As we have <a href="https://centerforfinancialinclusion.org/revisiting-building-financial-capability-with-a-gender-lens/" target="_blank" rel="noopener noreferrer">discussed previously</a>, building women’s financial capability means incorporating their households and communities into the process. Men and women are both bound by and to their relationships with household members, community expectations, and broader societal norms and laws. Women’s care responsibilities, limited access to markets and education, and often limited access to and use of mobile technology make these relationships particularly relevant. Mass market financial education is not useful – <a href="https://openknowledge.worldbank.org/handle/10986/26068" target="_blank" rel="noopener noreferrer">nor does it have behavioral impacts</a> – for building men’s and women’s financial health.

Our soon-to-be-published research into approaches to building women’s financial capability will yield excellent insights into how programs and organizations are grappling with how to reach women, understand their needs, and provide actionable, relevant information. Women MSME entrepreneurs in Brazil, female agents in the Philippines, and garment factory workers in Bangladesh all have different needs and entry points for capability building.

Women are not homogenous. We must always keep this in mind. But we have documented some similar needs that inform ideal learning habits and delivery channels. We elaborate on those here.
<h2>Build Digital Skills</h2>
Because digital technology is now a permanent fixture in the financial inclusion landscape, digital capability is a prerequisite for financial capability and no longer an optional add-on. With digital technology – specifically mobile phones – as a primary entry point to the financial ecosystem, all customers must develop the skills and confidence to use a phone to access financial services, and this presents an additional hurdle for women. Women are often not a high priority for digital financial services, whose designs and delivery channels may not account for their specific needs. Indeed, digital services – and digital technology itself – are largely <a href="https://www.centerforfinancialinclusion.org/the-case-for-a-gender-intelligent-approach-an-opportunity-for-inclusive-fintechs" target="_blank" rel="noopener noreferrer">gender blind</a>, which exacerbates, not ameliorates, inequalities in access and usage. Beyond expanding access to and use of DFS, improving women’s digital capability can also serve as a force multiplier for advancing women’s economic empowerment. For example, a woman with a high level of digital capability can navigate ecommerce platforms, access health information, and learn new skills.
<blockquote class="pullquote--right">Improving women’s digital capability can serve as a force multiplier for advancing women’s economic empowerment.</blockquote>
Building low-income <a href="https://www.pciglobal.org/wp-content/uploads/2020/09/PCI_Digitizing_Savings_Groups_Report_Tz_Sept_2020.pdf" target="_blank" rel="noopener noreferrer">women’s digital comfort and skills</a> to use any financial tool is critical to the success of the tool. As part of Grameen Foundation’s <a href="https://grameenfoundation.org/stories/blog/lessons-learned-in-designing-online-education-to-empower-women" target="_blank" rel="noopener noreferrer">agent training program in the Philippines</a>, agents received digital skill building in person to access the digitally designed agent-training curriculum, such as training videos through QR codes and an e-learning platform. Similarly, Women’s World Banking, in partnership with DBBL, a bank in Bangladesh, sought to <a href="https://www.womensworldbanking.org/insights-and-impact/building-digital-capacity-for-women-in-bangladesh/" target="_blank" rel="noopener noreferrer">increase female factory workers' digital capability</a>. Though they received their income via mobile money, female factory workers cashed out after each payment. DBBL account owners received in-person training that focused on a key skill: P2P transfers (such as remittances). The training included teaching women that they did not have to cash out and then send money via an agent – they could just send money directly from their mobile wallet. Women’s World Banking also found that timely text messages – received right after salary payments were made, for example – ensured women practiced and built on this training.
<h2>Identify Trusted Peers</h2>
Often, female clients <a href="https://nextbillion.net/mobile-digital-financial-service-women-india/" target="_blank" rel="noopener noreferrer">don’t see themselves as DFS customers</a>. They assume their <a href="https://www.agrilinks.org/post/assessing-gender-gap-access-digital-financial-services-burkina-faso" target="_blank" rel="noopener noreferrer">transactions are too small and the costs are too high</a>. This stems from lower levels of trust and hesitation to ask questions. Women learn well, however, from role models and gain confidence when they hear stories of other women.
<blockquote class="pullquote--left">Women learn well from role models and gain confidence when they hear stories of other women.</blockquote>
Some providers are seeking to use trusted peers and agents to build confidence and trust. Banco Itaú’s <a href="https://imulherempreendedora.com.br/" target="_blank" rel="noopener noreferrer">Mulher Empreendedora program</a> was built in response to insights indicating women MSME entrepreneurs often have low self-esteem and confidence, besides lacking financial knowledge. The program addressed this by creating a mentorship program that introduced female role models to the entrepreneurs and provided an online platform where bank clients and non-clients could connect with other women entrepreneurs.

Similar to agent networks, peer-to-peer channels can address customer financial capability, particularly for customer segments with low trust, low literacy, and low confidence in using financial products or technology. In-person training works well when the recipient <a href="https://www.sciencedirect.com/science/article/abs/pii/S030438781831277X" target="_blank" rel="noopener noreferrer">chooses their trainer</a> and when the trainer is well-equipped to provide information, as with the case of Grameen Foundation’s <a href="https://www.prnewswire.com/news-releases/in-midst-of-rural-poverty-nearly-1-3-million-gain-access-to-financial-services-through-grameen-foundation-womens-networks-300845966.html" target="_blank" rel="noopener noreferrer">Mitras in India</a>. Providers found that peer educators were considered less intimidating by women needing additional support since they could speak in the local language and were most likely familiar with the constraints or challenges that women clients faced. In addition, peer educators were viewed as more trustworthy than bank or organizational staff.

<a href="https://www.mobilizingmyanmar.org/about-us" target="_blank" rel="noopener noreferrer">Mobilizing Myanmar</a> offers digital literacy training to female-led MSMEs by leveraging women’s community networks to improve their digital financial capability. Critical to the program is establishing trust with female trainees who are innumerate, digitally illiterate, and have low levels of self-confidence. Female entrepreneurs are trained to securely register for digital wallets, manage G2P payments, receive digital payments via QR codes for their businesses, and use smartphones to make and sell products.
<h2>Segment and Be Flexible</h2>
Unfortunately, most providers identified in our research sought to reach bank or MFI clients without segmenting by type or need. Client segmentation is important, particularly for measuring the impact and success of a program. And while back-end data analysis of the number of deposits or withdrawals can illuminate financial activity, in-person research can allow for a fuller picture.

