Many have compared the steps required to overcome COVID-19 with those taken in previous economic crises or natural disasters, whereby the situation follows a similar pattern consisting of three stages: triage, stabilize, recover. While there is some applicability to the current COVID-19 pandemic, it implies a sequence and limited duration that may not truly characterize the nature of the challenges we now face. The reality is that COVID-19 is a more persistent phenomenon that may continue to ebb and flow for some time before it is fully under control.

Given the more entrenched and global nature of this crisis, it is likely that the consequences will be more varied and run deeper than what we have seen in past crises. To help get a sense of what these consequences may be for those who are most vulnerable, we asked a few members of CFI’s <a href="https://www.centerforfinancialinclusion.org/people/advisory-council" target="_blank" rel="noopener noreferrer">Advisory Council</a> to share some brief thoughts on what they see as the biggest implications of COVID-19 and the ways in which the inclusive finance sector can address them.
<h2>Camilla Nestor, Adjunct Professor at Columbia University</h2>
From my perspective, one of the biggest implications of COVID-19 is on food security for countries and populations that were already vulnerable. Before COVID-19, the world’s estimated 500 million smallholder farmers were one of the most financially underserved segments, with an estimated <a href="https://www.raflearning.org/post/covid-19-emergency-briefing-agri-smes-operating-uncertain-financial-operational-and-supply" target="_blank" rel="noopener noreferrer">$100 billion lending gap</a> in Africa alone.

As a result of COVID-19, smallholder farmers are dealing with significant volatility in demand for both cash crops and food crops, challenges securing the necessary inputs, and limits on accessing markets. On top of this, they are also facing reductions in access to already-scarce capital. If unaddressed, this lack of capital will directly impact their ability to produce food. We see that commercial lenders are pulling back on lending to agriculture; <a href="https://csaf.org/wp-content/uploads/2020/07/CSAF_State_of_Sector_2020_Summary_FINAL.pdf" target="_blank" rel="noopener noreferrer">cross-border social lending</a> is flat; and supply chain financing is at risk – for example, in a recent <a href="https://www.afap-partnership.org/covid-19-impact-assessment-on-the-agrismes-and-farming-communities-of-ghana-malawi-mozambique-tanzania-and-uganda/" target="_blank" rel="noopener noreferrer">survey</a> of 5 markets in Africa, farmers noted reduced access to both supplier credit and trade credit since the onset of the pandemic.
<blockquote>With smallholder farming contributing up to 80% of the food supplies in some regions, there is significant risk to food security at both a household level and a national level.</blockquote>
With smallholder farming contributing <a href="https://www.ifad.org/documents/38714170/40706188/Smallholders+can+feed+the+world_e.pdf/460ca6c2-7621-40d8-9f79-a56f6f8fa75e" target="_blank" rel="noopener noreferrer">up to 80%</a> of the food supplies in some regions, there is significant risk to food security at both a household level and a national level. This is an opportunity for the financial inclusion community and agricultural finance experts to come together to develop short-term and longer-term mechanisms to ensure that financing flows to this critical segment.
<h2>Mark Pickens, Senior Director of Social Impact at Visa</h2>
We need to step up for small and micro businesses as they are the backbone of the global economy. Unless they remain resilient and grow, most economies are going to suffer because small businesses typically account for half of all jobs and GDP. The challenge is even greater with women-owned small businesses, which face many challenges, including lack of access to capital.
<blockquote>Key factors to building resiliency will include how small and micro businesses digitize payments, access other financial services, and skill-up to operate in an increasingly digital economy.</blockquote>
Key factors to building resiliency will include how small and micro businesses digitize payments, access other financial services, and skill-up to operate in an increasingly digital economy. Earlier this year the Visa Foundation announced $210 million to help small businesses. Visa also launched online toolkits via Small Business Hubs in 20 countries, expanded our Practical Business Skills portal for a greater geographic reach, and committed to digitally enable 50 million small businesses as we collectively recover from the COVID-19 pandemic.
<h2>Joanna Ledgerwood, Independent Consultant</h2>
It has been well-documented that the COVID-19 crisis has disproportionately affected women and girls. In most countries, social norms dictate that women bear primary responsibility for feeding and caring for their families and managing the household. With children not able to attend school and sick family members needing care, women have increased responsibilities, exacerbating an already heavy workload. The result is women have less time for paid work, and because of the pandemic, less access to informal financial services such as savings groups or local shop credit to help them through.
<blockquote>This pandemic provides an opportunity to proactively promote women’s empowerment.</blockquote>
However, this pandemic provides an opportunity to proactively promote women’s empowerment and advance household food security. Understanding how women and men are impacted differently by the pandemic, as well as the risks, constraints and hardships women face and their specific needs, requires the collection and analysis of sex-disaggregated data. This data can help to design appropriate programs and policies and inform financial products and delivery channels to effectively reach women.

For example, providing digital cash transfers directly to women increases their chances of receiving and controlling money to meet household needs, which in turn is likely to lead to greater bargaining power at home. The use of sex-disaggregated data can help to design programs that mitigate unintended consequences of cash transfers such as increased domestic violence. In addition, G2P programs that take gender biases into account can enhance women’s resilience to future economic shocks and can influence change to social norms over the long-term. Now is the time to ensure that women’s increased responsibilities and reduced ability to earn income will not further widen the gender gap in financial inclusion that existed long before this pandemic.
<h2>David Ferrand, Independent Consultant</h2>
Much depends, I think, on factors beyond financial inclusion. The indications remain rather positive that the health impact on Africa will be relatively bearable, notwithstanding the tragic loss of life. But we still don’t know yet the eventual economic cost to Africa, either in absolute terms or in how it will be distributed. There is a very real concern that the recovery from the crisis could see the micro and smaller scale business sectors re-emerging significantly disadvantaged relative to larger scale. And many people who have lost their livelihoods in the crisis may end up in long-term poverty traps.
<blockquote>Only governments have the balance sheets necessary to bear the risks involved.</blockquote>
There are financial sector providers positioned to play a pivotal role in restoring liquidity to communities and investing in rebuilding. But it would be unrealistic to expect that financial sector players can do this alone. There needs to be a new partnership between the financial sector, communities, and governments. Only governments have the balance sheets necessary to bear the risks involved – but they need help from across the financial system in providing the support where it is needed.

Over the longer term, there is also a need for genuine innovation in developing solutions to deal with the human and economic losses. Digital transformation has extraordinary potential, both now and in the future, to change our societies and ultimately lead to ever greater economic, social and cultural integration of countries and the world. The best-case scenario is that the COVID-19 crisis could lead to our harnessing digital finance to empower the rebuilding and development of local communities. But this is going to require bold, swift and pragmatic action.

Implications of COVID-19 for the Most Vulnerable: A Snapshot of Views from CFI’s Advisory Council

Advisory Council

Our People

Test of a Lifetime: COVID-19 and Financial Inclusion

Agricultural and Rural Finance

Credit

Challenges and Crises

Enabling Environment

Digital Credit

Digital Financial Services

Delivery Channels

MSME/SME Finance

Policy, Regulation and Government Initiatives

Smallholder Farmers

Underserved Groups

Supply Chain Finance

Women

Blog Post

A woman´s financial inclusion is inextricably linked with her ability to access, use, and benefit from financial products and services. The overwhelming assumption within the inclusive finance industry and accompanying players is that well-designed products <a href="https://www.poverty-action.org/sites/default/files/publications/Womens-Economic-Empowerment-Through-Financial-Inclusion-Web.pdf" target="_blank" rel="noopener noreferrer">enable women to overcome barriers</a>, thus leading inexorably to their economic empowerment and inclusion. This common notion excludes the critical enabling environment outside of the financial space that determines how and whether a woman may gain access to that well-designed product in the first place and be able to use it effectively. In other words, men’s and women’s <a href="https://www.ifpri.org/publication/2019-annual-trends-and-outlook-report-gender-equality-rural-africa-commitments-0" target="_blank" rel="noopener noreferrer">lived experiences differ</a>, thereby requiring financial products, services, and approaches that account for these differences. The broader environment is made up of the social and gender norms which determine what is appropriate conduct and behavior and tend to be highly gendered. Taking these norms into account requires not just products and tools that enhance women’s awareness and capabilities, but, equally important, <a href="https://idl-bnc-idrc.dspacedirect.org/handle/10625/57156" target="_blank" rel="noopener noreferrer">changing the financial and social systems</a> to be more inclusive of women, their needs, and their behaviors.
<h2>Norms Present Multiple Dimensions of Constraints</h2>
<blockquote>The social rules and norms that lead to inequality need to be viewed as a serious economic challenge.</blockquote>
<a href="https://www.cgap.org/research/publication/social-norms-change-womens-financial-inclusion" target="_blank" rel="noopener noreferrer">Social norms</a> are the informal rules and standards that guide social behavior, expectations, perceptions, and actions at the individual, household, and community level, influencing household roles, livelihood responsibilities, and public life. Norms often influence official laws and rules, such as when national laws limit the industries in which women may participate or the type of property they can own, if any. Gender norms are also used to limit individual choices such as a woman’s mobility or household obligations. Gender and social norms applied in this manner determine the level to which women’s economic empowerment, and women’s financial inclusion more specifically, is possible. The social rules and norms that lead to inequality need to be viewed as a serious economic challenge.
<h2>Transformative Change Is Needed</h2>
<blockquote>Better products and services, as well as increased digital literacy, are only part of the solution to reduce and eliminate these gaps.</blockquote>
Until now, financial inclusion has largely steered clear of incorporating a social norms lens, assuming instead that access to bank accounts or savings groups will almost automatically lead to more female economic inclusion. However, lack of understanding of norms, and design that does not consider these constraints or try to alter them through financial systems and services, has resulted in an extended and persistent global <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">gender gap in bank account ownership</a> over the past decade. In addition, despite the proliferation of digital financial offerings, many of the same norms that have inhibited progress on accounts manifest and are heightened when it comes to access to technology and connectivity, and as a result, we also see a persistent global <a href="https://www.gsma.com/r/gender-gap/" target="_blank" rel="noopener noreferrer">mobile gender gap</a>. Better products and services, as well as increased digital literacy, are only part of the solution to reduce and eliminate these gaps. What is needed now is a shift toward gender transformative approaches to financial services that aim to challenge systemic inequality.
<blockquote>Taking a gender transformative view requires understanding the customer as part of an ecosystem.</blockquote>
What is clear, therefore, is that to achieve universal financial inclusion, those working in inclusive finance must find a way to account for men’s and women’s behavior outside their use of financial services. The bulk of the industry relies on individualized products – either via a mobile app or one-on-one with a banking agent. Taking a gender transformative view requires understanding the customer as part of an ecosystem. Men and women do not operate in a vacuum; they live in households, communities, and as part of regional and national cultures that <a href="https://www.povertyactionlab.org/publication/enhancing-womens-agency-cross-cutting-lessons-experimental-and-quasi-experimental" target="_blank" rel="noopener noreferrer">influence and dictate their choices</a>. Thus, full financial inclusion will take a systems approach, moving away from a myopic view of building a relationship between an individual and a provider toward a collective methodology of many providers serving the many needs of each customer.
<h2>CFI Is Investing in Directly Addressing Norms Constraints</h2>
CFI is undertaking landscape research of financial inclusion providers and tools that address both supply- and demand-side normative constraints. Mapping actors who are considering norms – by looking at customer attitudes or behaviors, for example – will enable us to amplify approaches and tools that work, as well as identify opportunities for further analysis. Among our research goals are to understand the specific constraints for customers by entry point (savings group, MFI or DFS, for example) and examine the best metrics to measure short-and long-term changes in attitude, knowledge, and behavior. We will be kicking off this exploration during the <a href="http://financialinclusionweek.org/" target="_blank" rel="noopener noreferrer">2020 Financial Inclusion Week on October 13-16</a> and hope you will join us on this journey.

The Time Has Come for Gender Transformative Approaches

CFI Gender and Financial Inclusion

Micro, small, and medium enterprises (MSMEs) in Indonesia are suffering in the wake of COVID-19 according to data collected by CFI. Seventeen percent of the businesses in the sample have closed, and 85 percent of those that continue to operate estimate their profits have decreased, often by 50 percent or more.

Owners of the MSMEs that were operating at the time of the survey remained optimistic despite the economic downturn. Almost two-thirds reported they were covering their business expenses with revenue and thought they could keep their doors open for another three months based on how things were going. In addition to altering their business practices to stay open, the data on owners’ use of financial tools suggests that they are drawing down their financial resources, raising concerns that they have little cushion for the months ahead.

