and regulatory viewpoint, we’re not seeing the full picture of what drives outcomes on the ground.
<blockquote>If we’re only looking at the policy and regulatory viewpoint, we’re not seeing the full picture of what drives outcomes on the ground.</blockquote>
The second drawback is lack of clarity on which policies actually matter. The Microscope tracks five domains with a total of 69 indicators. Each of these indicators has an equal weight in the score. But is it true that each indicator is equally likely to drive inclusion? The Microscope doesn’t do enough to help countries prioritize from among the 69 indicators it tracks. For example, in the new indicators on women’s financial inclusion, variables such as “non-discriminatory access to IDs” and “differences in access to a mobile phone between men and women” are included as indicators. How important is one or the other towards women’s financial inclusion? When everything is important, nothing is. The index may be inadvertently contributing to either paralysis or misguided prioritization by policy makers.
<blockquote>The Microscope doesn’t do enough to help countries prioritize from among its 69 indicators.</blockquote>
Regulators and policy makers are looking for evidence on what works to drive financial inclusion. This is where there is potential for researchers and the EIU to take this important data set and do additional analysis to identify which of the indicators correlate with results on the ground. The <a href="http://documents.worldbank.org/curated/en/926401524803880673/pdf/125804-PUB-REPLACEMENT-PUBLIC.pdf">World Bank’s Women, Business and the Law 2018</a> publication did a deep dive on financial inclusion which did this type of analysis linked to women’s financial inclusion, for example.

While correlations have their own set of limitations, they are nonetheless a step closer to helping us unpack which policies and regulations are priorities to drive inclusion. In the next round of the Global Microscope, we’d like to see less emphasis on rankings and much more effort devoted to helping policy makers understand which policies and regulations should be prioritized.

What’s in a Score? Reconciling Financial Access and Usage With the Microscope Rankings

Most of Mexico’s people lack access to a formal bank account. Accion has worked in Mexico for decades to create a thriving and competitive financial sector that embraces innovation and protects its clients.

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

What counts as financial inclusion? Reporting the number of active accounts in a country is a common way to measure progress in financial inclusion. But as access to, and uptake of, accounts increases, we need more powerful indicators to help us understand the dynamics of how people use financial services, and digital financial services in particular.

At <a href="https://i2ifacility.org/">insight2impact</a>, we’ve spent the last four years exploring these questions and have tested our measurement frameworks and emergent indicators on both demand-side survey data and transactional data in Mexico and Nigeria. We also went further by linking the data sets for the same person to analyze a more complete picture of people’s financial lives, both within and outside of formal financial services. What we found was both curious and transformative for our thinking on how we measure financial inclusion.
<h2>Frequency as a Means to Track Digitization</h2>
The first step to financial inclusion is <a href="http://www.worldbank.org/en/topic/financialinclusion/overview">having access to a transactional account</a>. If I choose to take up an account, I’m able to store money or send and receive payments, but if I use my account very rarely, am I still financially included? Maybe I receive a payment and immediately withdraw it all at an ATM. What if all the transactions I need to do can only be done in cash?

Analyzing frequency of usage gives us an indication of how populations are (or aren’t) switching to digital channels for transacting. We analyzed bank transaction data in Mexico to better understand financial service usage patterns. Debit-card usage by customers was relatively high, with 78 percent using their cards weekly, but 60 percent of monthly card usage occurred at ATMs to withdraw cash, not for purchases via POS or online. The frequency of ATM vs non-ATM card usage paints a more realistic picture of digitization in Mexico. It’s a picture of incomplete digitization, with cash remaining central for most people.

Secondly, we linked the transaction data to survey responses to compare people’s online vs offline transaction behavior. This revealed that most people still use cash for their regular expenses, even if they have a bank account. The graph below shows both banked and unbanked people’s cash usage for regular expenses such as rent and bills, and daily expenses such as groceries and transport. Cash was ubiquitous, regardless of gender, socio-economic segment or account ownership. By only counting the accounts, we would miss the scale of non-digital financial lives.

Counting More than Accounts: What Can Frequency of Transactions Tell Us About Financial Inclusion?

How is the world – and the World Bank – doing on its campaign for <a href="http://ufa.worldbank.org/">Universal Financial Access</a> (UFA) by 2020?