A few organizations, such as Grameen Foundation and the <a href="https://bomaproject.org/" target="_blank" rel="noopener noreferrer">BOMA Project</a>, conducted qualitative research on impact, which led to modifications in approach and type of information delivered to clients. The BOMA Project found that clients needed the help of a trusted peer to engage with IVR calls, particularly because some women found the phone touchpad confusing. Before starting training, Mobilizing Myanmar’s female community leaders conducted informal assessments of digital skills, allowing them to tailor their training as appropriate.

Flexibility also emerged as a key theme across the landscape in the form of iterative, test-and-learn approaches adopted by providers to adapt to women’s contexts and as a way of accommodating women’s time constraints by offering continuous learning opportunities through touchpoints like recorded or online video content, IVR, SMS, chatbot, mobile application, and social media forum groups.

What more can be done? Join us on our learning journey to find out: stay tuned for CFI’s detailed landscaping publication that expands on this post. Also, listen in on a discussion that my colleagues from Women’s World Banking and I will have on <a href="https://us02web.zoom.us/webinar/register/8116161826973/WN_qdddFkcRTiqpQrl_VnsPwA" target="_blank" rel="noopener noreferrer">April 28 at 8 am EDT.</a>

What Does It Take for a Woman to Become Financially Capable?

Women's Financial Capability

Banks

Financial Service Providers

Behavioral Insights

Financial Capability

Digital Financial Services

Delivery Channels

Partnerships

Underserved Groups

Women

Blog Post

International Women’s Day is set aside to celebrate women’s achievements over the past year. And there were many milestones to celebrate in 2020, particularly in the realm of politics. Over the past year, we have seen the first woman vice president of the United States, the first African woman to head the WTO, and mounting evidence that countries with <a href="https://www.tandfonline.com/doi/full/10.1080/13545701.2021.1874614" target="_blank" rel="noopener noreferrer">fewer gender gaps at the highest levels of leadership</a> were better governed through the COVID-19 crisis. But the greatest achievements belong to the billions of women who, as paid and unpaid essential workers within and outside their homes, labored and struggled to help their families and communities survive unprecedented crises of health, economy, and climate.

The gendered tumult and difficulties of the past year call for deeper reflection on women’s experiences and vulnerabilities. Even as there is more understanding and acknowledgment of the gendered impacts of the costs of economic and health crises, and even as many governments responded with more relief than in past recessions, it is becoming clear that the global gains towards greater gender equality made over the past few decades <a href="https://www.unwomen.org/-/media/headquarters/attachments/sections/library/publications/2020/gender-equality-in-the-wake-of-covid-19-en.pdf?la=en&amp;vs=5142" target="_blank" rel="noopener noreferrer">are being reversed by the pandemic</a>. The U.S. provides a particularly striking example. Despite being one of the richest countries in the world, with one of the world’s largest fiscal responses to the pandemic, job losses still fell disproportionately upon women. Women in the U.S. have dropped out of the labor force in larger numbers than men, with mothers being particularly hard hit. Globally, nearly <a href="https://www.unwomen.org/en/news/stories/2020/9/feature-covid-19-economic-impacts-on-women?gclid=Cj0KCQiA4feBBhC9ARIsABp_nbVTLERqYiHUAsYkM02mjmAKRm_0KP3iCvIhXBMHkj8ad3b-7kRi5IMaAgScEALw_wcB" target="_blank" rel="noopener noreferrer">30 million more women are living in poverty</a> than at the start of the pandemic, with <a href="https://www.unwomen.org/-/media/headquarters/attachments/sections/library/publications/2020/gender-equality-in-the-wake-of-covid-19-en.pdf?la=en&amp;vs=5142" target="_blank" rel="noopener noreferrer">women suffering the greatest livelihood losses</a>. The pandemic pulled back the curtain on the significance of the “developed” and “developing” country difference when it comes to gender inequality and revealed that women the world over face similar vulnerabilities.

The fact that economic gains for women fell apart as quickly and sharply as they did reminds us just how fragile our progress towards gender equality was. And the consequences of this reversal will be long lasting. Girls around the world will have their choices diminished if they are unable to return to school--or to stay enrolled in school for as many years as they may have without the economic burden of the pandemic. <a href="https://www.globalpartnership.org/sites/default/files/2018-07-gpe-high-cost-of-not-educating-girls.pdf" target="_blank" rel="noopener noreferrer">Girls who leave school early</a> are more likely to have an early pregnancy, have lifelong unmet family planning needs, experience intimate partner violence, and live part or all of their adult lives in poverty, the effects of which will likely be passed on to their daughters and granddaughters, too.
<blockquote class="blockquote">The fact that economic gains for women fell apart as quickly and sharply as they did reminds us just how fragile our progress towards gender equality was.</blockquote>
<h2>Pandemic Underscores the Undervaluation of Care Work</h2>
At the heart of this fragility is, as it has always been, the undervaluation of the kinds of care work most societies assign to women. This is the work of childcare, eldercare, cooking, cleaning, and healthcare that is performed for love and, tragically, far too little money.