From July 13 to August 8, 2020, CFI conducted phone interviews with a random sample of <a href="https://bina-artha.com/" target="_blank" rel="noopener noreferrer">Bina Artha Ventura (BAV)</a> clients in Indonesia. BAV, which is <a href="https://www.accion.org/mastercard-and-accions-partnership-to-unlock-millions-of-underserved-microbusinesses" target="_blank" rel="noopener noreferrer">participating in Accion’s partnership with Mastercard</a>, is a microfinance institution that uses a group lending methodology to serve entrepreneurs, mostly women, who predominantly live in rural areas. CFI completed 730 interviews, 660 of which were with female MSME owners. Two-thirds of the owners ran sole proprietorships while 31 percent ran microenterprises (one to 10 employees). Those microbusinesses employed an average of three people before the pandemic. MSMEs in the sample have been operating for almost eight years on average. Most businesses were grocery or food stands, although farming and the sale of household goods were also common. This is one of six surveys CFI is conducting in Indonesia as part of its <a href="https://www.centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact" target="_blank" rel="noopener noreferrer">ongoing effort to study the impact of COVID-19 on the financial health of MSMEs</a>. As with data from CFI’s first survey in Nigeria, the data from this survey is <a href="https://www.centerforfinancialinclusion.org/covid-19-and-msmes-data-and-analysis-to-understand-impact/indonesia" target="_blank" rel="noopener noreferrer">presented in this interactive dashboard</a>.
<h2>Survey Insights</h2>
<h4>Nearly one in five women-led businesses have closed. They were almost twice as likely to close as male-led businesses.</h4>
<blockquote>Of the women-led microbusinesses that closed, 78 percent said they were completely confident that they would reopen in the future, but only 57 percent of the women-led sole proprietorships that closed said the same.</blockquote>
Since COVID-19 struck Indonesia, 18 percent of women-led businesses in the sample have closed. These closures have proportionally impacted businesses of different types and sizes, and they have been driven largely by a drop in customer demand, likely the result of restrictions on movement being enforced in the country. The owners of these businesses were generally confident that they would be able to restart their business in the future, but there were major differences based on how large the businesses were prior to the pandemic. Of the women-led microbusinesses that closed, 78 percent said they were completely confident that they would reopen in the future, but only 57 percent of the women-led sole proprietorships that closed said the same. Importantly, women-led businesses were almost twice as likely to close as male-led businesses. Of the 70 male-led businesses in the sample, only 10 percent had shuttered their operations.
<h4>COVID-19 has led to dramatic declines in profits, but roughly two-thirds of businesses say they are covering their expenses.</h4>
<blockquote>70 percent of operating businesses reported a decrease in profits of 50 percent or more.</blockquote>
Businesses generally did well in the year before the pandemic struck. Fifty-six percent of respondents reported their profits increased compared to the year before while 38 percent said they had stayed the same. Only 5 percent of people said their profits had declined, but that number has skyrocketed since COVID-19: 85 percent of businesses reported that their profits have declined compared to pre-pandemic levels. Those declines have been dramatic, with 70 percent of operating businesses reporting a decrease in profits of 50 percent or more. While profit levels shrunk dramatically, owners were confident that they would be resilient to this shock. Sixty-three percent of owners said they were covering their expenses just with business revenue and think they could continue operating for at least three months based on how things were going.
<h4>MSMEs are trying to survive by changing business practices to boost revenue and cut costs, including reducing their labor force.</h4>
<blockquote>Half of operating microenterprises reported that they cut employees.</blockquote>
MSME owners are employing a mix of revenue-boosting and cost-cutting measures to ensure their revenues continue covering their expenses. For instance, a third of all operating businesses reported offering discounts to stimulate sales while a fifth chose to raise prices instead. Almost a fifth of businesses started a delivery service since the pandemic began. Cost-cutting measures were also common. For those businesses with employees, reducing the size of their workforce and work hours for staff was an important strategy. Half of operating microenterprises reported that they cut employees, leading to a 42 percent reduction in employment within this segment. This action likely had downstream effects. Many owners reported that they were working longer hours to meet customer demand or make ends meet, potentially a result of a reduced workforce.
<h4>In addition to their businesses, owners’ households are enduring, but data on financial tools suggests their margin of error is small.</h4>
Three-quarters of households reported that they were covering all their expenses with non-debt income sources. Severe food insecurity – defined as people going to bed hungry because of a lack of money – was relatively low at 10 percent. In comparison, CFI’s survey of urban MSME owners in Lagos, Nigeria found that 34 percent of owners reported severe food insecurity in their households.

While this is encouraging, a closer look at the financial tools owners are using to cope with the crisis suggests that conditions are likely to worsen. For example, 22 percent of owners sold a household asset to keep their business running. Of the households that sold an asset, only 63 percent reported being able to cover their expenses compared to 79 percent who did not sell an asset. Similarly, 47 percent of MSME owners reported skipping a loan payment, and those owners were less likely to have covered their household expenses by a similar margin compared to those who had made their payments.
<blockquote>Savings also appears to have collapsed in the months since the pandemic hit.</blockquote>
Savings also appears to have collapsed in the months since the pandemic hit. Since March, only 38 percent of people reported saving while 53 percent reported withdrawing money from savings. In the year prior to the pandemic, 84 percent of people reported saving compared to 54 percent who said they withdrew money. While the comparison is not one-to-one because of the different periods, it is certainly not encouraging, especially because savings is another indicator of households’ ability to cope. Ninety percent of owners who had saved since March reported being able to cover their household expenses compared to only 67 percent of owners who had not saved.

Collectively, this analysis implies respondents have dwindling financial options. Only so many assets can be sold, and savings will dry up if not replenished. Debts not repaid choke future lines of credit. These underlying patterns may help to explain a less optimistic sentiment shared by respondents: 79 percent said they could only cover their essentials for a month or less if their income sources dried up.
<h2>Summary and Reflections</h2>
Since the pandemic reached Indonesia in March, 17 percent of businesses have closed, profits have collapsed, and employment has plummeted. Women-owned businesses have been hit especially hard, with 18 percent of them closing compared to only 10 percent of male-owned businesses. Owners who managed to keep their business open reported a high degree of confidence in their ability to continue operating, relying on a mix of revenue-boosting and cost-cutting business practices to ensure their revenues continue to at least meet their expenses. This has helped stave off catastrophe at home, where food insecurity remains low and people continue to cover their household expenses.

However, data on the use of financial tools suggests owners and their households have little margin for error in the months ahead. Selling household assets, skipping loan payments, and net savings withdrawal activity indicate that respondents are already relying heavily on financial tools to meet their basic needs. Without a change in their circumstances, it is unlikely that MSME owners will be able to replenish these resources. Thus, it is reasonable to expect a worsening financial situation in the months ahead.

<em>This survey is part of our partnership with <a href="https://www.accion.org/mastercard-and-accion-partner-to-unlock-growth-for-millions-of-underserved-microbusinesses-around-the-world" target="_blank" rel="noopener noreferrer">Mastercard Center for Inclusive Growth</a> to understand the impact of COVID-19 on MSMEs.</em>

MSMEs in Indonesia Are Surviving but COVID-19 Leaves Little Margin for Error

CFI MSME Financial Health Data Team

Indonesia

East Asia and Pacific

Data Analytics

Financial Technology

Entrepreneurs of MSMEs

Financial Health

Resilience

This is the second part of CFI’s blog series exploring 2019 data from <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50</a> and <a href="https://www.themix.org/fintech-benchmarks" target="_blank" rel="noopener noreferrer">Results of the Fintech Benchmarks Proof-of-Concept</a> to shed light on current gender disparities in the fintech industry -- both at the management level and in their customer base. This blog post focuses on the role fintechs can play in designing products with women in mind, and thus help to close the gender gap in financial inclusion. It is structured around two broad observations and concludes with several recommendations for fintechs and researchers.
<h2>1. There is a gender gap in the customer base served by fintechs</h2>
<blockquote>The median fintech had only 36 percent female customers.</blockquote>
The Inclusive Fintech Benchmarks data reveals a gender gap in the customer base served by inclusive fintechs. Given the social aim of these fintechs, gathering critical demographic information is paramount to product design and meeting customer needs. However, only 20 out of 45 fintechs recorded sex-disaggregated data on their customer base. Among these 20 fintechs, the median fintech had only 36 percent female customers. This again drives home the need for such data, in particular to understand whether women were specifically targeted, and if so, which strategies were most effective. And if women were not specifically targeted, it would also be useful to understand how these female customers were attracted in the first place.

Perhaps it is not surprising that these fintechs have a low female customer base. Women in developing economies are <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">9 percentage points</a> less likely to have a bank account than men, <a href="https://www.gsma.com/r/gender-gap/" target="_blank" rel="noopener noreferrer">8 percent less</a> likely to own a mobile phone, and <a href="https://www.vitalvoices.org/2019/09/international-literacy-day-the-literacy-gender-gap/" target="_blank" rel="noopener noreferrer">7 percentage points</a> less likely to be literate. These gaps in financial and digital literacy are much wider in certain regions, such as South Asia and East Africa.

Access to financial services is a key enabler for women to achieve financial independence and economic empowerment. However, women face unique and often intertwined barriers in accessing financial services, including but not limited to regulatory constraints (i.e. registrations requiring national ID cards), the aforementioned low <a href="https://gflec.org/wp-content/uploads/2017/07/The-Gender-Gap-in-Financial-Literacy-A-Global-Perspective-Report.pdf?x87657" target="_blank" rel="noopener noreferrer">financial</a> and <a href="http://www.oecd.org/internet/bridging-the-digital-gender-divide.pdf" target="_blank" rel="noopener noreferrer">digital literacy</a> levels compared to men, and social norms that may restrict their mobility and financial decision-making autonomy. One of the biggest barriers women face in accessing financial services is the <a href="http://mujeresinnovadoras.com/wp-content/uploads/2018/09/Exploring-Fintech-Solutions-for-Women.pdf" target="_blank" rel="noopener noreferrer">lack of money or regular income</a>.

However, mobile money has the potential to narrow the gender gap in financial inclusion. An analysis of the Findex 2017 data by <a href="https://www.gsma.com/mobilefordevelopment/blog/the-promise-of-mobile-money-for-further-advancing-womens-financial-inclusion/#_ftn2" target="_blank" rel="noopener noreferrer">GSMA</a> finds that countries with high mobile money usage have indeed narrowed the gender gap in financial inclusion. By transacting digitally, women do not need to travel to inconvenient locations or where they feel unsafe, and they can make payments securely and privately. A <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2019/12/IRC_Report_R_WebSpreads.pdf" target="_blank" rel="noopener noreferrer">study conducted</a> on the <a href="https://www.rescue.org/" target="_blank" rel="noopener noreferrer">International Rescue Committee’s</a> (IRC) mobile money cash-aid programs in rural Sindh, Pakistan found that IRC’s consistent financial and digital literacy trainings played a crucial role. Female clients were not only able to use mobile money to receive their cash-aid, but appreciated the convenience, privacy and speed of mobile money.

Globally, however, women are still <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2019/03/GSMA-Connected-Women-The-Mobile-Gender-Gap-Report-2019.pdf" target="_blank" rel="noopener noreferrer">33 percent less likely</a> than men to own a mobile money account, mainly attributed to lower rates of mobile phone ownership and lack of access to identity documents. Some state governments in India, for example, have <a href="https://epod.cid.harvard.edu/article/mobile-phone-gender-gap-why-does-it-matter-and-what-can-we-do" target="_blank" rel="noopener noreferrer">initiated programs to subsidize phone ownership</a>, which helps to address the access gap but not the usage gap. Efforts to overcome women’s barriers to accessing financial services need to be coordinated, recognizing that women are not a homogenous group or customer segment. Fintechs are uniquely positioned to help close the gender gap in financial inclusion while also serving an untapped market that represents a large potential revenue source.
<h2>2. Female-led fintechs are more likely to target female clients and other underserved populations</h2>
<blockquote>Female-led fintechs appear more likely to serve female clients.</blockquote>
The 2019 Inclusive Fintech 50 data reveals that female-led fintechs target different markets than non-female-led fintechs. The Inclusive Fintech Benchmarks sample of 20 fintechs further shows that female-led fintechs appear more likely to serve female clients. The median female-led fintech had a customer base that was 58 percent female, compared to 35 percent female for fintechs that did not have women in leadership positions.

Diverse organizational leadership provides numerous benefits. For fintechs, female leaders can play a pivotal role in designing and marketing financial products to meet the needs of women. Although female-led and non-female-led fintechs in the Inclusive Fintech 50 2019 data target broadly defined “underserved” customers at similar rates, female-led fintechs are more likely to support micro, small, and medium enterprises (MSMEs), as well as farmers and rural households. Fintechs that do not have women in leadership positions are more likely to instead target their products to the general public, which may not produce as great an impact on financial inclusion.

&nbsp;

<img class="aligncenter wp-image-39779 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/09/Primary-Target-Market-of-Female-Led-Fintechs-V2.png" alt="" width="1059" height="678" />

Additionally, segmenting and targeting more female customers represents a market growth opportunity for fintechs. Much like sex-disaggregated client data, segmentation also forces providers to understand the specific needs of their target customers and the unique barriers they face. For instance, <a href="https://www.financedigitalafrica.org/wp-content/uploads/2018/02/FiDA-Snapshot-9-Best-practices-in-big-data-analytics.pdf" target="_blank" rel="noopener noreferrer">JazzCash Pakistan</a> wanted to understand how to improve women’s mobile wallet usage. In exploring this, their research partners, Women’s World Banking and ideas42, found that female and male customers used JazzCash accounts in very similar ways and that the real problem was not usage but acquisition. Female customers accounted for only 15% of new account openings, likely due to marketing campaigns aimed at men. With further research, the team was able to design solutions to accelerate the acquisition of new female customers.
<h2>Recommendations</h2>
<h3>For Fintechs</h3>
<ul>
 	<li>In order to ensure that they include female customers, fintechs must gather data on the gender makeup of their customer base. As mentioned earlier, among the 45 fintechs in the Inclusive Fintech 50 Benchmarks report, only 20 could report the number of female customers served, indicating a data gap. Having this data would enable fintechs to track their contribution to female financial inclusion and identify areas for growth.</li>
 	<li>Fintechs must be intentional about including female customers when designing products. They would benefit from thinking about whether their product is designed in a way that excludes women, even if it is unintentional. This can only be accomplished by conducting market research on female customer segments to better understand their needs, preferences and barriers. It is imperative that providers design compelling use cases to meet women’s financial needs. Addressing this gender gap can also represent a commercial opportunity. For instance, if mobile operators could close the gender gap in mobile ownership and use in low and middle-income countries by 2023, this would provide an <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2019/03/GSMA-Connected-Women-The-Mobile-Gender-Gap-Report-2019.pdf" target="_blank" rel="noopener noreferrer">estimated $140 billion in additional revenue</a> to the mobile industry.</li>
 	<li>Fintechs should also consider gender when marketing and selling fintech products. For instance, <a href="https://www.womensworldbanking.org/insights-and-impact/its-as-easy-as-a-b-c-how-a-b-testing-helped-onboard-more-women-customers-through-mobile-account-referrals/" target="_blank" rel="noopener noreferrer">JazzCash Pakistan recently tested behaviorally informed text messages</a> to encourage current JazzCash users to send more referrals to women. Forthcoming data from <a href="https://www.themix.org/relay-fintech" target="_blank" rel="noopener noreferrer">RELAY</a>, a fintech data solution developed by MIX, will examine the share of female agents among fintechs that rely on an agent network.</li>
</ul>
<h3>For Researchers</h3>
<ul>
 	<li>Further research should examine the role of fintechs in serving women. Some questions to explore further can include: how to monitor the performance of fintechs; how to co-create products and solutions with female customers; effective marketing strategies to onboard women; the relationship between fintechs and the SME credit gap; and whether credit scoring algorithms introduce gender bias.
<blockquote>Fintech products alone will not produce meaningful change in the lives of women.</blockquote>
</li>
 	<li>Additional research is needed on the intersection between female financial inclusion and the societal and regulatory constraints that women face. Fintech products alone will not produce meaningful change in the lives of women without addressing broader disparities in digital and economic inclusion.</li>
</ul>
We are excited to delve deeper into the 2020 Inclusive Fintech 50 data to answer some of the questions we were not able to answer based on the 2019 data here. Nevertheless, this two-part blog post has highlighted several important ways in which advancing women’s inclusion in the fintech space, both at the leadership level and among the customer base, is not only the right thing to do, but also the smart thing to do.