With 2020 just a short year away, this question will be asked wherever financial inclusion is discussed at the World Bank Spring Meetings this week. Only so much can change in a year, so it is just a small leap to imagine the likely situation in 2020. During last year’s meetings, the World Bank cited a figure of 69 percent of adults in the world having accounts, according to the 2017 Global Findex data collection round. <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/09/FI_Hype_vs_Reality_Deconstructing_2017_Findex_Results-08032018-1.pdf">Our own look at the 2017 Findex numbers</a>, which removes fully dormant accounts, shows that only 48 percent of adults in low- and middle-income countries had accounts that they actually used.

We think this is the right number to focus on: it sets aside the many useless accounts that inflate the rolls and avoids the overly rosy picture that emerges from including high income countries where account access is no longer a relevant challenge. Based on what we’ve seen in the past several years, we could guesstimate that by 2020 active account access in the developing world will be somewhere between 50 and 60 percent of adults, still well short of universal. We won’t know the 2020 result until 2021, when the Findex 2020 data is published. The Findex team is gearing up now for that massive data collection and analysis effort.

The World Bank could declare victory, recognizing the enormous increases in account access that have occurred, and expressing confidence in the momentum around financial inclusion across the world, which will surely result in universal access within the next decade.

Meanwhile, the World Bank and its partners are focusing on upholding their institutional commitments to the UFA campaign. The bank pledged to contribute to the inclusion of one billion people. Many others have also made numeric pledges, including VISA, Mastercard, and GSMA (500 million people each), large mass-market-oriented financial institutions (Ant Financial, China, 100 million; Equity Bank, Kenya, 50 million; and Bank Mandiri, Indonesia, 50 million) and associations like the <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/partnership-for-responsible-financial-inclusion/">Partnership for Responsible Financial Inclusion</a> (70 million) and the <a href="https://www.wsbi-esbg.org/About-us">World Savings Bank Institute</a> (400 million). I am aware first hand of the efforts of some of these organizations to take their pledges seriously, putting in both resources and high-level attention. This week we hope to see some of these partners report on the progress of their efforts.

With the departure of its former president, Jim Kim, who championed the UFA effort personally, one wonders how much attention the World Bank will continue to pay to financial inclusion. The new chief, David Malpass, begins his term with this weeks’ meetings. Malpass, a former Bear Stearns economist and Trump campaign advisor, has been <a href="https://foreignpolicy.com/2019/02/05/will-david-malpass-run-the-world-bank-or-ruin-it/">highly critical</a> of the World Bank. Understandably, World Bank watchers are speculating intensely over whether he will pursue his critiques of the bank, though in the lead-up to his arrival he softened his prior calls for the bank to end lending to upper middle-income countries like China and Brazil and affirmed the focus of the bank on elimination of extreme poverty and on economic growth. This sounds compatible with maintaining a focus on financial inclusion, though staff inside the Trump foreign policy world have reported that the administration does not often use the words “inclusion” or “inclusive”, preferring “market development.”
<blockquote>Unless the new president takes the World Bank in a radically different direction, it's hard to see his arrival affecting the UFA campaign greatly.</blockquote>
Nevertheless, unless the new president takes the World Bank in a radically different direction, it's hard to see his arrival affecting the UFA campaign greatly. Perhaps it will not receive the same spotlight it has enjoyed in recent years, but work will undoubtedly continue off stage. As bank staff members I recently spoke with noted, financial inclusion is embedded in many departments of the bank, with dozens if not hundreds of professionals working with individual countries to make progress every day. Barring a drastic turn in the World Bank’s mission, this will continue, regardless of who takes the helm.

The Outlook for Universal Financial Access in 2020

This post originally appeared on the <a href="https://www.accion.org/">Accion</a> website.

The Global Findex is crucial for pushing forward financial inclusion. With data from 150 countries, we can see progress toward bringing financial tools to everyone and even understand how people are using those tools. The driving force behind this research is Leora Klapper, Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank Group. Because of her exceptional leadership in advancing financial inclusion, Accion has chosen Leora as their <a href="https://www.accion.org/leora-klapper-to-receive-accions-edward-w-claugus-award-for-leadership-and-innovation-in-financial-inclusion">Edward W. Claugus Award honoree</a>. We took the opportunity to ask her thoughts on the Global <a href="https://www.centerforfinancialinclusion.org/new-global-findex-sixty-nine-percent-of-global-population-is-banked">Findex</a>, the financial inclusion gender gap, and how we can continue to build a world where all people have financial services that make a meaningful impact in their lives. CFI participated in a panel discussion with Klapper (pictured above) after the bestowing of the Claugus  Award. CFI's Beth Rhyne and Deb Drake participated, along with the Economist Intelligence Unit's Monica Ballesteros Aria.