This fundamental inequality has resulted in overworked and underpaid health care workers struggling to care for COVID-19 patients and overworked and unpaid mothers (and some fathers) laboring to address the tremendous need created by the global shutdown of educational systems. The data on women’s job losses are a reminder of the fundamentally unequal, often invisible, gender division of labor upon which the 21st-century global economy is based.
<blockquote class="pullquote--left">The data on women’s job losses are a reminder of the fundamentally unequal, often invisible, gender division of labor.</blockquote>
The concentration of women in paid care work also meant that women who did stay employed had to take on the heightened risks of working closely with other people even as a virus transmitted through human contact was spreading fast. While they were termed essential workers, they rarely received additional compensation for taking on this essential work. Further, many of the women workers performing the most essential forms of care work are migrant women. Stranded and unable to return home in the first months of the pandemic, these essential women workers were nevertheless largely <a href="https://www.tandfonline.com/doi/full/10.1080/13545701.2020.1849763" target="_blank" rel="noopener noreferrer">excluded from any social protections</a> offered by their host countries.
<h2>Universal Social Protection’s Mitigating Power</h2>
In at least two different ways, universal social protection can mitigate gender unequal outcomes. First, access to a strong social safety net can speed up the broader recovery from the pandemic and blunt the economic impact of crises, helping men, women, and children across the globe. Universal access to housing, food, and healthcare is critical to global economic recovery, and, it can be argued, is a fundamental human right and fundamental function of a legitimate government. Second, in too many countries, women’s labor still constitutes the primary and most accessible safety net during a crisis. Universal social protection can go a long way toward addressing that inequity.
<blockquote class="pullquote--right">Women’s labor still constitutes the primary and most accessible safety net during a crisis. Universal social protection can go a long way toward addressing that inequity.</blockquote>
This is an especially urgent issue given the growing threat of climate-related crises. As we’ve seen over the past year, unemployment and increased economic vulnerability can be quickly exacerbated by unexpected extreme weather events, which reduce food and safe water availability. In the US, residents across the south have <a href="https://www.usnews.com/news/us/articles/2021-02-18/lights-come-back-on-in-texas-as-water-woes-rise-in-the-south" target="_blank" rel="noopener noreferrer">remained without access to clean water</a> and during an extreme winter storm were forced to boil snow for potable drinking water, among other public health hazards. These crises increase families’ long-standing reliance on women, especially mothers, to provide care and sustenance to survive.

In response to the pandemic, many governments introduced or increase social protection payments directly to individuals. However, while social protection schemes have increased in number and intensity, more is needed. Globally, an additional $11.7 trillion was spent to mitigate the pandemic’s impact. Unfortunately, a vast majority of this (83 percent) was spent by just 36 developed countries, compared with $42 billion spread across 59 developing nations.

Furthermore, <a href="https://oxfamilibrary.openrepository.com/bitstream/handle/10546/621132/bp-social-protection-covid-19-151220-summ-en.pdf" target="_blank" rel="noopener noreferrer">a majority of countries’ schemes reach less than half of their populations</a> and means-tested qualifications leave women completely uncovered due to the informal nature of their work. A global push among multinational bodies, such as the World Bank, for nations to expand and extend all social protection payments would go a long way toward addressing these disparities.
<h2>The Critical Role of Inclusive Financial Services</h2>
The financial services industry is a critical part of this solution, advocating for and helping implement ways to extend financial supports to individuals and informal sector enterprises.

As part of this approach, social protection must go beyond just payments to include tax relief and grants to MSMEs - regardless of formality. Targeting these informal enterprises is difficult but using civil society organizations and microfinance banks can help governments reach the most vulnerable. At the start of the pandemic, many lending institutions, including microfinance banks, foresaw large-scale loan defaults. As such, regulators in many countries granted moratoria on loan payments for a certain period of time. For many borrowers, this temporary relief is mixed given that in many countries interest continued to accrue on their loans. As such, we recommend <a href="https://centerforfinancialinclusion.org/regulatory-flexibility-during-the-pandemic-emerging-lessons/" target="_blank" rel="noopener noreferrer">providers work with their customers to restructure outstanding loans</a> by automatically extending the term of the loan and refrain from compounding interest accrued during moratoria. Mexico, for example, is encouraging lenders to <a href="https://www.cgap.org/blog/moratoria-during-covid-19-how-are-they-working-out" target="_blank" rel="noopener noreferrer">offer permanent interest or principal relief</a>. Debt forgiveness in some form for microloans may catalyze economic recovery -- particularly if it is coupled with continued access to safe and fair lending. For many around the world, access to finance is key to recovery.

The rapidity with which COVID-19 vaccines were developed and approved brings much joy – and awe – and as of February 2021 numbers of new infections globally are starting to go down. But ending the crisis means more than mass vaccination or even elimination of COVID-19. It will require a gender transformative approach to recovery that prioritizes structural protections to ‘reverse the reversals’ in gender inequalities and poverty gaps.
<blockquote class="pullquote--left">Ending the crisis will require a gender transformative approach to recovery that prioritizes structural protections.</blockquote>
We are hopeful that, given the way the world came together to create and share vaccine knowledge, this universal collaboration may be reflected in inclusive finance, too. If central banks, regulators, aid organizations, and financial service providers come together to design social protection relief, we can prevent a gendered humanitarian economic crisis.

Care Work During Crisis: Pandemic Unravels Fragile Gains in Gender Equality

Challenges and Crises

Enabling Environment

Policy, Regulation and Government Initiatives

CFI is undertaking a global landscape of financial capability innovations.

Sound familiar?

That’s because this research follows up on the <a href="https://centerforfinancialinclusion.org/a-change-in-behavior-innovations-in-financial-capability-2/" target="_blank" rel="noopener noreferrer">landscape we published in 2016</a>, which did the same. At that time, the financial capability landscape was fairly nascent – most traditional providers were still conducting financial education in classroom-like settings. The innovators – mostly fintechs – were taking a more behaviorally informed approach, tying financial education to everyday customer inflection points such as delivering key information at the point of a transaction or transfer, building a skillset by teaching the customer as they navigate a product or process, tailoring the approach to unique customer needs, and/or leveraging social platforms to encourage and promote financial goals and choices. We were optimistic that our <a href="https://centerforfinancialinclusion.org/a-change-in-behavior-innovations-in-financial-capability/" target="_blank" rel="noopener noreferrer">seven principles of effective financial capability interventions</a> provided guidance to providers that needed to move their knowledge and skill-building closer to the customer.

Since that publication, we’ve further fleshed out our thinking on the topic. In 2020, CFI published its <a href="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/08/MSME-Framework-08122020.pdf" target="_blank" rel="noopener noreferrer">MSME Financial Health Framework</a> to evaluate and provide guidance on the drivers of the financial health of MSME entrepreneurs. CFI is also developing an app called FinVenture that utilizes best practices from financial capability and behavioral research to improve customers' financial well-being. Now, we’re setting out to capture another global view because the financial landscape has only gotten more complex and crowded since 2016, brought on by two main trends:
<ul>
 	<li>a proliferation of fintechs and digitally-enabled offerings, such as chatbots, mobile apps, and nudges and reminders as features of seemingly every product; and</li>
 	<li>a growing awareness of the digital and financial gender divide.</li>
</ul>
All of this has become more important as a result of the COVID-19 pandemic, which limited physical mobility and in-person meetings, causing providers to pivot to digitally-enabled financial capability solutions.