Including Women Customers in “Inclusive Fintech”

Financial Service Providers

Fintechs

Fintech startups have leveraged technology to lower transaction costs and reach underserved populations. These technologies can <a href="https://www.worldbank.org/en/results/2013/04/01/banking-on-women-extending-womens-access-to-financial-services" target="_blank" rel="noopener noreferrer">expand</a> financial services to women, who are often <a href="https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/bridging+the+gender+gap+in+access+to+finance" target="_blank" rel="noopener noreferrer">excluded</a> from formal financial services. The COVID-19 pandemic makes it even more critical to address gender equity, as <a href="https://www.womensworldbanking.org/insights-and-impact/building-resilience-how-to-ensure-women-are-not-left-behind-as-a-result-of-covid-19/" target="_blank" rel="noopener noreferrer">evidence</a> indicates women have been disproportionately impacted by the economic impacts of the virus. While fintechs can play an important role in designing accessible and meaningful solutions for marginalized populations, they can also run the risk of exacerbating the digital divide, including the mobile <a href="https://www.gsma.com/mobilefordevelopment/resources/mobile-gender-gap-report-2019/" target="_blank" rel="noopener noreferrer">gender gap</a>.

This two-part blog post explores data from <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50</a> and <a href="https://www.themix.org/publications/fintech-benchmarks-report" target="_blank" rel="noopener noreferrer">Results of the Fintech Benchmarks Proof-of-Concept</a> to shed light on current gender disparities in the fintech industry – both at the management level and in their customer base. We provide initial insights and recommendations for investors and fintechs on overcoming some of these challenges. We hope the research community digs deeper into the disparities we highlight to understand the nuanced and sometimes intertwined barriers that female founders face, as well as how fintechs can serve the needs and preferences of female clients.

Two key insights emerge from the data focusing on early-stage fintechs:
<ul>
 	<li>Female-led fintechs face unique challenges when raising funds, but when they do, they demonstrate greater revenue generating potential compared to fintechs without women in leadership positions.</li>
 	<li>Perhaps not surprisingly, there is a gender gap in the customer base served by fintechs, and there is significant room for them to grow by addressing this gap.</li>
</ul>
In this first post, we will focus on the first point. Below are five broad observations.
<h2>1. Women are underrepresented among fintech CEOs and founders.</h2>
Female-founded companies are traditionally underrepresented in venture capital funding, and the fintech industry is no exception. In 2019, companies with a female CEO <a href="https://www.allraise.org/assets/pitchbook_all_raise_2019_all_in_women_in_the_vc_ecosystem.pdf" target="_blank" rel="noopener noreferrer">represented 11 percent of all venture capital deals</a> made globally (this increases to 20 percent if a female founder is included). However, only 7 percent of fintech VC deals had a woman in a CEO position.
<blockquote>Women are particularly underrepresented in fintechs founded in certain regions.</blockquote>
The 2019 Inclusive Fintech 50 data present a similar trend: 19 percent of the 400 applicants are female led, as defined by at least one female founder or executive. Women are particularly underrepresented in fintechs founded in certain regions – Middle East and North Africa (MENA) has the lowest share of female-led fintechs (only 8 percent), while Latin America and Caribbean and Sub-Saharan Africa stand marginally better at 15 percent and 11 percent, respectively. Furthermore, the data does not examine founders by country of origin, and female founders from developing countries may face unique barriers. As one female fintech founder from Sub-Saharan Africa explained: “A lot of the funding goes to foreign male founders. That’s one of the biggest challenges.”

<img class="aligncenter size-full wp-image-39748" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/08/Number-of-female-fintech-leaders-region.png" alt="graph" width="887" height="641" />

It’s important to put this data in the broader context of women’s representation in the workforce. Financial services have long been <a href="https://www.ftadviser.com/opinion/2019/12/04/financial-services-15-year-gender-diversity-failure/" target="_blank" rel="noopener noreferrer">dominated by men</a>. There is a misconception and unconscious bias that women do “better” in roles like HR, marketing and implementation versus strategy and innovation. For instance, according the <a href="http://www3.weforum.org/docs/WEF_GGGR_2020.pdf" target="_blank" rel="noopener noreferrer">World Economic Forum</a>, women make up about 26 percent of workers in data and AI roles, 15 percent in engineering roles and 12 percent in cloud computing roles, compared to 40 percent in marketing, 37 percent in sales, and 35 percent in product development.

It’s also no secret that women – particularly women of color – are underrepresented in educational programs, like MBAs, that can provide them a stepping stone into the financial services industry. While 2019 saw an increase in the number of female MBA applicants, socio-cultural values and norms can influence a woman’s ability and decision to attend higher educational programs. Programs like <a href="https://girlswhocode.com/">Girls who Code</a> and <a href="https://girlsintech.org/">Girls in Tech</a> are working towards eliminating the gender gap in technology and recruiting/encouraging young women to enter the tech industry.
<h2>2. Female-led fintechs generate higher revenues than those without women in leadership positions.</h2>
The 2019 Inclusive Fintech 50 data did not survey fintechs on revenue per customer, but preliminary evidence from the Fintech Benchmarks Proof-of-Concept reveals that female-led fintechs generate higher revenues. Among the sample of 45 fintechs, female-led ones had nearly three times the revenue per customer of non-female-led fintechs, but also three times the cost per customer. This year’s Inclusive Fintech 50 data will examine whether this trend holds true in a larger sample.
<blockquote>Among the sample of 45 fintechs, female-led ones had nearly three times the revenue per customer.</blockquote>
These findings add to the evidence of the strong relative performance of female-led fintechs, and are consistent with research across sectors demonstrating the revenue potential of female-led companies. For example, <a href="https://www.bcg.com/publications/2018/why-women-owned-startups-are-better-bet.aspx" target="_blank" rel="noopener noreferrer">research from BCG</a> finds that female-founded startups generate 10 percent higher revenue than their male peers over a five-year period. Similarly, a study of 3,000 top global companies by Credit Suisse shows that female leadership is associated with <a href="https://www.wgea.gov.au/sites/default/files/documents/csri-gender-3000.pdf" target="_blank" rel="noopener noreferrer">higher profitability and superior financial returns</a>.
<h2>3. Female-led fintechs are able to raise funds at similar rates to their counterparts, but disparities persist in certain regions, namely, those with wide financial inclusion gender gaps.</h2>
The BCG study also revealed that female-founded startups raise less than half of what male-founded startups raise. A Harvard Business Review piece <a href="https://hbr.org/2017/06/male-and-female-entrepreneurs-get-asked-different-questions-by-vcs-and-it-affects-how-much-funding-they-get" target="_blank" rel="noopener noreferrer">echoes</a> the same conclusion – female founders are asked more challenging and skeptical questions during pitches, which leads to lower funding. This practice may be traced back to the stereotypes women face of not being the “right fit” for the role/sector.
<blockquote>Female-led inclusive fintechs raise 24 percent more than non-female-led startups.</blockquote>
The data from Inclusive Fintech 50 presents a more optimistic picture. At the median, female-led inclusive fintechs raise 24 percent more than non-female-led startups. This trend is largely driven by funding in formal investment rounds, echoing research in the U.S. from the <a href="https://startupsusa.org/women-founded-venture-backed-startups/#main-findings" target="_blank" rel="noopener noreferrer">Center for American Entrepreneurship</a> that once a female-founded startup is funded, it receives similar funding to male-founded startups in additional fundraising rounds.

<img class="aligncenter wp-image-39735 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/08/meadian-annual-amount-raised-by-female-fintech-leaders-1.png" alt="" width="899" height="654" />

However, we again see that there are stark differences across geographies. The median female-led fintech raises approximately three-fourths as much as non-female-led fintechs in Latin America, two-thirds as much in East Asia and Pacific, and nearly one-third as much in South Asia. In Sub-Saharan Africa and North America, female-led fintechs raise more at the median than non-female-led fintechs, though they raise 74 percent as much in Sub-Saharan Africa when measuring the average rather than the median, as noted in this <a href="https://www.themix.org/publications/measuring-funding-flows-for-digital-financial-inclusion" target="_blank" rel="noopener noreferrer">white paper</a>. In Europe and Central Asia, there is no observed gap in funding.

Perhaps it is not surprising that these regions also have a large gender gap in broader financial inclusion. For instance, the <a href="https://www.gsma.com/mobilefordevelopment/blog/the-promise-of-mobile-money-for-further-advancing-womens-financial-inclusion/#_ftn2" target="_blank" rel="noopener noreferrer">gender gap in mobile money usage</a> is 25 percent in Latin America, 21 percent in East Asia and Pacific, and 75 percent in South Asia. In these regions, the same <a href="https://blogs.worldbank.org/voices/gender-gap-financial-inclusion-three-ways-shrink-it" target="_blank" rel="noopener noreferrer">regulations and social norms</a> that prevent women from opening bank accounts may also provide additional hurdles for female entrepreneurship in a male-dominated industry.
<h2>4. Female-led fintechs have less funds available to get started, but receive a boost from angel investors.</h2>
During the initial stage, female-led fintechs have less capacity to invest personal funds into their ventures than non-female-led fintechs – they can put in only 19 percent of what a non-female-led fintech does (see figure below). As a result, many female founders and CEOs can fail to make it to formal funding rounds, thereby reducing the number of female-led fintechs from the start.

<img class="aligncenter wp-image-39736 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/08/median-annual-amount-raised-female-led-fintech-BY-FUNDING-STAGE.png" alt="graph" width="891" height="647" />

These findings are consistent with a <a href="https://www.goldmansachs.com/citizenship/10000women/news-and-events/10kw-progress-report/progress-report-full.pdf" target="_blank" rel="noopener noreferrer">study by Goldman Sachs</a> that found that female entrepreneurs in emerging markets often do not seek external financing due to challenges of navigating the process or perceptions of likelihood of success.

Female-led fintechs have performed particularly well with angel investors. Another recent <a href="https://www.tandfonline.com/doi/abs/10.1080/13691066.2020.1747692" target="_blank" rel="noopener noreferrer">study</a> found that female entrepreneurs have greater success receiving funding from angel funders than from early-stage and late-stage VCs. The Inclusive Fintech 50 data show a similar trend, with the median female-led fintech raising 80 percent more than non-female-led fintechs at the angel investor stage.
<h2>5. The network effect is weaker for female-led fintechs.</h2>
Fintechs that are “networked” – part of a fintech hub, incubator, accelerator, or award – raise <a href="https://www.themix.org/publications/measuring-funding-flows-for-digital-financial-inclusion" target="_blank" rel="noopener noreferrer">more funding than non-networked fintechs</a>. However, female-led fintechs managed to raise only 8 percent more if they were networked. Meanwhile non-female-led fintechs raised 43 percent more if they were networked. This trend is consistent with a report which found that <a href="https://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/venture+capital/vc-resources/vc-gender-financing" target="_blank" rel="noopener noreferrer">accelerators widen the equity financing gap</a>, with male-led startups experiencing a 2.6 times increase in funding raised post-acceleration relative to female-led startups.
<blockquote>Female-led fintechs managed to raise only 8 percent more if they were networked.</blockquote>
Additionally, a study that employed network analysis to <a href="https://endeavor.org/content/uploads/2015/06/Fostering-Productive-Entrepreneurship-Communities.pdf" target="_blank" rel="noopener noreferrer">assess the collective impact of entrepreneurship communities</a> found that start-ups that received experience, mentorship, or investment from an entrepreneur who has led a company to scale were approximately two times more likely to achieve top performance. It would be prudent to explore further what this means for female entrepreneurs who may face barriers accessing entrepreneurship communities that may be male-dominated.