Q: Accion has selected you for our Claugus Award based on your contributions to driving financial inclusion. Are there moments of your career that make you particularly proud of the work you’ve done in financial inclusion?

A: I’m excited that the Global Findex has become a valued resource in the world of financial inclusion research and policy. Several places wrote previews before we released the latest Findex round, and then followed up with reviews after the data was published. People were treating the Findex like a Beyonce album drop. It was a little crazy but very encouraging. But seriously, we’re grateful that the Bill &amp; Melinda Gates Foundation had the vision to fund the Findex data collection and appreciate our great partnership with Gallup. It’s been a privilege to contribute to the policy dialogue with the credibility of data backing us up. Reporting to policymakers the number of millions of unbanked women receiving their welfare payments in cash or the number of government workers with bank accounts, still receiving their wages in cash, is a game-changer.

I’m proud that we moved the needle in highlighting the importance of collecting data not only on household heads, usually men, but on every adult member of the household — including women, young adults, and older adults. I’ve been on my soapbox since the first round of Findex data was published ranting about the importance for women to have their own account. I hope shining light on the gender gap in the use of financial services has helped more women get a safe place to keep their money.

Q: In your time at the World Bank, how have you seen financial inclusion’s role in eliminating poverty evolve?

A: When I started working at the World Bank, the overall thinking in development was that countries should generally focus on getting the macro picture “right” — through privatization, deregulation, and so on — so growth would take off and poverty would drop. Now there’s a greater focus on individuals and more recognition that financial services can help people better meet their goals in health, education, entrepreneurship, and so on, thereby driving <a href="http://SDG_Compendium_Digital_Financial_Inclusion_September_2018">development outcomes</a> overall. Each year, we get more Findex queries from a broader range of World Bank colleagues who see financial inclusion as relevant to what they do.

The focus of financial inclusion research has also shifted during my time at the World Bank. At first, it was almost exclusively about microcredit. Then new data sources, including financial diaries, showed us that even poor families that have small, unpredictable incomes lead complicated financial lives — but they often use informal, expensive, and riskier financial products. Now there are tons of studies on savings, payments, agricultural insurance, financial consumer protections, and more. It’s hard to keep up with all the new papers — which is a good problem to have.

[caption id="attachment_33558" align="aligncenter" width="1000"]<img class="size-full wp-image-33558" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2018/11/award-klapper-pose.jpg" alt="" width="1000" height="516" /> (L to R) Jim Mercadante of host Reed Smith, EIU's Monica Ballesteros Aria, Deb Drake, Leora Klapper, Beth Rhyne, Accion CEO Michael Schlein, Accion Board Director Tara Kenny, and Accion CDO Brian Clancy at the Accion Claugus Forum[/caption]

Q: What part of the most recent Findex results do you think has resonated most strongly with the industry and why?

A: I think our data on digital financial services has drawn the most attention. One of the great things about financial inclusion is that it appeals to so many constituencies. We attract the development crowd, of course, but also the tech geeks, big data aficionados, policy technocrats, women’s empowerment champions, financial industry titans, bitcoin zealots, blockchain evangelists, and many others. Our data is routinely cited in both the major international media and regional media across the developing world. People are looking at progress and setbacks in neighboring countries and seeing how they can apply lessons to their own countries.

Q: If we could do one thing to promote usage of financial accounts, what would it be?

A: Can I cheat and mention two? First, I would love to see wider digital payment acceptance among merchants in emerging countries. Second, the development advocate in me yearns for cheaper ways to send remittances. Every year migrants send home more money to the developing world than governments spend in aid. That money provides vital support for people in poor countries. But remittances are still crazily expensive: On average, they <a href="https://remittanceprices.worldbank.org/sites/default/files/rpw_report_sept_2018.pdf">cost</a> just beneath 7 percent of the amount being sent, and banks charge the most on average, at more than 10 percent. Our colleagues estimate that reducing costs by 5 percentage points could save up to $16 billion annually — money that could go to development needs.

Q: As we look beyond access to see whether financial tools are being used and improving people’s lives, what are some of the most important metrics to look at?

A: I’m quite excited about the research showing the impact of having an account on household spending decisions — like studies in Africa and Asia showing that offering woman an account leads to greater spending on healthcare, education, and nutritious food. In Bangladesh, we’re finding that paying women into an account increases their savings, decreases their impulse spending, and gives them greater say on how household income is spent. In other words, having an account gives a woman greater privacy, security, and control over her money — which gives her a more comfortable seat at the table.