[caption id="attachment_41486" align="alignright" width="300"]<img class="wp-image-41486 size-medium" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/02/7-financial-capability-1-300x300.png" alt="he seven principles of effective financial capability interventions" width="300" height="300" /> <em><strong>The seven principles of effective financial capability interventions, published in 2016. Are they still applicable? How should we update them?</strong></em>[/caption]

Digital technology has allowed traditional providers to embed nudges and reminders into their delivery models, or provide information and services closer to the customer via agents, trusted intermediaries, or community members. Digital technology has also allowed all types of providers to bring targeted messages and products directly to the customer, but it also requires customers to have the skills to use and navigate digital technology. And while more and more people have access to mobile phones globally, we also know that <a href="https://www.pewresearch.org/global/2019/02/05/smartphone-ownership-is-growing-rapidly-around-the-world-but-not-always-equally/#:~:text=Mobile%20technology%20has%20spread%20rapidly,of%20these%20connections%20are%20smartphones" target="_blank" rel="noopener noreferrer">billions do not</a> and that the <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2020/05/GSMA-The-Mobile-Gender-Gap-Report-2020.pdf" target="_blank" rel="noopener noreferrer">digital divide is even more pronounced for female customers</a>.

While the rapidly changing and complex landscape is reason enough, this time we are taking a gender lens to our approach, asking specifically about building women’s financial capability. Low-income women are more likely to have low levels of financial literacy than men. In developing contexts, there are <a href="https://data.unicef.org/topic/gender/gender-disparities-in-education/" target="_blank" rel="noopener noreferrer">more out-of-school girls than boys</a>, limiting opportunities for learning financial skills taught in school. <a href="https://www.icrw.org/child-marriage-facts-and-figures/" target="_blank" rel="noopener noreferrer">Early marriage</a> has detrimental knock-on effects on girls’ learning opportunities and earning potential. In addition to fewer formal learning opportunities, social and gender norms – informal and invisible rules governing people’s behavior – determine women’s care responsibilities and time use as well as <a href="https://www.icrw.org/publications/overcoming-barriers-to-womens-entrepreneurship/" target="_blank" rel="noopener noreferrer">limit women’s mobility, labor force participation, and the makeup of their networks</a> (women and men tend to move in different social spheres, which may mean more limited political and economic influences). Low-income women in developing countries tend to work in the informal sector; in Africa, 90 percent of employed women are in the informal sector. Informal sector work often leaves workers vulnerable and with limited social protection policies, women are left with particular needs and knowledge gaps when it comes to building financial capability. Women are also less likely than men to have access to a phone, and <a href="https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2020/05/GSMA-The-Mobile-Gender-Gap-Report-2020.pdf" target="_blank" rel="noopener noreferrer">far less likely to use mobile internet</a>, for example, leaving them with fewer alternate learning channels.
<blockquote class="pullquote--left">The digital divide is even more pronounced for female customers.</blockquote>
With this context, we want to know which delivery models are optimal for which targeted female customer segments. And we set out to understand the importance of building digital capability as a complement to financial capability given the expansive use of digital delivery channels.

Building financial capability is a central component to financial inclusion. Indeed, informed and empowered men and women make less risky financial decisions than those with less knowledge. Financial products and systems remain fundamentally complex, particularly for people with low financial literacy. A household budget, saving for business investment, or managing an unforeseen emergency can cause chaos in the most adept household, let alone those experiencing the vulnerability and volatility of poverty. Building the necessary skills to navigate financial tools and normative obstacles can take time and creativity. While recent evidence shows that<a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3603973" target="_blank" rel="noopener noreferrer"> financial education can have meaningful impacts on individuals</a>, evidence focused on disaggregated impacts – not just sex-disaggregated, but any type of segment disaggregation – of financial education remains scarce, frustrating progress on these key questions.
<h2>Taking a Community View</h2>
Building women’s financial capability, therefore, must take a community view – seeing women as part of a larger ecosystem that impacts their opportunities to learn, apply the information, and make economic decisions for themselves and their families. Financial education may be an individual study, but financial capability involves many more players.

Successfully building women’s financial capability must account for the systemic barriers women face. For example, a well-designed chatbot or IVR education series may provide flexibility, increasing women’s likelihood of taking in the information when she has time. A well-trained financial community champion familiar in a neighborhood may be able to navigate resistance to involving women in household decision-making, i<a href="https://nextbillion.net/local-women-rural-financial-inclusion-india-covid19/" target="_blank" rel="noopener noreferrer">ncreasing her choices in her economic sphere</a>. A workplace digital financial literacy program can reach women on their own terms, providing them with <a href="https://herproject.org/programs/herfinance/digital-wages" target="_blank" rel="noopener noreferrer">relevant information and skill-building when navigating digital payments for the first time</a>. All of this has become more important in light of the pandemic, which increased the number of digitally-enabled financial capability solutions.
<blockquote class="pullquote--right">Successfully building women’s financial capability must account for the systemic barriers women face.</blockquote>
Our global landscape research of financial capability innovations takes these specific constraints into account. We’ve interviewed more than 30 financial service providers, financial inclusion and women’s economic empowerment programs, thought leaders and donors to find out which approaches are working well to serve different female customer segments and where there are gaps in our understanding.

Our research will likely be published in spring 2021, but we will be sharing our analysis in a blog series. Up next, we will explore a few examples of providers navigating women’s specific needs when building financial capability.