<img class="aligncenter wp-image-39737 size-full" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/08/networked-multiplier-of-female-led-fintechs.png" alt="graph" width="845" height="614" />
<h2>Recommendations</h2>
<h3>For Investors</h3>
<ul>
 	<li>Investors have the potential to address this underrepresentation by investing in more female-led, early-stage fintechs, particularly in regions such as Asia and Latin America. Investors can not only seek out fintechs with strong programs that support female leadership, but also screen out those that do not. As described above, there is evidence that female-led fintechs produce higher revenues.</li>
 	<li>In order to address funding disparities for female-led fintechs in early stages, investors can adopt gender lens investing, particularly when providing grant funding. This will build upon work done by DFS Lab, Flourish Ventures, FinEquity, and Women’s World Banking, who have sponsored a female-focused fintech competition.</li>
 	<li>Incubators and accelerators can also support early-stage, female-led fintechs by actively recruiting female startups and supporting them in raising funding and also assessing whether their programs themselves are female-friendly.</li>
 	<li>Gender-diverse hiring practices and implicit bias training are vital for investors and incubators/accelerators to reach these goals. Moreover, while we were not able to distinguish between women of color founders and white women, evidence on the institutional barriers and discrimination that people of color face likely apply to the fintech space. Implicit bias trainings play an important role in raising awareness on lending practices.</li>
</ul>
<h3>For Researchers</h3>
<ul>
 	<li>Research organizations can provide valuable evidence to build a case for investment in female-led fintechs and the nuanced barriers that female-led fintechs face. Building upon work by organizations such as Women’s World Banking, researchers can demonstrate that female-led fintechs produce strong financial returns while also making unique contributions to financial inclusion.</li>
 	<li>Additional research is needed to examine the challenges faced by female fintech founders. Inclusive Fintech 50 data sheds light onto funding amounts received by female fintechs, but it does not address potential disparities in the likelihood of receiving funds, or other discrimination that female founders -- particularly women of color -- may face.</li>
</ul>
Be on the lookout for the next post, when we will discuss how fintechs may be able to close the gender gap in financial inclusion for their users.

Including Women in “Inclusive Fintech”

Equity Investing

Impact Investing

Valuation

Richard Greenberg is a Managing Director of the Social Enterprise Finance group at U.S. International Development Finance Corporation (DFC, formerly OPIC). The group leads DFC efforts to place capital in highly impactful and innovative enterprises and funds.

Like other development finance institutions, DFC – which has prioritized inclusive finance for decades to address critical challenges facing the developing world – has been hard at work supporting immediate and longer-term needs of MFIs and other actors so they can continue supporting base-of-pyramid clients during the COVID-19 crisis. In this interview with CFI, Greenberg discusses collaboration with other DFIs, DFC’s social impact initiatives that support its development goals, digitization during the pandemic, and more.
<h3>In April’s COVID-related joint <a href="https://www.dfc.gov/media/press-releases/development-finance-institutions-join-forces-respond-covid-19-developing" target="_blank" rel="noopener noreferrer">statement</a>, the <a href="https://www.dfc.gov/media/opic-press-releases/opic-signs-mou-establishing-dfi-alliance-key-allies" target="_blank" rel="noopener noreferrer">DFI Alliance</a> highlighted that its DFI members would work to address not only current liquidity issues in the financial sector, but also other measures related to essential business activities. How have you collaborated on your inclusive finance objectives since that announcement? Has there been any other inter-DFI coordination? What more could be done in this regard?</h3>
There have been extensive conversations to collaborate and coordinate with other DFIs to ensure we’re deploying our capital as efficiently as possible given the significant impacts of the crisis. The crisis has generated tremendous demand for capital from DFC and other DFIs. Since we are long-term lenders focused on our missions, in times like these, DFIs become even more important in addressing market gaps.
<blockquote>In times like these, DFIs become even more important in addressing market gaps.</blockquote>
Many of the projects that we’re looking at involve multiple DFIs. Sometimes that’s a challenge because our level of participation, our products, our policies and our risk-return requirements may all be slightly different, but these diverse strengths and capabilities are also what make our collaboration so powerful. Our goal is to make sure we can accommodate—and leverage—the differences there may be to arrive at the financing package that best supports the developmental impact we’re seeking.

We have also recently announced that DFIs have collectively <a href="https://www.dfc.gov/media/press-releases/2x-challenge-drives-groundbreaking-45-billion-women-developing-countries" target="_blank" rel="noopener noreferrer">catalyzed $4.5 billion in investment financing</a> to support women through the <a href="https://www.2xchallenge.org/" target="_blank" rel="noopener noreferrer">2X Challenge</a>, surpassing the initial goal of $3 billion. Building on DFC’s <a href="https://www.dfc.gov/our-work/2x-womens-initiative" target="_blank" rel="noopener noreferrer">2X Women’s Initiative</a>, launched in 2018, we encouraged our counterparts from G7 countries to accept the 2X Challenge by prioritizing investments in women. And it’s not just G7 countries: 15 total countries have joined to date.

Another aspect of our collaboration is discussions with DFIs and other investment partners to share market and institutional response information. One of those groups that we have joined is being led by CGAP.
<h3><strong>In addition to the recently <a href="https://yourstory.com/2020/06/funding-alert-northern-arc-us-international-development-finance-corporation" target="_blank" rel="noopener noreferrer">announced</a> $50 million of debt financing for Northern Arc, has DFC provided direct assistance to institutions support base-of-pyramid clients during these difficult times? Could you tell us a bit more about how the Northern Arc support came to pass?</strong></h3>
We’ve had a long-standing relationship with the senior management of Northern Arc (formerly IFMR Trust). They are a pioneer and a leader in wholesale finance in India. They have tremendous expertise and knowledge of the market. The proceeds of our loan to Northern Arc will be used to expand its loan portfolio in areas of importance to DFC, such as women’s economic empowerment, food security, and the WASH sector.
<blockquote>Our goal is be as responsive as we can to what the market needs at this unique time.</blockquote>
Our goal is be as responsive as we can to what the market needs at this unique time, working with established and new clients. For clients that we have previously worked with, we’ve been able to move projects forward especially quickly throughout the crisis. For example, in India, we have closed and disbursed funds to two clients, including <a href="https://www.dfc.gov/investment-story/improving-access-quality-education-india" target="_blank" rel="noopener noreferrer">Varthana</a>, an education finance company that serves low-income families, and <a href="https://yourstory.com/2020/05/funding-alert-caspian-debt-investment-from-dfc" target="_blank" rel="noopener noreferrer">Caspian</a>, an income fund manager that lends to SMEs. The debt <a href="https://economictimes.indiatimes.com/wealth/save/sbi-loan-emi-moratorium-extended-here-are-all-the-details/articleshow/76087915.cms" target="_blank" rel="noopener noreferrer">moratorium</a> in India certainly created additional risk and complexity, but the quality of these entities and the strong relationships we had with them enabled us to keep moving forward.

These are just two examples among <a href="https://www.dfc.gov/media/press-releases/dfc-approves-1-billion-investments-global-development" target="_blank" rel="noopener noreferrer">many others</a> we are supporting in developing countries reeling from COVID-19, such as Banco Industrial in <a href="https://gt.usembassy.gov/dfc-approves-a-200-million-investment-for-guatemala/" target="_blank" rel="noopener noreferrer">Guatemala</a>, whose portfolio includes 30 percent women-owned or women-led businesses, Root Capital for farmers in Latin America and Africa, <a href="https://www.dfc.gov/investment-story/supporting-worlds-smallest-farmers" target="_blank" rel="noopener noreferrer">One Acre Fund</a> supporting farmers in Kenya, and a fund managed by <a href="https://www.dfc.gov/media/press-releases/dfc-approves-nearly-900-million-global-development-projects" target="_blank" rel="noopener noreferrer">WaterEquity</a>, which lends to MFIs to improve access to reliable and clean sources of water.
<h3><strong>What about coordinating with fund managers? What role have they played?</strong></h3>
We have relationships with many of the leading global microfinance fund managers. Some of them have expanded their investment strategy to include SMEs and other financial intermediaries. Shortly after the crisis began, we were contacted by many fund managers with ideas about how to address needs by expanding existing funds, creating new funds, or reorienting funds that were already raising capital but not yet launched.
<blockquote>There are a lot of questions related to the type of capital to be deployed, the timing, and demand versus supply in various markets.</blockquote>
We are working with several of them right now, making good progress on underwriting and collaboration with other DFIs and fund managers to put together the right kind of capital for these funds so they can quickly start to deploy it. Of course, in the context of the crisis, there are a lot of questions related to the type of capital to be deployed, the timing, and demand versus supply in various markets. The base case assumption for most is that there’s going to be significant liquidity needs in the near term, though that will likely vary significantly across markets.
<h3><strong>Geographically, DFC’s microfinance/inclusive finance activities have reached a <a href="https://www.dfc.gov/sites/default/files/2019-08/fy2019_cbj.pdf" target="_blank" rel="noopener noreferrer">diverse range</a> of countries and regions. Are there any countries or regions DFC has prioritized with regards to its support of inclusive finance during COVID? Are there issues unique to specific places, or are challenges mostly universal?</strong></h3>
In terms of regions, DFC is open for business across emerging markets. We focus on low-income and lower middle-income countries. Priority regions include Africa, Latin America and the Caribbean, and the Indo-Pacific.

There are different needs and challenges around the world. The strength and resilience of financial sector institutions and regulation varies considerably, as does extent of digitization which is so important at this time. Countries are getting hit very differently and we need to account for that.
<h3>Has the crisis altered DFC’s approach to funding social impact enterprises beyond microfinance?</h3>
DFC’s <a href="https://www.dfc.gov/what-we-offer-our-products/portfolio-impact" target="_blank" rel="noopener noreferrer">Portfolio for Impact and Innovation (PI2)</a> has launched, which builds on the success of OPIC’s Portfolio for Impact (PI) initiative, introduced in 2014. PI2 is how we serve smaller, early-stage social enterprises that have a highly developmental impact but that lack scale-up capital due to their relative size, novel approach, or limited track record. Initially, financing for each project under PI2 was $1 to $5 million; now, we’re able to go up to $10 million per deal.

In the wake of COVID-19, PI2 takes on even greater importance: we know that it is often small, early-stage ventures that introduce the most innovative solutions to daunting challenges. These creative business models will be exactly what we need to navigate the many new challenges that COVID-19 has brought to emerging markets.
<h3><strong>Has the crisis shifted the perceptions of inclusive finance within DFC?</strong></h3>
Inclusive finance has been a focus of DFC for a long time. We have become one of the most significant capital providers among DFIs to microfinance over the last 10 years. This crisis is demonstrating how inclusive finance is even more essential.

Though our underwriting process is rigorous, we have leveraged information sharing with co-investors to further accelerate the deployment of capital. Additionally, in the management of our existing portfolio, we have been proactive and expeditious in trying to respond to clients who may be struggling as a result of this crisis and may need some relief.
<h3><strong>Has DFC engaged with fintechs and non-microfinance FSPs during this crisis? Are you seeing a rush to digitization among your partners? How, if at all, are your investees working to accelerate digitization for consumer segments who were conducting business primarily offline – and how might this be done <a href="https://www.centerforfinancialinclusion.org/a-covid-digitization-stampede-mustnt-trample-consumer-protection" target="_blank" rel="noopener noreferrer">safely</a>?</strong></h3>
There’s no question that, with the lockdowns, having a digital platform is critical. Some MFIs have already digitized, others less so, and the latter are of course a lot more vulnerable in these conditions.

It’s really important that those MFIs and intermediaries that need to further digitize have the opportunity and support to do that. For example, a fund manager launching a fund for which we expect to provide financing has a specific technical assistance facility that focuses on digitization. They assess an MFI’s digitization needs and can provide finance to facilitate action items. It’s important that we not only provide financing, but provide this kind of targeted support to strengthen financial institutions to which we are lending.
<h3>What about time frames? <a href="https://centerforfinancialinclusion.org/how-should-investors-coordinate-when-time-is-of-the-essence/" target="_blank" rel="noopener noreferrer">CFI</a>, the <a href="https://centerforfinancialinclusion.org/microfinance-coalition-call-to-action-for-investors/" target="_blank" rel="noopener noreferrer">Microfinance Coalition</a>, and others have identified investor medium-term needs as well as short term ones. What do you see as the medium-term needs beyond liquidity? When does the medium term “start”?</h3>
My personal interpretation is the “short term” is the next quarter or two. We’re trying to move very quickly. We don’t want to miss the opportunity to support pressing needs.

We are thinking about liquidity now and solvency issues that might arise down the road. At this time it is difficult to forecast market conditions in the coming quarters. One of our existing partners that lends to MFIs has a view that demand for their funds will slow down temporarily while others are expecting increased demand. Projecting the demand for capital in this kind of volatile market is less certain than it typically would be, so that’s creating some challenges in thinking about the risks versus returns.
<blockquote>We are thinking about liquidity now and solvency issues that might arise down the road.</blockquote>
Unfortunately, it seems likely that some people in the markets we serve who are currently middle income may lose jobs and income that will push them into a lower income level or even poverty – at least temporarily – so that could create more demand for the services from some of the institutions that we fund.

We want to support funds and intermediaries that will manage their capital prudently and avoid taking unnecessary risks. In some cases, this may mean focusing their lending initially to MFIs that are the strongest right now, and then adding institutions to their portfolios that are smaller and more vulnerable – but serve important underserved groups – over time.

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DFIs, COVID-19 and Financial Inclusion: A Conversation with Richard Greenberg of DFC

India

South Asia

Latin America and The Caribbean

DFIs: COVID-19 and Financial Inclusion

Credit Provision

Underwriting

Scrolling through Instagram these days, I’ve noticed a pattern that has emerged since COVID-19 prompted lockdowns across the globe. With movement restricted, many social media users in the US have engaged in culinary adventures. New experiments in the kitchen abound despite the noted shortage of ingredients like flour on supermarket shelves.