The link between financial inclusion and productivity has been on my mind lately. We’re starting new work with tea pluckers and asking the question: If a woman gets paid directly into her own account, and sees the full payoff of her labor, will she work harder? Or be more productive? Will she be less likely to quit her job? I think this is an exciting new avenue of research to motivate the private sector to partner in our efforts to expand financial inclusion and digital payments.
<blockquote>If a woman gets paid directly into her own account, and sees the full payoff of her labor, will she work harder? Or be more productive?</blockquote>
A lot of financial inclusion analysts have raised the importance of financial health and how to measure it. I’m not yet sure what the best metrics are, but lots of smart people at IPA JPAL and elsewhere are thinking about that, and the results should be exciting.

Q: The latest data shows that the gender gap in financial inclusion persists. In your research, have you seen any particularly effective strategies for closing this gap?

A: India’s experience shows that policies can help close the gender gap. Three years ago, men were 20 percentage points more likely than women to have an account. Today, the gender gap has fallen to 6 percentage points, thanks to a government push to expand account ownership by drawing on biometric identification. That progress comes with a lot of caveats. Nearly half of accounts in India are dormant, and women are more likely than men to have a dormant account. But at least they have greater access to this basic financial service — and the potential is huge.

Q: As mobile phone usage continues to grow, how do we ensure technology can live up to its promise for driving financial inclusion?

A: Mobile phones can be tools for delivering fair, affordable financial services to the poor, and they can also be tools for defrauding the poor. The difference between the two has a lot to do with consumer protections. Recent CGAP <a href="http://www.cgap.org/research/publication/digital-credit-revolution-insights-borrowers-kenya-and-tanzania">research</a> on digital credit suggests that weak oversight has allowed companies to push predatory loans through mobile phones, leading to defaults and indebtedness. Policymakers need to make sure that regulations keep pace with digital innovation to ensure things like that don’t happen. Otherwise, people will distrust digital financial services, and development opportunities will be lost.

We also need to make sure that women have access to the technology and aren’t being left behind at the starting gate. As we increasingly leverage mobile phones and the internet to deliver financial services, we need to watch the 10 percentage point gender gap in mobile phone ownership across developing countries, and much larger in some regions.

Q: How will we know when financial inclusion has succeeded?

A: Ultimately, I’d like to see a situation where everyone has access to affordable and transparent financial services which they can use to meet their needs — whether for saving, investing, moving money, or hedging against risk. But I’m not sure if we’ll ever get to a situation where we can just declare victory and go home. Development progress is always uneven, and there will also be groups of people excluded from appropriate financial services. I think we’ll be working on financial inclusion for a while.

Findex Lead Discusses Gender Gap, Account Usage, and More

In celebration of its 10th anniversary, the Center for Financial Inclusion at Accion asked 10 leaders in the financial inclusion community to set out their agenda for Getting Inclusion Right. The resulting essay and webinar series creates a roadmap to take financial inclusion into the next decade.

You are invited to join CFI on Wednesday, October 24, at 10:00 am EDT for this third virtual event , featuring <a href="https://www.centerforfinancialinclusion.org/bio/shameran-abed">Shameran Abed</a>, Director of BRAC Microfinance and Ultra Poor Programs, on the digital and gender divide. Our Getting Inclusion Right series features insights from:
<ul>
 	<li>Simone di Castri and Ariadne Plaitakis of Bankable Frontier Associates on getting policies right and Buhle Goslar, Chief Customer Officer of Jumo, on getting credit right (held Thursday, October 18 at 10am EDT)</li>
 	<li>Garance Wattez-Richard of AXA on getting insurance right and Elisabeth Rhyne, Managing Director of CFI, on getting inclusion right from the customer’s perspective (now available to listen to <a href="https://www.centerforfinancialinclusion.org/webinar-getting-inclusion-right">here</a>)</li>
</ul>
Over the coming weeks, you will also have a chance to read or hear from Tim Adams of the Institute of International Finance on why financial inclusion matters, and Mark Pickens of Visa on payments. We will also look at the ecosystem with Chris Skinner of the Finanser, data privacy with Katharine Kemp of the University of New South Wales, and the role of investors with Jonathan Whittle of Quona Capital.

Together, these leaders lay out a “true North” for the financial inclusion sector that is both visionary and practical as we work to create tangible benefits for the financially excluded and underserved.

We hope you’ll tune into these live conversations with leading figures as they discuss and respond to your questions about key challenges and opportunities for Getting Inclusion Right—we look forward to having you <a href="https://register.gotowebinar.com/register/7243419170722974721">join us</a>!