Revisiting Building Financial Capability with a Gender Lens

Personal Financial Management

For low-income women, digital financial inclusion offers an opportunity to upend entrenched gender inequalities by entering spheres from which they have been otherwise excluded. Financial services delivered via mobile phone can bridge the last-mile gap, bringing financial tools and services directly to women where they work and live. However, women are underrepresented customers of digital financial providers and platforms. Well-established impediments such as cost, literacy, and normative barriers (that shape the way people behave and expect others to behave) prevent low-income women from using such services at the same rate as men. These demand-side constraints, combined with a dearth of sex-disaggregated customer data, leave most fintech firms without a clear picture of women’s wants and needs for digital financial tools. As such, most mass-market tools are not designed with women in mind.
<blockquote>Demand-side constraints and a dearth of sex-disaggregated customer data leave most fintech firms without a clear picture of women’s wants and needs for digital financial tools.</blockquote>
It’s not just digital financial inclusion: Fewer women than men have access to formal bank accounts and mobile technology. Globally, 65 percent of women, compared with 72 percent of men, have bank accounts, while 197 million fewer women own a phone than men, according to the <a href="https://www.gsma.com/r/gender-gap-2019/" target="_blank" rel="noopener noreferrer">GSMA Mobile Gender Gap Report 2019</a>. Regional variations make these gaps more striking. In Sub-Saharan Africa, for example, home to many promising emerging market fintech innovations, the mobile gender gap is 15 percent, while in South Asia (including Pakistan, India, and Bangladesh) the gap is 28 percent. Further, access to formal bank accounts is extremely low across Africa. For example, the gender gap in account ownership in Kenya, according to the table below, looks to be only about 8 percentage points. However, the gap widens when adults with only a mobile money account are disaggregated from formal bank accounts and mobile money accounts. Around 65 percent of men in Kenya have both a formal bank account and mobile money account, while only 50 percent of women do. Interestingly, the gender gap in adults with only a mobile money account is reversed; more women than men have only a mobile money account, likely because the barriers to entry are lower than for a formal bank account. This trend can be seen throughout Africa.

<img class="aligncenter size-full wp-image-41359" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/Sample-of-countries-in-Africa-Table-VF2-800.png" alt="table " width="800" height="412" />

Given the gender gaps in bank account ownership and mobile technology, it is not difficult to see why many fintech firms do not have visibility on how to better serve women. With fewer women users, and little to no sex-disaggregated data around how women’s use of and needs for these products differ from men’s, it can be difficult to identify low-income women’s needs and preferences. Excluding women is often unintentional — “gender-blind” design is thought of as an inclusive strategy. If “bias” is not baked into the design, the thinking goes, then anyone who wants to use the product can. Unfortunately, the opposite is true. Gender-blind product and platform design strategies allow products to flow in the way they always have: into the hands of those who are already in the marketplace and who make the decisions about who else can benefit from or access these products. A “gender-intelligent” or “gender-aware” approach, on the other hand, seeks to overcome women’s specific constraints through <a href="https://financialallianceforwomen.org/download/how-fintechs-can-profit-from-the-multi-trillion-dollar-female-economy/" target="_blank" rel="noopener noreferrer">data-driven design based on market research</a> in order to create distinct customer value. And the numbers in the table demonstrate that men disproportionately benefit from bank accounts and mobile technology.
<blockquote class="pullquote--left">We show the potential of gender-aware design, and how to design for specific needs and constraints of women, while accounting for the norms that define their lives.</blockquote>
This brief examines design principles employed by two fintechs, <a href="https://paycode.com/">Paycode</a> and <a href="https://extramileafrica.com/" target="_blank" rel="noopener noreferrer">Extramile</a>, working in Sub-Saharan Africa. We show the potential of gender-aware design, and how to design for specific needs and constraints of women, while accounting for the norms that define their lives. These two examples provide insights into why intentionally focusing on women can bring benefits to this largely untapped market and how fintechs can design products that meet women’s needs. Only by improving women’s meaningful use of financial services through concerted efforts to close the gender gaps will low-income communities and households begin to see potential economic benefits from inclusion, benefits that will also flow back to the providers that serve them. It is vital that fintechs move away from gender-blind or -neutral strategies toward gender-aware <a href="https://www.ifpri.org/publication/beyond-access-gender-transformative-financial-inclusion-agriculture-and-entrepreneurship" target="_blank" rel="noopener noreferrer">and even transformative strategies</a> that bake in access pathways for potential customers with limited knowledge or physical mobility. <a href="https://medium.com/hh-design/the-world-is-designed-for-men-d06640654491" target="_blank" rel="noopener noreferrer">Gender-blind design is not gender-neutral</a>.
<h2>Fintechs in Sub-Saharan Africa and a Gender-Blind Approach</h2>
According to data collected by <a href="https://www.inclusivefintech50.com/" target="_blank" rel="noopener noreferrer">Inclusive Fintech 50</a> (IF50) -- a competition founded by MetLife Foundation and Visa, with support from Accion and IFC, and additional funding from Jersey Overseas Aid &amp; Comic Relief -- only six of the 403 fintech applicants claimed women as their target customers. Most applicants selected “rural households,” “MSMEs,” or “low-income individuals” as their target market. This belies the fact that all of these fintechs reach women — for many of the IF50 winners, women make up nearly 50 percent of their customers. Indeed, women make up a large proportion, if not the majority, among those market segments.

This trend continues among the IF50 fintechs focused on the African continent. Of the 2020 winners in Africa, the product and livelihood focus ranged from mobile banking, water and utility payments, mobile-based crop insurance, and a range of credit and savings products directed at low-income populations. For example, OKO secures the income of farmers of unirrigated farms in Mali and Uganda through a mobile-based crop insurance that automatically compensates them if they suffer from adverse weather.

<img class="alignright wp-image-41342" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2021/01/Social-Norms-Table-VF-1005x1024.png" alt="" width="400" height="407" />Within the profile descriptions of the 15 IF50 winners based in or delivering services in Africa, their customer segments were primarily described as “unbanked,” “underserved,” or “low-income.” A few mentioned women, but most called out their customers by their lack of access to financial services. Only three out of the 15 mention women in their key problem statement, while eight mention “unbanked” populations. Identifying women as their target market is not a requirement, even if women make up nearly half of their customers. But by calling out their target customers in terms of livelihood rather than by gender, these fintechs may assume that every “unbanked” person or MSME has the same level of access to their products. This is rarely, if ever, the case.