But what I haven’t been seeing on my social media feed on the food front is much more dire: COVID-19 will push up to an estimated <a href="https://www.oxfam.org/en/research/dignity-not-destitution" target="_blank" rel="noopener noreferrer">half billion people into poverty</a> across the globe, threatening food security. Prior to the pandemic, approximately <a href="https://www.who.int/news-room/detail/11-09-2018-global-hunger-continues-to-rise---new-un-report-says" target="_blank" rel="noopener noreferrer">820 million people were chronically hungry</a>. Now, the World Food Program estimates that by the end of 2020, <a href="https://insight.wfp.org/covid-19-will-almost-double-people-in-acute-hunger-by-end-of-2020-59df0c4a8072" target="_blank" rel="noopener noreferrer">265 million people</a> in low and middle-income countries will be under the threat of starvation.
<h2>A Challenge for a Continent</h2>
These issues are particularly acute in several countries in Africa, where job losses and income losses are affecting food security, defined as access to sufficient, safe, and nutritious food. In a recent <a href="https://amref.zoom.us/rec/play/uZZ_Ju2p-zo3E9ed4wSDBKR6W9S9J_2s0iFP-qZemkixVXRQOlWkYuAbMLeKlvVOBygaPgBJmSDPJCzg?continueMode=true&amp;_x_zm_rtaid=FQWENb2fTM2AEbhvJuEg9g.1590501183404.6cee48bfc63a9f06cac60da22d85013d&amp;_x_zm_rhtaid=599" target="_blank" rel="noopener noreferrer">Africa Dialogues webinar</a>, hosted by Dalberg Advisors and Amref Health Africa and moderated by Lolem Ngong and Edwin Macharia, Professor Hamadi Iddi Boga of the Ministry of Agriculture, Livestock, and Fisheries in Kenya; Sara Menker, Founder and CEO of Gro Intelligence; and Monica Musonda, Founder and CEO of Java Foods, explored how the pandemic is disrupting agricultural supply chains and impacting smallholder farmers and vulnerable populations across the continent.

As Menker highlighted, there isn’t a lack of food around the world. Food insecurity, rather, is rooted in a massive distribution problem and a widespread inability to afford food, now exacerbated by COVID-19. Foreign exchange reserves across the African continent are at an all-time low due to the pandemic. In a weakened macroeconomic environment, the cost of imports has increased, and although some African markets are experiencing food insecurity to a greater extent than others, net importers of calories are finding themselves in an increasingly precarious situation. In Zambia, for example, the <a href="http://www.fao.org/giews/countrybrief/country.jsp?code=ZMB" target="_blank" rel="noopener noreferrer">price of fortified cereal</a> for children has increased to $6. Groups including informal workers, microentrepreneurs, and women tend to be the most adversely impacted by such price fluctuations.
<blockquote>Informal workers, microentrepreneurs and women tend to be the most adversely impacted by price fluctuations.</blockquote>
Musonda noted during the webinar that up to 60 percent of wages from informal work in Africa are used to buy food. Finding themselves without work, or with fewer working hours due to COVID-related restrictions on physical movement, informal workers and microentrepreneurs face increasing food insecurity, and women, who allocate more of their own resources to <a href="https://www.cgap.org/blog/3-ways-financial-inclusion-improves-womens-food-security" target="_blank" rel="noopener noreferrer">other members of the household during hardship</a>, are disproportionately affected.
<h2>How Does Financial Inclusion Come into Play?</h2>
As a well-documented <a href="https://www.uncdf.org/financial-inclusion-and-the-sdgs" target="_blank" rel="noopener noreferrer">enabler of food security</a>, financial inclusion has an important role to play in the mitigation of COVID-19’s harms to vulnerable groups. Here, I highlight a few of <a href="https://centerforfinancialinclusion.org/covid-19-reveals-the-limits-of-individual-action-and-market-based-solutions/" target="_blank" rel="noopener noreferrer">many considerations</a> for financial inclusion initiatives when taking action to reduce food insecurity.
<h3>Supporting SMEs and Smallholder Farmers</h3>
Propping up small and medium-sized business is an important consideration for financial inclusion and, by extension, food security in Africa. SMEs form an <a href="https://www.researchgate.net/publication/315516536_AFRICAN_SMALL_AND_MEDIUM_ENTERPRISES_SMES_CONTRIBUTIONS_CHALLENGES_AND_SOLUTIONS" target="_blank" rel="noopener noreferrer">integral part</a> of the food supply chain in Africa. According to Musonda, <a href="http://www.ipsnews.net/2019/09/smes-main-drivers-africas-food-economy/" target="_blank" rel="noopener noreferrer">SMEs handle 64 percent of food</a>, much of which is fresh and perishable, on the continent. These are the foods that are crucial, but we must do more to ensure that SMEs stay alive during this time of crisis.

This is where financial service providers (FSPs) play an important role. FSPs need to address both short-term and longer-term financing options for SMEs. In the short-term, as <a href="https://www.covid-finclusion.org/forum/discussion/surviving-the-liquidity-crunch-what-are-your-expectations-and-plans-for-managing-mfi-liquidity-what-worries-you-most" target="_blank" rel="noopener noreferrer">FSPs themselves are struggling with liquidity constraints</a>, the role of other actors, such as impact investors, development finance institutions, and policymakers, will be important to filling the void in available liquidity. But beyond liquidity through FSPs, there is a broader role for governments to play when it comes to food security.

In Kenya, the government has created an ecosystem of SMEs to support smallholder farmers in a mutually beneficial initiative that connects nodes of the supply chain. According to Prof. Boga, 90 percent of farmers in Kenya are smallholder farmers. To support this population, the government has created an ecosystem of SMEs to support them, and has implemented an e-voucher program in which farmers receive vouchers on their mobile phones to exchange for partially subsidized farm supplies based on their individual and household needs.
<h3>Promoting and Strengthening Cash Transfer Systems</h3>
Government-to-person (G2P) and person-to-person (P2P) <a href="https://blogs.worldbank.org/voices/responding-crisis-digital-payments-social-protection-short-term-measures-long-term-benefits" target="_blank" rel="noopener noreferrer">cash transfers are an effective strategy</a> to increase both financial inclusion and food security. NGOs, governments, and the private sector are working together to promote and strengthen this most important vehicle for quickly delivering crucial cash to low-income households and individuals. <a href="https://www.unicef-irc.org/publications/pdf/IRB 2016_04.pdf" target="_blank" rel="noopener noreferrer">Evidence</a> from several large-scale <a href="https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/7596.pdf" target="_blank" rel="noopener noreferrer">evaluations</a> shows that as households receive more in cash transfers, they spend more on food, with positive impacts on meals consumed and dietary quality.

The regulatory environment and payment infrastructure in many countries can present a challenge for massive payouts, but the financial inclusion community views the current crisis as an <a href="https://blogs.worldbank.org/voices/responding-crisis-digital-payments-social-protection-short-term-measures-long-term-benefits">opportunity to fast-track improvements to payments systems</a>, particularly through digital payments ecosystems. While digitalization is promising, however, CFI’s Alex Rizzi <a href="https://centerforfinancialinclusion.org/a-covid-digitization-stampede-mustnt-trample-consumer-protection/" target="_blank" rel="noopener noreferrer">cautions</a> that rushed pushes to go digital may harm the poor, and it will continue to be important to put base-of-the-pyramid consumers at the center of considerations for digital cash payments.
<blockquote>Countries with strong DFS infrastructures are taking the lead in implementing systems to help people afford food.</blockquote>
In Africa, countries with strong DFS infrastructures are taking the lead in implementing systems to help the base of the pyramid afford food and other living expenses. The Western Africa Central Bank (BCEAO) is promoting the use of electronic payment tools by making it easier for people to open a mobile money account and by making P2P transfers free. Kenya’s National Treasury <a href="https://www.ugogentilini.net/wp-content/uploads/2020/04/Country-social-protection-COVID-responses_April3-1.pdf" target="_blank" rel="noopener noreferrer">appropriated</a> an additional 10 billion Kenyan schillings, or $100 million, to support for the elderly, orphans and other vulnerable groups through cash transfers. In addition, fee waivers on P2P mobile money transactions on M-PESA were <a href="https://techcrunch.com/2020/03/16/kenya-turns-to-its-mobile-money-dominance-to-stem-the-spread-of-covid-19/" target="_blank" rel="noopener noreferrer">approved</a>. The Moroccan Economic Watch Committee activated a mobile payment device for cash transfers directly to an estimated 3 million informal workers, while in Tunisia, the government is offering one-off cash transfers to households with members working in the informal sector and housing the elderly.

To support governments and markets where the digital payment infrastructure is still developing, initiatives like the <a href="https://www.worldbank.org/en/topic/paymentsystemsremittances" target="_blank" rel="noopener noreferrer">World Bank’s G2Px</a> focus on bringing together expertise across sectors to scale G2P payments responsibly. NGOs such as the World Food Program <a href="https://www.wfp.org/cash-transfers" target="_blank" rel="noopener noreferrer">continue to employ cash transfers</a> in coordination with partners.
<h3>Supporting Women’s Financial Inclusion as a Means to Greater Food Security</h3>
Research indicates that within households, women are at a <a href="https://www.adb.org/sites/default/files/publication/30315/gender-equality-and-food-security.pdf" target="_blank" rel="noopener noreferrer">greater risk of being food insecure</a>. In times of hardship, such as the current pandemic, they are more likely to reduce their own food consumption to leave enough for men and boys. However, access to secure financial services <a href="https://www.cgap.org/blog/3-ways-financial-inclusion-improves-womens-food-security" target="_blank" rel="noopener noreferrer">has the potential</a> to <a href="https://elibrary.worldbank.org/doi/abs/10.1093/wbro/lkx003" target="_blank" rel="noopener noreferrer">promote women’s empowerment</a> and advance food security. Women with bank accounts are likely to have greater bargaining power to allocate more household resources to purchasing nutritious food. Increasingly, many donors and policymakers are recognizing the need to shift cash transfers to women as one approach to tackling food insecurity. This provides an <a href="https://elibrary.worldbank.org/doi/abs/10.1093/wbro/lkx003" target="_blank" rel="noopener noreferrer">on-ramp for digital financial services while improving convenience and confidentiality</a> of these payments.

Will our documentation of this moment in time capture the resilience, cooperation, and hard work of the individuals and institutions responding to this unprecedented crisis? Food security is a critical basic need, and financial inclusion is an important means of achieving it. With financial services digitizing at a breakneck pace, we mustn’t forget our most basic needs and how inclusive finance can serve them.

Food Security and COVID-19: How Financial Inclusion Can Support Livelihoods

Sub-Saharan Africa

Payments

It’s 7 a.m. in a remote village in India’s Bihar state. Punam Kumari, a bank <em>sakhi</em>, is ready to serve her customers. Many of them have already arrived at her customer service point (CSP). She ensures that everyone is complying with social distancing norms while she also takes COVID-related safety precautions for transactions she conducts.

This early morning routine represents a major shift in how she works. She used to open her outlet at 10 a.m., but since the lockdown was imposed by the government to curb the spread of COVID-19, she has been working from 7 am to 7 pm providing financial services to the village. She caters to customers at her CSP outlet and at a nearby school, where she’s set up shop at the request of local authorities.
<blockquote>Thanks to bank sakhis, accessing money during COVID-19 has been made easier for rural women.</blockquote>
Thanks to her and her colleagues, known colloquially as bank <em>sakhis</em>, what would otherwise have been a daunting task of accessing money during COVID-19 has been made easier for rural women. Bank <em>sakhi</em> – literally “female banker friend” in Hindi – is an informal term for female banking agents, who are collectively known in India as business correspondents (BCs). Equipped with smartphones, tablets, or laptops and biometric scanners, they provide basic banking services and financial access for women, self-help groups and many others in some 20,000 difficult-to-reach villages in rural India. Punam has been a bank <em>sakhi</em> since 2018 after her husband passed away, and she needed a way to support her three children.
<h2>The Banking Correspondent Model Works Toward Gender Equality</h2>
The BC model, supported by the Reserve Bank of India (RBI) since 2006, allows third-party agents to provide banking services on behalf of banks, eliminating the need for brick-and-mortar structures. In 2015-16, <a href="http://documents.worldbank.org/curated/en/662851590658776125/pdf/Self-Help-Group-Members-as-Banking-Agents-for-Deepening-Financial-Inclusion.pdf" target="_blank" rel="noopener noreferrer">a female BC model</a> was promoted by the National Rural Livelihoods Mission (NRLM), with support from the World Bank, financed the <a href="https://projects.worldbank.org/en/projects-operations/project-detail/P104164" target="_blank" rel="noopener noreferrer">National Rural Livelihoods Project</a> (NRLP), which was built on the <a href="https://www.giz.de/en/downloads_els/sakhimodel.pdf" target="_blank" rel="noopener noreferrer">GIZ-NABARD</a> experience. This pilot initiative helped in reducing the gender gap in access to financial services and provided a regular income stream for local women who were trained and employed as BCs. Fifty-four percent of <a href="https://pmjdy.gov.in/">Pradhan Mantri Jan Dhan Yojana</a> (PMJDY) accountholders are women and, unofficially, <a href="https://www.microsave.net/2018/05/01/india-needs-more-women-business-correspondent-agents/">most BC agents are men</a>, but these women BC agents are servicing first-time women customers and challenging gender disparities in an otherwise male-dominated profession. On average, approximately 6000 NRLM BCs across 9 low-income states collectively complete 700,000 transactions each month, worth over INR 2.5 billion.
<h2>Leveraging the Power of Business Correspondents During the Pandemic</h2>
In the past couple of months, Punam’s business volume has increased considerably due to the government-initiated direct benefit transfer (DBT) schemes as part of the <a href="https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1608345" target="_blank" rel="noopener noreferrer">Pradhan Mantri Garib Kalyan Yojana (PMGKY) - COVID-19 relief package</a> announced by the prime minister on March 26. Under the PMGKY, 206 million PMJDY women account holders are now receiving INR 500 per month for three months.

During the COVID-19 lockdown, BC agents have proven effective in the delivery of financial services in rural areas and have been granted exemption because the Indian government has now classified their services as essential. In Bihar, Odisha, Madhya Pradesh, Jharkhand, Chhattisgarh and several other states, bank <em>sakhis</em> have continued working to provide cash flow in their villages since the lockdown. They now wear gloves while conducting the transactions, regularly sanitize their devices and require all customers to wash or sanitize their hands before completing the required biometric scanning. While they’ve had to discontinue service delivery at their customers’ doorsteps during this period, they’ve set up services from home, roadsides, and are helping with information dissemination in communities, ensuring that their customers are aware of COVID-19 guidelines on quarantine, handwashing and social distancing.
<h2>Insights on BC Transactions During the COVID-19 Era</h2>
A quick review of daily transactions of 39 bank <em>sakhis </em>(SHG-BCs in the graph below) of a private sector bank in rural Bihar -- the data was collected from mid-March to April -- reveals three interesting points:
<ul>
 	<li><strong>An initial drop in daily transaction volumes immediately after the lockdown was announced</strong>. These 39 agents conducted 3035 transactions worth about INR 9 million in mid-March, which dropped by about 50 percent to 1629 transactions and INR 4.5 million right after the lockdown was announced.</li>
 	<li><strong>A spike in transactions in the first week of April corresponding with the release of the first tranche of the PMGKY G2Ps cash transfers</strong>. While the size of transactions in the first week of April is lower than in the preceding weeks, cash flow resumed in the rural economy. The agents completed 4895 transactions by April 10, 2020, but with a lower value of INR 7.6 million and this uptick continues through May.</li>
 	<li><strong>A corresponding increase in transaction failures</strong>. These are largely due to network and bandwidth requirements for a spike in demand for services, mostly in the case of inter-bank transactions.</li>
</ul>

Gender Gap Narrowing “Bank Sakhis” Take Crucial G2P Support the Last Mile During COVID-19

Agent Banking

<em>This post was <a href="https://www.womensworldbanking.org/insights-and-impact/continuity-in-a-crisis-exploring-reactions-to-the-covid-19-outbreak-among-providers-of-financial-services-for-low-income-women/">originally published</a> by Women's World Banking.</em>

The impact of the COVID-19 outbreak on the global economy will only become fully known in the coming months, as government responses to curtail the spread of the virus feed through into the global economy. However, based on past events related to health, the economy or the environment, we do know that low-income women are among those most adversely affected by economic shocks, whatever their cause.
<blockquote>Low-income women are among those most adversely affected by economic shocks, whatever their cause.</blockquote>
Women’s World Banking maintains a network of more than 48 financial services providers, operating in 28 developing markets around the world and focusing on the underserved, in particular women. These financial institutions work with Women’s World Banking to scale solutions to reach more low-income women. We reached out to financial services providers (FSPs) from the Middle East, Africa, Asia, Latin America and Eastern Europe to gauge their initial reactions to the developing situation around the COVID-19 outbreak. What we found was interesting. While many expressed very similar concerns about the future, they were also largely united in their identification of opportunities to either weather the storm, or to evolve their operations in order to get ahead of what is being called the “new normal.”

Here’s what they had to say about their main concerns regarding the current crisis, as well as the new opportunities they have identified so far:
<h2>Main Concerns Among FSPs</h2>
<ul>
 	<li><strong>Unpredictability and uncertainty of the situation:</strong> No one was prepared for how quickly and seriously the crisis developed. The biggest fear many of the institutions are expressing is that they do not yet have enough clear data to make informed decisions. The FSPS are asking themselves daily how long the crisis might last, what will happen next, and how long they can afford to operate as they are currently doing. These questions relate to institutional uncertainty. Many FSPs are wrestling with concerns about their crisis preparedness, liquidity and ability to manage portfolio performance.</li>
</ul>
<blockquote>Protecting staff is seen as the most urgent task.</blockquote>
<ul>
 	<li><strong>Staff and client infections and related issues:</strong> The FSPs we spoke to see their most urgent task as protecting staff, especially essential personnel that still physically report for work. There is also a high level of concern for contract or low-paid staff, for those on daily salaries, and for client location infections. The institutions are drawing up disinfection plans should their premises become infected. They also raised concerns about scarcity of medical and food supplies. We also heard a lot of concern about the impact of a reduction in high touch methods (personal visits to deposit savings, cash disbursements) as a means of curtailing the virus, while digital alternatives were less developed to fill the gap.</li>
 	<li><strong>Leadership in a time of crisis:</strong> Many respondents are acutely aware of their personal role, and the role of their institution, in a time of crisis. They recognize that managing stress at all levels – with clients, staff and their own personal lives — is an emotional challenge. The FSPs are working to ensure “dynamic, adaptive and better” decision-making, for example in areas such as loan rescheduling, lay-offs, hiring freezes and budget revisions. The major leadership concerns we heard revolve around how to keep staff motivated as they work remotely, how to manage competing priorities like home schooling, and how to navigate concerns about clients and about their own roles. Respondents also mentioned mental health concerns as a significant factor.</li>
 	<li><strong>Losing the client connection:</strong> Building on the leadership point above, many FSPs are asking themselves how to keep in close contact with their clients in the new environment, so they can better understand their customers’ health condition, financial outlook and potential need for assistance. Many FSPs referenced change management and the importance of revisiting their business models now and for the longer term, for example as they move from a high touch to a low touch customer interaction system. The institutions also raised concerns about how to offer practical help when their clients’ financial positions are uncertain, now that key revenue streams (like remittances) have slowed and credit scores and histories are unclear.</li>
 	<li><strong>Failing to stay afloat and serve the vulnerable:</strong> Many of the FSPs are voicing concerns around tightening liquidity, as lending and loan repayments slow down. They recognize that if their institution fails, it would affect not only their employees, but also thousands of low-income and vulnerable clients, many of whom are women. This could have terrible economic consequences and lead to further economic aftershocks.</li>
</ul>
Despite the challenges of the current context, FSPs do see opportunities both to evolve internally and to offer value externally.
<h2>New Opportunities to Support Clients</h2>
<ul>
 	<li><strong>Forward looking and future thinking:</strong> Some FSPs are starting to think about post-lockdown operations and what sort of world they will be coming back to. Most agree that staff issues will be a major consideration. The institutions must ensure they can motivate employees to come back to work, offer them job security, provide allowances to cover restart costs on top of salaries, give homeschooling assistance for staff with children, and allow team members time to rebuild their client knowledge base. Many are also considering more proactive communication with staff and investors. Some said they would strengthen internal processes over the next six months to include scenario planning/simulations, and to provision for losses in their budget.</li>
 	<li><strong>Customer focus:</strong> Some respondents plan to emphasize their focus on clients and their welfare by creating a helpline that builds customer engagement, addresses urgent needs, offers information on coronavirus symptoms, and provides locations of pharmacies and clinics. A number of FSPs are beginning to survey clients to better understand their situation and needs. Others are considering financial assistance outside of Central Bank mandates, such as loan repayment moratoriums and interest freezes. The institutions we spoke with are expressing an overarching goal of supporting their customers as much as possible in order to ensure longer-term loyalty. Shorter-term financial hits are seen as secondary compared to long-term engagement.</li>
 	<li><strong>Innovation and digital: </strong>Many are seeing the current context as an opportunity to challenge accepted practices and explore new approaches, partnerships or ways of working: for example, exploring new communications approaches through social media, offering voice SMS in local languages, piloting digital disbursement of loans, innovating with digital savings, and using chat bots for improved remote customer service. In financial terms, many see this crisis as highlighting the critical importance of insurance products, as well as of refinancing and short-term bridging loans. Some institutions are considering additional services like training for clients, business advice, and financial education, and some are looking at non-financial support through partnerships, for example ones that can offer information about telemedicine or intimate partner violence. One provider spoke about a pilot program with a fintech to help clients acquire goods from local stores for delivery. Businesses that are not cash-reliant might also have a competitive advantage in that they can accept more forms of payment. Governments might accelerate non-cash capabilities and infrastructure among merchants post crisis as a potential fix.</li>
</ul>
<blockquote>Many see this crisis as highlighting the critical importance of insurance products, as well as of refinancing and short-term bridging loans.</blockquote>
<ul>
 	<li><strong>Supportive government and funders:</strong> Many FSPs flagged that in a number of countries, the Central Bank and government have been supportive by waiving penalties for delayed reporting, postponing loan installments, and implementing government direct assistance programs to affected clients. In turn, creditors were easing repayment obligations. This is creating a positive downward trickle in the economy.</li>
 	<li><strong>Supporting the fight against COVID-19:</strong> Interestingly, FSPs see one of their roles as helping to provide a channel of accurate information to their clients. They view themselves as responsible businesses that can collaborate with government and spread its messages, and work with other sectors such as civil society and the banker’s association. Some also plan to repurpose their institution and its front line staff (roles such as Loan Officers) to organize health seminars; use data to create services such as a “symptom checking heat-map;” and offer other tools to assist in combating COVID-19.</li>
</ul>
<h2>What We Learned</h2>
In times of crisis, it is especially important for FSPs to remember their societal value and role, and not to lose focus on the clients and communities they serve. As they anchor themselves in their values, they can also take the opportunity to roll with the punches and use the forcing mechanism of a crisis to interrogate how they work. The current context offers new ways to make their business models work harder for their own organizations and their clients. The institutions now also have free rein to explore off-center value-add services under the shelter of a crisis situation and an experiment. When else could an FSP explore offering medical location and access advice to clients? However, the increase in ecommerce payments at pharmacies could also open up a new revenue stream for the card business, for example.

Similarly, it is becoming clearer by the day that certain products and services are critical to longer-term financial security, especially among the most vulnerable. These include insurance, savings, and digital financial delivery models. The first two safeguard clients from disaster, and the second offers both the FSP and the client access to better financial services, more efficiently and at a lower cost. And in the case of a pandemic, the social distancing that digital transactions offer could save lives. Equally, non-financial services that FSPs can offer, from business advice to financial education, could be critical to securing long-term loyalty and helping customers stay afloat. FSPs are also trusted sources of information in their communities and can play a role in disseminating wider government messages.

Internally, FSPs need to focus on staff welfare and support. Internal communication is critical in updating staff and helping them focus on what is most important. Repurposing roles that have slowed down in the crisis in order to create value elsewhere is a good place to start. This is also a unique opportunity for internal reflection: We found that risk assessment, client segmentation, diversity of portfolio, stress testing, operational preparedness, contingency plans and business continuity plans are all critical and perhaps under-valued at other times, especially in smaller FSPs. The suddenness of events caught many FSPs unprepared. Leadership, as always, is key at this moment. Staff and clients are looking at the leaders of an organization to set the tone and give clues to what the post-COVID-19 world will look like. On the evidence of our conversations, the world will indeed be different, but FSPs will be even better poised to serve their clients once the crisis is over.

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Continuity in a Crisis

<h2>What does the issue of gender within financial inclusion mean to you personally?</h2>
<strong>AT</strong>: It’s a pretty universal experience for women that data gaps lead to a world that is designed with men as the default. I think it’s important in this field that we highlight the diversity of women’s experiences in different countries and at different socioeconomic levels. A pain point for many women is that we don’t believe our experiences are properly captured or represented. I feel fortunate that in a professional setting I can advocate for closing those gaps.
<blockquote>A pain point for many women is that we don’t believe our experiences are properly captured or represented.</blockquote>
<strong>JF</strong>: I’m constantly reminded of my identity as a woman. These reminders manifest themselves both overtly and subtly, and reveal that women are hugely forgotten or omitted from the equation. At home, caretaking responsibilities are predominantly taken on by women, which represent a tremendous opportunity cost in the form of foregone income or time away from individual pursuits. At work, gender inequality is reflected not only in yawning pay gaps but also in the unbalanced representation of women in senior positions. In the marketplace, the design of products continues to be based on the view that women are a monolith, thereby failing to respond to the unique needs and preferences of women. In every way I can – whether it’s in conversation with my peers or through our research at CFI – I look forward to building more gender-inclusive attitudes and approaches.
<h2>What are some key takeaways from your research?</h2>
<strong>JF</strong>: One main takeaway is that absence of evidence is not evidence of absence. A financial institution’s failure to classify clients by gender does not mean that it does not have any women clients. We ultimately have a choice in the data we collect and how that data get applied. Therefore, we should choose to actively and consistently gather gender-disaggregated data to more accurately diagnose the full extent of gender inequality in financial inclusion and design solutions accordingly.
<blockquote>We should actively and consistently gather gender-disaggregated data to diagnose the full extent of gender inequality in financial inclusion.</blockquote>
<strong>AT</strong>: One of the key takeaways is the importance of norms in dictating what barriers prevent women from accessing formal financial services. The existence of norms was not a surprise. Those of us who’ve worked in a cross-cultural context get that. The idea of designing norms transformative work is something important to highlight. I think many people believe norms are a force to design around, but there are ways to design financial inclusion interventions that can have a transformative outcome on the way people are thinking about gender roles. It’s not about dictating what gender roles should be, but promoting the principles of equal access and opportunity as something everyone is striving for. The actual norms people hold can be really surprising and not what people expect, and the first step is not to dictate what norms should be but to understand what stories people tell themselves. Then we need to think about designing financial inclusion interventions that are accompanied by dialogue that creates greater reflection on gender roles, and hopefully greater inclusion.

<strong>JF</strong>: “Reflection” is an operative word. Our role is to facilitate discussion amongst the stakeholders within a particular population, especially when it comes to norms. We must be intentional in our approach, which is not to wag our finger and be prescriptive, but rather to reflect back in order to influence positive change.
<h2>What has surprised you during your research?</h2>
<strong>AT</strong>: In our research process, we’ve talked a lot about the constraints of unpaid labor on women. There are studies in the US about time use among liberal, feminist leaning couples and how care and unpaid labor are still not evenly split in even when there’s the aspiration to do so. There’s an intention level and a systems level to the issue of unpaid labor. Part of it is whether two partners intend to split labor equally, and there are also larger, structural forces and societal pressures that reinforce inequality. In our industry, we need to be thinking about how financial services can address time constraints women face due to unpaid labor or their role as caretakers, especially when that burden is much larger for poor women in developing countries as <a href="https://www.oxfam.org/en/research/time-care">Oxfam has documented</a>.