If these fintechs do not see women as their target market, how do they reach so many women? Gender-blind product design does not translate into complete exclusion — but it does mean that a product is more likely to reach and work well for certain segments of customers, namely men. Gender-blind design can be seen in mass-market items like car seatbelts and mobile phones as well as digital financial tools such as chatbots with basic financial literacy information or a mobile wallet. In some cases, targeting certain livelihood segments may lead fintechs to see where their design is ill-suited for their women customers and make adjustments. In 2019, <a href="https://www.uncdf.org/article/5171/uncdfs-sprint4women-design-sprint-competition-to-increase-zambian-womens-financial-inclusion-kicks-off" target="_blank" rel="noopener noreferrer">UNCDF hosted a design sprint in Zambia</a> for fintechs seeking to increase their female customers — the finalists all designed and modified their products after interacting with women customers. In other cases, women may in fact be a central target segment, but aspects of a woman’s life, such as normative constraints (like care responsibilities or intra-household decision-making), and thus the product doesn’t achieve desired inclusion or impact.

The Case for a Gender-Intelligent Approach: An Opportunity for Inclusive Fintechs

Sub-Saharan Africa

Inclusive Fintech 50

Agent Banking

Fintechs

Mobile Banking

Payments

Saving

Brief

Perhaps more than ever, 2020 provided us an opportunity to reflect on that for which we are thankful. One thing we’re thankful for at CFI is our <a href="https://centerforfinancialinclusion.org/blog/" target="_blank" rel="noopener noreferrer">blog</a>, a place where CFI and our community of contributors share their unique perspectives and calls to action for inclusive finance. The 76 posts of 2020 offer incredible insights into a wide range of themes and projects across many geographies.

Not surprisingly, since late March, nearly every CFI post has covered or mentioned COVID-19 in some form or fashion. But the top 10 posts (by unique page views) also dove into topics such as data and consumer protection -- pillars of CFI’s <a href="https://centerforfinancialinclusion.org/reflecting-on-the-past-and-charting-a-new-direction/" target="_blank" rel="noopener noreferrer">new strategy</a> -- over-indebtedness in Kenya, internal migration, women’s financial inclusion (another key, cross-cutting CFI strategic focus area), a deep dive into resilience, and even how comics were used to spread COVID-19 awareness.