<strong>JF</strong>: One thing that surprised me is that – despite the progress made in identifying data gaps and biases that result in suboptimal outcomes for women – there’s still so much ground to cover. Separately, the idea that gender is relational really struck me. When talking about advancing women’s economic empowerment, our focus often turns to what women can do or how women can be better equipped with the skills, tools, and knowledge required to improve their lot. Unfortunately, this thinking assumes that all women have full agency over the decision-making processes that govern their lives. As this is not the case, I have started to think a lot about the role that the men can and must play in reconciling gender disparities.
<h2>What about digitalization? Can you speak to the role of digitalization of financial services and gender?</h2>
<strong>JF</strong>: Digitalization is rapidly reconfiguring the menu of financial services and products that are being offered and the ways in which they are being delivered. This flurry of activity creates a lot of momentum and excitement that can be channeled to bring women into the fold. But it’s important to recognize that digitalization can also present a significant risk of further excluding already marginalized groups, including women. Digitalization effectively serves as a multiplier: while it has the potential to yield enormous gains for women, it can also further entrench norms that may not favor women.

<strong>AT</strong>: We often start with an assumed positive outcome of digitalization and DFS. These tools aren’t positive or negative. We get a little over-excited about the potential of technology in our industry sometimes, without thinking about the risks that automation pose, for instance in automated credit decision. Further entrenching exclusion of unbanked and underbanked groups is a real danger because using bad data in a data driven economy can create bad outcomes. When we don’t have a good historical picture or data trail of unbanked, low-income women in developing countries, algorithm-based decisions may not result in the best outcomes for those people. We have the assumption that if we add technology, things should just be better, but it’s not purely a technology issue. Inclusion is a socio-technical issue.
<blockquote>We sometimes get a little over-excited about the potential of technology without thinking about the risks.</blockquote>
<strong>JT</strong>: And our role at CFI is to observe where digitalization can go wrong and steer efforts so that it can be applied to go right.

<strong>AT</strong>: And that’s where the consumer protection role comes in: we need to give people access to digital financial services with appropriate guardrails and the capability to use it best for themselves.
<h2>Can you briefly discuss digital interventions that get it right?</h2>
<strong>AT</strong>: Digitizing cash transfers actually address some of the privacy concerns women have about their finances. It doesn’t get a dialogue of norms going, but there are papers that have looked at <a href="https://law.yale.edu/sites/default/files/area/workshop/leo/leo19_pande.pdf">cash transfers to rural women in India</a> and how notifications of the transfer on a mobile device allowed women to know when the money was deposited, giving them the opportunity to spend it on something they thought was important before negotiating with their husbands. The notification shifted the power dynamic a little bit. Accompanying that with dialogue and community-based work could actually then have a greater impact. This is an example of how a digital delivery mechanism can address a privacy need for women giving them a little more financial agency.
<blockquote>Accompanying cash transfers with dialogue and community-based work could have great impact.</blockquote>
<strong>JF</strong>: As a think tank, having a finger on the pulse of customers is extremely important to understand how well their needs are being met by financial institutions and other actors. While one-on-one interviews help bring great depth and granularity to our research, we also want to be certain that the data we collect are representative and accurately reflect the scope of any given problem. This is where technology can play a central role. Mobile-based technologies such as interactive voice response can be deployed at relatively low cost to collect feedback directly from customers at scale. In addition, the wealth of data generated by digital platforms can also be used to draw insights on the financial lives of women and other client segments.
<h2>How do you see CFI’s gender research progressing? Where’s the “white space”?</h2>
<strong>JF</strong>: I am excited about the direction in which CFI is heading. By making women’s economic empowerment a strategic priority, we can employ a systematic methodology to define and test our theory of change for how women’s financial inclusion can lead to better outcomes for women. Furthermore, connecting gender into the broader development agenda to advance social economic development is something I’m really passionate about. My work at CFI has focused on financial capability, and I’ve found that strengthening one’s financial capability has positive ripple effects in other domains of our lives and vice versa. In much the same way, I believe that an intentional focus on improving women’s financial lives will yield positive externalities that will empower women.

<strong>AT</strong>: We think there’s a need for better consumer protection, better financial capability interventions and an overall policy assessment to evaluate what areas of focus result in greater women’s financial inclusion. We think that focusing on these three pillars will help the digital economy actually work for women. Simultaneously, we need to be aware of the absence of sex-disaggregated data and the norms-based work that needs to accompany any interventions aimed at closing the gender gap in financial inclusion. Those are the areas where CFI’s work is relevant and could be strengthened with a gender lens.

<strong>JF</strong>: I’m also looking forward to speaking with women directly to inform best practices and policies. It will also be important to evaluate the effectiveness of said practices and policies by monitoring how well – or not well – they are being operationalized on the ground.

[Q and A] Addressing Gender Inequality in the Formal Financial System: Data Gaps, Digitalization and Future Interventions

Appropriate Product Design and Delivery

Consumer Protection

Eric Noggle

Senior Research Director 

Mayada El-Zoghbi

Managing Director

Camilla Nestor

Mark Pickens

Joanna Ledgerwood

David Ferrand

Julia Arnold

Maha Khan

Carrie Ruh

Richard  Greenberg

Laura Schroeder

Alreena  Pinto

Amit  Arora

Andy  Woolnough

Ade  Ashaye

Alex Taylor

Jacqueline Foelster

Bobbi Gray

Tess Johnson

Virginia Moore

Ezra Mannix

Leora Klapper

Danielle Piskadlo

Benin

Cambodia

Ghana

Rwanda

Bangladesh

Philippines

Responsible Digital Finance

Saving

Rural Populations

Access Usage Gap

Podcast

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.

CFI has begun the new year with many developments and shifts in our agenda. We have been working hard behind the scenes to position our strategy where inclusive finance can have an important role on issues that are most pressing for the lives of the poor. As we have been undertaking this strategy refresh – looking both internally and externally to identify what is critical for the inclusive finance field – we have identified several important areas of focus. At this juncture, we would like to share how our thinking is evolving with regard to our role and future focus priorities.
<h2><strong>First, we want to use this opportunity to relay our continued commitment to improved consumer protections for people at the base of the pyramid.</strong></h2>
CFI has been supporting the Smart Campaign for more than 10 years. This initiative has had many achievements, most notably, its role in defining a set of standards, the Client Protection Principles, which guide how providers adapt their internal practices and how regulators should think about consumer protection regulation and the tools they use to monitor market conduct. We expect to continue to evolve CFI’s work on consumer protection by expanding our research and analysis of how the digital economy is presenting new risks for consumers. We also plan on expanding our work with regulators on both regulation and market conduct.
<blockquote>Consumer protection in the digital economy will be a focus area for CFI research and analysis.</blockquote>
We anticipate Smart Campaign’s role will be that of an industry initiative: it will continue to be supported by the many actors that are part of that community. CFI’s role in the Campaign will be discussed in an upcoming steering committee meeting and will align with CFI’s broader strategic shifts.
<h2><strong>Second, we want to double-down on our advocacy role in protecting and empowering customers.</strong></h2>
We believe there are few organizations in the inclusive finance field that truly prioritize the customer voice and perspectives. Our role is doing just that. Over the years we have used many tools to listen to customers and have used these listening exercises to inform our policy recommendations and our consumer protection standards, and we want to continue to do this. In 2019, we published the Client Voice Rwanda which used surveys and focus groups to better understand Rwandans experiences with mobile money, and our ongoing work in Cambodia is testing IVR technology as a means of collecting client feedback. And we have tested many ways to share information with customers to improve their ability to make informed decisions. In the past year, we ran consumer awareness campaigns in Ghana, Benin, and Uganda using different engagement techniques, such as social media videos, radio dramas and interviews, and journalist competitions, to inform consumers about their rights and responsibilities when accessing financial services.
<h2><strong>Third, we want to elevate the work that will be most impactful on the poor: financial services that help the poor deal with and adapt to climate change, gender inequality, and data opportunities and risks.</strong></h2>
This shift does not mean we stop working with providers or on important market infrastructure issues. It means that given resource limitations, each institution that is focusing on inclusive finance needs to ensure that its focus areas have a direct line of sight on how this work will lead to improved outcomes for the poor. For CFI, we have identified three key areas of focus that we will add to our agenda to help us have a more impactful influence toward improved customer outcomes. These areas are doing additional research on how financial services can both reduce risks and help customers adapt to the reality of climate change, doing additional research and experimentation on how to address the remaining policy and norms barriers that impede progress on women’s participation in the formal financial system, and better understanding the risks and opportunities that the new digital economy and the use of data pose for customers and identifying innovative solutions for managing those risks through regulation, data practices by providers, and industry wide solutions.
<h2><strong>Finally, we want to refine our influence model to improve our impact.</strong></h2>
As an independent global think tank housed at Accion, we know we must continue to partner to have leverage. We want to continue to build partnerships with like-minded organizations to test new ideas, conduct research, share and advocate. As in the past, we strongly believe that collaboration is the key to improving our impact, and we will continue to work together to scale our learnings.
<blockquote>I am excited to see the opportunities that lay ahead for CFI and inclusive finance.</blockquote>
After a few months on the job, I am excited to see the opportunities that lay ahead for CFI and for the inclusive finance field and hope that you will be a part of this journey.

New Decade, New Focus Areas: CFI's Role in an Evolving Space

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

Advancing Women’s Financial Inclusion: What Does the Global Microscope Tell Us?

I’m a Freakonomics junkie. Stephen Dubner, the host, presents one of the more entertaining ways to consume the latest research.

In 2015, Freakonomics produced a podcast with the title “This Idea Must Die,” based on a book of the same name, where he interviewed scientists and researchers to explore ideas they believed were ready for retirement because they were getting in the way of progress.

If Stephen were to call and ask me this question about financial inclusion, here’s what I’d say:
<h2>Outdated Idea #1: Financial Inclusion Has a Single Purpose</h2>
Financial inclusion is a means to an end and serves as a platform for other development outcomes. For example, at Grameen, we've advocated that public health and financial services work together to help people improve their lives. The financial services sector must design better<a href="https://grameenfoundation.org/resource/developing-next-generation-health-financing-instruments-households-drawing-lessons-learned"> health financing</a> products for low-income households and the health sector needs to make sure quality health services are available. Without both, services are fragmented, ineffective and often result in failure.

The very same can be said of agriculture. Agricultural financing is a well-recognized gap in the agricultural sector. Farmers can’t invest in good agricultural practices or farm renovations without financial products that are designed to help them respond to those needs. The ultimate goal here isn’t financial inclusion, but access to financial services is a critical driver for these other outcomes.
<h2>Outdated Idea #2: Women’s Financial Inclusion Only Involves Women</h2>
I’d like to retire this idea, too. Increasingly, we’re building on evidence and experiences that demonstrate how social norms influence women’s access to and use of resources, whether they be financial, health, agricultural services. With FinEquity’s and SEEP’s working groups on women’s financial inclusion and economic empowerment continuing to coordinate learning and responses to ensure women are not left behind, I’m hopeful that we’re at a tipping point of this being a commonly held belief. In addition to these two groups, Grameen is part of a consortium of actors called <a href="http://www.wageglobal.org/">Women and Girls Empowered</a> (WAGE) that tries to address the legal, financial, business and social barriers that women entrepreneurs face globally. In countries like El Salvador, where conflict and gender-based violence (GBV) severely impede women’s progress, we’ve learned that despite financial institutions having no mandate to address GBV, women wished they were more sensitive to these dangers.

The sooner we can think about how to provide financial services to women that effectively involve men, the sooner I believe we’ll see real change. Many women make few financial decisions on their own, but rather in collaboration with, or worse, under duress of another person. Ultimately, while we measure the financial inclusion of individuals, we may inadvertently underestimate the importance of households.
<h2>Outdated Idea #3: Financial Inclusion Is Always Positive</h2>
Finally, I’d like to suggest the idea that financial inclusion is always good should die as well. This has resulted in researchers like me monitoring and evaluating for positive impact and rarely for negative impact. We are at risk of confirmation bias and losing opportunities to learn why some products work better for some and not so well for others. We should assume no product works well for everyone and design our monitoring and evaluation processes accordingly.

We must recognize that the world of financial inclusion is nuanced. The idea that microcredit is good for people should die. So should the idea that microcredit is bad. The real answer? “It depends.” Microcredit works well for people who can benefit from the investment in a business. It can also help people respond to emergencies and avoid greater catastrophes. But for some, it results in over-indebtedness, financial stress, child labor, and GBV.
<blockquote>The idea that microcredit is good for people should die.</blockquote>
The same can be said about other financial products. Commitment savings are great, but if the commitments are too hard, having savings locked up can be bad. Good insurance products protect people from catastrophes and bad ones waste people’s meager resources on a product that never brings them any benefit. It all depends. Our mandate should be to continually improve, improve, improve, just like the world’s best product companies do.

What long-held beliefs or ideas do you believe are impeding financial inclusion progress and too must die? I invite your ideas. Comment below!

These Ideas Must Die: Notions Impeding Financial Inclusion Progress

For Financial Inclusion Week 2019, CFI sought out a small group of financial inclusion thought leaders to comment and take a position on this year’s theme, “Financial Inclusion: For What?” CFI Director of Communications Virginia Moore sat down with Bobbi Gray (Grameen Foundation), Till Bruett (DAI), and Shivani Siroya (Tala) to discuss the theme and evaluate our four proposed answers to it: financial health, sustainable development, equity, and the bottom line. They examine ways in which these answers complement or conflict with one another, and assess how the industry should measure its success, among other topics.