Happy reading, and happy new year!
<h2>1. <a href="https://centerforfinancialinclusion.org/pandemics-and-natural-disasters-what-can-we-learn-from-past-disasters-to-help-with-todays-pandemic/" target="_blank" rel="noopener noreferrer">Pandemics and Natural Disasters: What Can We Learn from Past Disasters to Help with Today’s Pandemic?</a></h2>
Two weeks after the WHO declared the COVID-19 outbreak a pandemic, Managing Director <a href="https://centerforfinancialinclusion.org/people/mayada-el-zoghbi/" target="_blank" rel="noopener noreferrer">Mayada El-Zoghbi</a> wrote about how this crisis compares to previous ones: namely, the Indonesian tsunami of 2004 and the Pakistan earthquake of 2013. She pointed out that households experience shocks similarly, regardless of the cause, and that the systemic nature of the shocks means that the firms and FSPs that serve them need to measure and implement the right responses to meet the challenge. She also predicted that the pandemic would be a “tipping point” for platform financial service provision.
<h2>2. <a href="https://centerforfinancialinclusion.org/what-is-the-future-of-microfinance-q-and-a-with-paul-dileo/" target="_blank" rel="noopener noreferrer">What Is the Future of Microfinance? Q and A with Paul DiLeo</a></h2>
This year was a tipping point for microfinance, too, noted <a href="https://centerforfinancialinclusion.org/people/paul-dileo/" target="_blank" rel="noopener noreferrer">Paul DiLeo</a> in this interview with CFI. DiLeo is the Managing Director of Grassroots Capital Management and a veteran faculty member of CFI <a href="https://centerforfinancialinclusion.org/board-leadership-for-impact-program-overview/" target="_blank" rel="noopener noreferrer">board governance training</a>. He is also coeditor of a recently published volume, “The Future of Microfinance.” DiLeo suggested that investors in this space resist the temptation to move on to the next “bright, shiny object” in financial inclusion and continue to support microfinance to preserve social missions and benefit target populations.
<h2>3. <a href="https://centerforfinancialinclusion.org/resilience-and-the-three-phases-of-response-brac/" target="_blank" rel="noopener noreferrer">Resilience and the Three Phases of Response</a></h2>
In May, BRAC’s microfinance director <a href="https://centerforfinancialinclusion.org/people/shameran-abed/" target="_blank" rel="noopener noreferrer">Shameran Abed</a> and <a href="https://centerforfinancialinclusion.org/people/laurie-j-spengler/" target="_blank" rel="noopener noreferrer">Laurie J. Spengler</a>, the CEO of Courageous Capital Advisors, wrote that resilience is the “connective tissue” between the three phases of response: relief, recovery and rebuild. The authors advocate for assessing resilience through two lenses, opportunity and risk, and point out that the pandemic is an opportunity to invest in resilience because “recurring dividends will be realized by all.”
<h2>4. <a href="https://centerforfinancialinclusion.org/data-globalization-vs-data-localization/" target="_blank" rel="noopener noreferrer">Data Globalization vs. Data Localization</a></h2>
Before the pandemic hit, CFI’s <a href="https://centerforfinancialinclusion.org/people/ethan-loufield/" target="_blank" rel="noopener noreferrer">Ethan Loufield</a> and Credit Suisse’s <a href="https://centerforfinancialinclusion.org/people/shweta-vashisht/" target="_blank" rel="noopener noreferrer">Shweta Vashisht</a> wrote about how the flow of data across borders is a contentious issue countries encounter when developing data protection laws and regulations. They present arguments for data localization, but ultimately conclude that data can, and should, be allowed to flow across borders with the right frameworks in place.
<h2>5. <a href="https://centerforfinancialinclusion.org/data-consent-lets-share-the-burden-for-effective-consumer-protection/" target="_blank" rel="noopener noreferrer">Data Consent: Let’s Share the Burden for Effective Consumer Protection</a></h2>
Also part of the <a href="https://centerforfinancialinclusion.org/data-protection-and-financial-inclusion-why-it-matters-introduction/" target="_blank" rel="noopener noreferrer">Data Protection and Financial Inclusion: Why It Matters</a> series, this post argues that it’s futile for small tech to keep up with high-standard consent practices, and that the path from data consent principles to implementation is, for low-capacity environments, “littered with landmines.” Vashisht and Loufield conclude that successful solutions need to be shouldered by both consumers and providers.
<h2>6. <a href="https://centerforfinancialinclusion.org/q-and-a-using-comics-for-covid-19-awareness/" target="_blank" rel="noopener noreferrer">Q and A: Using Comics for COVID-19 Awareness</a></h2>
<a href="https://centerforfinancialinclusion.org/people/graham-a-n-wright/" target="_blank" rel="noopener noreferrer">Graham A.N. Wright</a>, founder of MSC, sat down with CFI to discuss a series of informative comics his team produced to get the word out about the dangers of COVID. The colorful comics, complete with protagonists warning clients about the hazards of the virus and how they can help knock it out, informed how real-life group meetings and staff visits have been conducted.
<h2>7. <a href="https://centerforfinancialinclusion.org/support-for-indias-migrants-during-covid-19-navigating-potential-gaps-in-the-system/" target="_blank" rel="noopener noreferrer">Support for India’s Migrants During COVID-19: Navigating Potential Gaps in the System</a></h2>
The lockdown in India had massive impacts, perhaps for none more than internal migrant workers, who left for home villages in droves when work dried up. This post warned that system-wide social payments challenges boded poorly for these vulnerable workers due to, among other reasons, ATM access constraints and domicile restrictions of state governments. The post was authored by <a href="https://centerforfinancialinclusion.org/people/shashank-shreedharan/" target="_blank" rel="noopener noreferrer">Shashank Shreedharan</a> and <a href="https://centerforfinancialinclusion.org/people/jithin-jose/" target="_blank" rel="noopener noreferrer">Jithin Jose</a> of LEAD.
<h2>8. <a href="https://centerforfinancialinclusion.org/its-time-to-protect-kenyans-from-a-digital-lending-laboratory/" target="_blank" rel="noopener noreferrer">It’s Time to Protect Kenyans from a Digital Lending Laboratory</a></h2>
CFI’s <a href="https://centerforfinancialinclusion.org/people/alex-kessler/" target="_blank" rel="noopener noreferrer">Alex Kessler</a> warns readers that the breakneck growth in mobile lending and aggressive debt collection and debt stress have raised enormous consumer protection red flags. This article offers key statistics on mobile money’s exponential growth there, highlights the need for consumer protection-oriented algorithms, and suggests calls to action for regulators.
<h2>9. <a href="https://centerforfinancialinclusion.org/reimagining-inclusive-finance-with-women-in-mind/" target="_blank" rel="noopener noreferrer">Reimagining Inclusive Finance With Women In Mind</a></h2>
In this <a href="https://centerforfinancialinclusion.org/about/what-we-do/financial-inclusion-week/" target="_blank" rel="noopener noreferrer">Financial Inclusion Week</a> post, we meet Carla, a fictitious -- but very realistic -- mother of three young children living in a village in Tanzania. Carla’s story is like that of millions of poor women in the Global South who are excluded from financial products that weren’t designed for them. CFI gender lead <a href="https://centerforfinancialinclusion.org/people/julia-arnold/" target="_blank" rel="noopener noreferrer">Julia Arnold</a> asks our community if we are listening to women enough, and implores our sector to design and deliver financial products and services with the Carlas of the world in mind. She also provides early thinking around CFI’s gender work in 2021 and beyond.
<h2>10. <a href="https://centerforfinancialinclusion.org/can-financial-inclusion-moderate-impacts-to-coronavirus/" target="_blank" rel="noopener noreferrer">Can Financial Inclusion Moderate Impacts of Coronavirus?</a></h2>
It’s fitting that we round out the 2020 list with our very first COVID response post, written by research lead <a href="https://centerforfinancialinclusion.org/people/eric-noggle/" target="_blank" rel="noopener noreferrer">Eric Noggle</a> and published on March 20. While alarm bells in the media had sounded long before, this was one of the early posts in the inclusive finance space that offered a clear call to action for this “major stress test,” namely, getting as much money as possible into the hands of those who need it most -- and doing so as quickly as possible. How did governments of the world do? Read our December <a href="https://centerforfinancialinclusion.org/rapid-response-for-social-payments-during-covid-19/" target="_blank" rel="noopener noreferrer">policy brief</a> for examples of many governments that innovated quickly to get social payments into the literal and digital hands of citizens.
<h3>We hope you continue to read and share views from our blog in 2021. For a sneak peek into the kind of content you'll see, revisit these Financial Inclusion Week posts (plus #9) related to our top priorities for inclusive finance:</h3>
<h3>• “<a href="https://centerforfinancialinclusion.org/financial-services-are-needed-to-help-low-income-people-mitigate-and-adapt-to-climate-change/" target="_blank" rel="noopener noreferrer">Financial Services are Needed to Help Low-Income People Mitigate and Adapt to Climate Change</a>” By Eric Noggle
• “<a href="https://centerforfinancialinclusion.org/covid-19-ushers-in-new-challenges-for-consumer-protection/" target="_blank" rel="noopener noreferrer">COVID-19 Ushers in New Challenges for Consumer Protection</a>” By Lauren Braniff
• “<a href="https://centerforfinancialinclusion.org/data-for-inclusive-finance-delivering-on-the-promise-for-consumers/" target="_blank" rel="noopener noreferrer">Data for Inclusive Finance: Delivering on the Promise for Consumers</a>” By Alexandra Rizzi and Alex Kessler</h3>

Alternative Data

Financial Technology

Consumer Protection

Data Analytics

Trends

Microcredit brought the first wave of financial inclusion for hundreds of millions of unbanked people beginning in the 1970s, albeit with uncertain impacts. Many are now excited about digital financial services (DFS), which can deepen the level of access to finance and create new opportunities by improving flexibility, security, and privacy of transactions. Now, there is growing <a href="///Users/ezramannix/Downloads/RWP16-037_Pande.pdf" target="_blank" rel="noopener noreferrer">evidence</a> that DFS is improving the welfare of marginalized people by making transfers from informal support networks easier in order to help them better cope with shocks.