Financial Inclusion: For What? Podcast

Earlier this month, we announced that <a href="https://content.centerforfinancialinclusion.org/people/mayada-el-zoghbi/">Mayada El-Zoghbi</a> is joining us as the new Managing Director of the Center for Financial Inclusion at Accion (CFI). Mayada is known for her extensive research in – and advocacy for – financial inclusion. As CGAP’s Lead for Strategy, Research &amp; Development, she coordinated CGAP’s strategy development and its research on women’s financial inclusion, financial services in crisis environments, and other emerging topics.

Prior to CGAP, Mayada founded and managed a development consulting firm, led numerous technical assistance, evaluation, and research assignments, served as a research director for a USAID initiative, helped develop several financial institutions, and lectured at Columbia's School of International and Public Affairs (SIPA).
<h4>CFI: What sparked your passion for financial inclusion, and what continues to propel it as you assume your new role at CFI?</h4>
<strong>Mayada</strong>: After graduating from college, I went to Morocco on a research fellowship with a program called Minnesota Studies in International Development (MSID). I lived both with a family in Rabat and spent a month in a rural community doing survey work on a rural credit research project with a professor from the Agronomy Institute in Rabat. This experience piqued my interest in financial services.

The project in Morocco was clearly not good practice and I was interested to learn more about what works. I decided to go back to graduate school to learn more about it, so I studied at SIPA. It was during a course on microenterprise development, taught by Heather Clark, who was heading UNCDF at the time and who is now a dear friend, that I knew for sure that this was a field that combined all of my interests in business, financial services, and sustainable development. Most importantly, it aligned with my social values.

The inclusive finance field has expanded so much beyond my initial exposure to an agricultural loan program in rural Morocco. The many ways in which this sector continues to evolve and expand is what continues to draw me in. I’m especially excited by our ability to shape responsible growth of the industry, and the role that organizations like CFI have in guiding both public and private sector actors in inclusive finance.
<blockquote>I’m especially excited by our ability to shape responsible growth of the industry.</blockquote>
<h4><strong>CFI</strong>: Why did you choose to join CFI? What about CFI resonated with you?</h4>
<strong>Mayada</strong>: I’ve worked on inclusive finance from many angles: managing institutions in the field, supporting donors on their strategies, conducting research, providing technical assistance to providers and other stakeholders. All of these experiences have been rewarding, but perhaps the role that I’ve enjoyed the most is thought leadership. I’ve been fortunate to do that at CGAP for the past 10 years.

With its convening power, independence, and ability to influence the private sector, investors and the broader inclusive finance community, CFI is unique. Its position as an independent think tank with deep expertise in consumer protection and a strong advocacy platform representing people living in poverty makes it an extremely compelling platform for me personally. At a time when digital platforms represent transformative opportunities to serve the poor and present serious risks for those who are the least able to withstand those risks, there’s no denying that a laser focus on consumer protection has to be front and center. Ensuring that the digital economy evolves in a way that’s both inclusive and protective is critical, and I believe that CFI is well positioned to lead the industry in such a way as to make that a reality.

Q and A with Mayada El-Zoghbi, CFI’s New Managing Director

<em>This post originally appeared on our sister website, <a href="https://www.accion.org/want-to-fix-the-financial-inclusion-gender-gap-ask-better-questions">Accion</a>.</em>

As I worked on the latest update to the World Bank’s <a href="https://globalfindex.worldbank.org/">Global Findex database</a>, I was pleased to see some significant progress in account ownership and digital finance. However, I was disheartened — if not surprised ­— to find that we’re still stuck in 2011 when it comes to the stubborn gender gap in financial services.

Closing the gender gap remains the grand prize for financial inclusion advocates — a truly inclusive financial system should break down barriers and bring opportunities to all people. But women in developing countries are still 9 percentage points less likely than men to have an account. That gap has not improved since the Findex began in 2011, and it’s just an average — scores are even worse in some countries. For instance, in Pakistan, men are five times as likely as women to have an account.

Why are women left out to a greater degree than men? One reason is there’s also a persistent digital divide when it comes to access to technology. According to the Gallup World Poll survey, Men are 10 percentage points more likely than women to report owning a phone. In Egypt, Ethiopia, and India, men are 20 percentage points more likely than women to have their own phone.

We need to better identify the underlying causes of digital exclusion, such as social norms. For example, it may not be acceptable for women to give their phone numbers to male bank agents — meaning women are missing out on the opportunities of mobile money accounts.

But it’s not just technology — we need more data on how women experience financial inclusion broadly, and how social norms may keep women excluded from the financial system. We’d be in a better position to close the gender gap if we had more data. I’d like to see more research exploring how and if the gender of agents influences financial inclusion. Would more female mobile and merchant agents mean more financial access and activity? It would be good to know one way or the other.
<blockquote>Would more female mobile and merchant agents mean more financial access and activity?</blockquote>
I’m also interested in whether we can establish a link between electronic wage payments and higher productivity. This relationship could affect the financial inclusion gender gap: the World Bank is starting new work with tea pluckers in Sri Lanka. In the past, many of these women’s husbands might have claimed their salaries. I’d like to know if a woman receives payments into her own account, and if she gets the full pay-off for her labor, will she work harder? Will she be more productive? Will job retention at her employer increase? These questions represent an exciting new road of research to motivate the private sector to expand financial inclusion and digital payments, particularly for women.

We need more information. We know that inclusive financial services can help women gain more autonomy; moreover, by supporting women, we might also catalyze social and economic progress. But we need to know more about how and why women use or are prevented from accessing financial services to shape our efforts going forward. I hope we begin asking these questions and pursuing real answers soon.

Want to Fix the Financial Inclusion Gender Gap? Ask Better Questions

It was the <a href="https://en.wikipedia.org/wiki/Dixie_Chicks">Dixie Chicks</a> who led me to a career in financial inclusion.

Back in 2006, I moved home because I wanted to “do more” with my life and figure out what that meant. That involved a lot of “I am woman, hear me roar” inspirational music.

This brings me to the Dixie Chicks: one of their album covers mentioned the work of <a href="https://promujer.org/">Pro Mujer</a>. I had never heard of microfinance but it was getting a lot of attention because 2005 was the <a href="https://en.wikipedia.org/wiki/International_Year_of_Microcredit">International Year of Microcredit</a>. Microfinance checked two important boxes for me: the focus on women and, specifically, a sustainable approach to providing women with a “hand up, not a hand out.”
<h2>Confronting Harsh Realities of Structural, Systemic and Societal Barriers</h2>
On this <a href="https://www.internationalwomensday.com/">International Women’s Day</a>, 13 years later, I remain convinced that access to quality financial products and services helps women around the world. I'm sure that greater financial independence helps empower women, and gives them greater choice, confidence and independence.

However, I also know there are many harsh realities and inequalities women face, and that access to financial products and services isn’t always enough to improve the lives of women. We need to be able to recognize that a loan or savings account alone does not allow all woman to be able to start or grow a business.

This hands-off, “bootstraps” approach, making women responsible for working their own way out of poverty, comes up short. It doesn’t actively address so many of the structural, systemic and societal barriers, biases and inequalities that women continue to face, especially in the poorest countries, and that prevent women from being able to start or grow a business.
<blockquote>The “bootstraps” approach, making women responsible for working their own way out of poverty, comes up short.</blockquote>
Many women around the world continue to show incredible strength and resilience while facing the horrific realities of lacking rights, being marginalized or abused, and living in extreme poverty. In some places, women can’t own property, they’re not equally educated, and too often they’re forced into marriages and motherhood too soon. At less extreme levels, many girls are still very young when they start to internalize the societal inequalities they see in childcare and housework. The resulting “less than” perception causes some to lose their confidence and voice.

These gaps and barriers must be taken into account and intentionally combatted when providing financial products and services, as the account access and usage data continues to show us that women lag men. Findex data show that <a href="http://www.worldbank.org/en/news/press-release/2018/04/19/financial-inclusion-on-the-rise-but-gaps-remain-global-findex-database-shows">men remain more likely than women to have an account</a>. The gap between men and women in developing economies has remain unchanged since 2011, at 9 percentage points, even though there’s clear evidence that women continue to prove themselves <a href="https://partners.wsj.com/metlife/multipliers/articles/using-data-bridge-gender-gap-financial-services/#.W0ybSqvaO8w.mailto">more reliable re-payers and lower credit risks</a>.
<h2>Digital Is No Panacea</h2>
Of particular concern to me is how the movement toward digital financial services could be widening this gender gap. The research is not showing entirely positive trends for women and digital financial service access:
<ul>
 	<li>Women in low- and middle-income countries are still <a href="https://evans.uw.edu/policy-impact/epar/research/digital-financial-services-gender-analysis-correlates-awareness-adoption">33 percent less likely than men to use mobile money</a> and 10 percent less likely to own a mobile phone.</li>
 	<li>Women have consistently <a href="https://evans.uw.edu/policy-impact/epar/research/digital-financial-services-gender-analysis-correlates-awareness-adoption">lower levels of awareness, adoption, and use</a> than men across countries, according to a 2017 report. “Even controlling for other sociodemographic and economic factors, we find that being female is associated with an overall lower likelihood of awareness of mobile money,” the analysis notes. “Across all countries, women who are aware of mobile money are also less likely to adopt mobile money than are aware men, with the negative effect of gender increasing in each wave. Gender does not have a significant association with the use of mobile money among those that have adopted it, however, which suggests that barriers to first-time use may be the most important for women’s access to mobile money.”</li>
 	<li>A 2017 CFI report, <em>Uniting Tech and Touch,</em> has shown that, in Kenya, more than three quarters of women <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2017/11/Uniting_TechandTouch_Kenya_FINAL1.pdf">prefer to ask a question in person</a>. “Eight out of 10 of female respondents preferred to ask a question in person. More than half of our male respondents preferred to ask questions via the phone or had no preference and were comfortable either way. Interestingly, a majority of our female respondents preferred to conduct regular transactions with the support of a person as well. For rural women, this mostly corresponded with low literacy.”</li>
</ul>
<h2>Call to Action for Financial Inclusion Professionals</h2>
Given that the theme of this year’s International Womens Day is Balance for Better (<a href="https://twitter.com/hashtag/BalanceforBetter?src=tren&amp;data_id=tweet%3A1104011406201012226">#BalanceForBetter</a>), overcoming these barriers could be more effective if we take a look at ourselves as an industry. Making lasting changes requires financial service providers (FSPs) and fintechs to look internally to ensure a balance of women’s voices at all levels – from boards and leadership to product designers. We can’t allow male-dominated boards to make strategic decisions about women clients, and then have male-dominated tech teams design digital financial products for women based on a survey or focus group.
<blockquote>We can’t allow male-dominated boards to make strategic decisions about women clients.</blockquote>
There’s research showing women make <a href="https://www.businessinsider.com/study-women-are-better-leaders-2014-1">better leaders</a> than men, including evidence that <a href="https://www.bostonglobe.com/business/2012/03/06/women-corporate-roles-still-lag-european-union/ds0uBZVYFPfZV7NCB7Qt4M/story.html">boards with more women perform better financially</a>, show better risk management, are more professional, and better understand the needs of the female clients they are serving. Yet none of this evidence is translating into women-started or women-led businesses getting more funding, or more female leadership or board participation at FSPs.

Here are good places for financial service providers to start:
<ol>
 	<li>Make a strategic decision to focus on serving women, even if they require smaller loans or have smaller savings balances. Only <a href="https://www.sciencedirect.com/science/article/pii/S2352673418301574">one fifth of FSPs currently focus on women</a>.</li>
 	<li>Provide business and financial literacy trainings and support bundled with finances.</li>
 	<li>Think strategically about the potential add-on services and partnerships with NGOs that might be possible to provide - healthcare, education, etc.</li>
 	<li>Reconsider what’s a productive business loan: if household appliances and scooters allow women more time and independence for their business, then they should also be financed.</li>
 	<li>Provide adequate channels for women to ask questions to a human.</li>
 	<li>Focus extra effort on helping women overcome the initial adoption hurdle when it comes to digital financial products.</li>
 	<li>Invest in more women-led or women-run FSPs and fintechs.</li>
 	<li>Pay equal wages for the same job.</li>
 	<li>Ensure gender equity on boards.</li>
 	<li>Set gender-specific goals and targets and tracking progress toward them over time.</li>
 	<li>Provide digital public assistance or government payments to women specifically.</li>
 	<li>End industry “manels” at conferences.</li>
</ol>
The industry has evolved a lot since 2006, but we still have yet to implement these practices. I had many advantages and lots of support to help me advance in my career, but women at the base of the pyramid do not. They need advocates. Let’s take a closer look internally at what each one of us can personally do to make a change to combat the unequal playing field women face globally. It will take a concerted and collective effort to tackle the major challenges of achieving full gender equality in financial inclusion.

Women and Financial Inclusion: What More Can We Do to Address the Systemic Barriers Women Face?

<em>This post originally appeared on the <a href="https://www.accion.org/">Accion</a> website.</em>

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.<em>
</em>

<strong>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?</strong>

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.

<strong>Q: In your time at the World Bank, how have you seen financial inclusion’s role in eliminating poverty evolve?</strong>

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]

<strong>Q: What part of the most recent Findex results do you think has resonated most strongly with the industry and why?</strong>

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.

<strong>Q: If we could do one thing to promote usage of financial accounts, what would it be?</strong>

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.

<strong>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?</strong>

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.

<strong>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?</strong>

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.

<strong>Q: As mobile phone usage continues to grow, how do we ensure technology can live up to its promise for driving financial inclusion?</strong>

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.

<strong>Q: How will we know when financial inclusion has succeeded?</strong>

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