DFS also offers great promise for women’s economic empowerment (WEE), but can also exacerbate gender disparities and create new risks for women. As DFS are spreading, we need more evidence on DFS and WEE for the following reasons:
<ul>
 	<li>to understand how and why digital finance empowers women by unpacking the "impact" black box</li>
 	<li>to reduce the risks of exacerbating gender inequality and any possible negative consequences for women.</li>
</ul>
The late Sir Fazle Hasan Abed, the founder of BRAC, and Dr. Muhammad Yunus of Grameen Bank both believed in the power of empowered women in transforming societies and targeted them as primary microcredit beneficiaries. But the evidence on microfinance empowering women <a href="https://www.3ieimpact.org/sites/default/files/2019-01/sr4-microcredit-review.pdf" target="_blank" rel="noopener noreferrer">is limited</a>; for example, in a randomized control trial (RCT) in India, Banerjee and colleagues found that access to microfinance had <a href="https://economics.mit.edu/files/4162" target="_blank" rel="noopener noreferrer">no significant impact on women’s empowerment</a>. And there are indications of <a href="https://www.icrw.org/wp-content/uploads/2019/09/Brief-Unintended-consequences_revised-Sept-9.pdf" target="_blank" rel="noopener noreferrer">unintended consequences</a> of microfinance on women: <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1753-1411.2012.00066.x" target="_blank" rel="noopener noreferrer">loss of control</a> over borrowed money is one example.

Like microcredit, DFS are expected to influence women’s empowerment, particularly WEE, through several pathways. For example, by making information available to service providers, DFS can help eliminate biases against women as potential borrowers, which is often the case, and consequently improve their access to finance. Moreover, by offering quick and affordable transfers, DFS can help women expand their support networks beyond their vicinity, enabling them to better manage shocks independently.
<blockquote class="pullquote--right">Digital financial services can have unintended consequences for women.</blockquote>
Unfortunately, DFS can also have unintended consequences for women. To start with, persistent digital inequality between men and women -- e.g. in <a href="https://openknowledge.worldbank.org/handle/10986/29510" target="_blank" rel="noopener noreferrer">device ownership and digital literacy</a> -- means that universal access to undifferentiated DFS can potentially increase the gender difference. Some features of DFS, such as the automated transfer of microcredit to individual accounts, as opposed to physical transfer in a group setting, may even have a regressive impact on women as the modest positive impact of microcredit on women’s empowerment appears to be <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.0012-155X.2005.00403.x" target="_blank" rel="noopener noreferrer">strongly associated with its collective dimension</a>, i.e., group meetings. Indeed, it has been shown that a shift to mobile money from cash transactions in a group setting <a href="https://www.semanticscholar.org/paper/Effects-of-Digitization-on-Financial-Behaviors-%3A-Harigaya/13160107ab47963d79b809decbc3b3276fc0572c" target="_blank" rel="noopener noreferrer">reduced the importance of group meetings</a>, group cohesion, and peer support.
<h3>How can DFS be designed to support, not hinder, women? Can DFS benefit women and men equally?</h3>
Evidence on the causal mechanism between WEE and DFS, as well as different features of DFS, e.g., biometric security, is sparse. In a systematic review of almost 600 papers on financial inclusion up to 2017, of which 116 were on digital finance, Gammage et al. found that <a href="https://www.icrw.org/wp-content/uploads/2017/11/Gender-and-digital-financial-inclusion.pdf" target="_blank" rel="noopener noreferrer">WEE is far less emphasized as an outcome in digital finance</a> compared to the financial inclusion literature. Furthermore, often the evidence is incomplete and contradictory. Here we have tried to provide a synopsis of the existing evidence and identify areas where more research is needed.

There is <a href="https://www.journals.uchicago.edu/doi/full/10.1086/687578" target="_blank" rel="noopener noreferrer">some evidence</a> that access to finance through DFS, such as mobile transfer of safety-net benefits, increases women's bargaining power, reflected in greater dietary diversity and child feeding practice. But it is not clear whether the impact is because of DFS or just access to financial services. And there is <a href="https://www.nber.org/system/files/working_papers/w23252/w23252.pdf" target="_blank" rel="noopener noreferrer">contradictory evidence on the gender-differentiated effect</a> of access to ATMs, which can increase household savings, but lower women’s control over their cash by making it <a href="http://jhr.uwpress.org/content/52/4/919.short" target="_blank" rel="noopener noreferrer">easy for their husbands to withdraw money from their accounts</a>.
<blockquote class="pullquote--left">We do not know what privacy features of DFS can enhance women's empowerment, nor do we know if the privacy offered by DFS can have negative consequences.</blockquote>
The role of privacy of financial information on women’s empowerment and household resource allocation is relatively <a href="https://www.aeaweb.org/articles?id=10.1257/aer.103.3.263" target="_blank" rel="noopener noreferrer">well</a>-<a href="https://www.nber.org/papers/w10498" target="_blank" rel="noopener noreferrer">established</a>. But we do not know what privacy features of DFS can enhance women's empowerment, nor do we know if the privacy offered by DFS can have negative consequences, e.g., an increase in domestic violence once the private information is revealed.

Similarly, it is <a href="https://www.aeaweb.org/articles?id=10.1257/aer.20141346" target="_blank" rel="noopener noreferrer">easy to imagine DFS saving time</a> for financial transactions -- and <a href="https://www.pciglobal.org/wp-content/uploads/2020/09/PCI_Digitizing_Savings_Groups_Report_Tz_Sept_2020.pdf" target="_blank" rel="noopener noreferrer">recent evidence</a> from Tanzania has, in fact, shown that it does -- but we do not know if the time saved has an impact on WEE, neither do we know what type of DFS will save women more time and how women will use their saved time, whether it be on productive activity, care work, leisure, or something else.

We have strong evidence on the beneficial effect of mobile money in coping with shocks, mainly through receiving quick transfers from wide social networks. But we know nothing about the differential impact on men and women. Previously, simple interventions, such as a <a href="https://www.aeaweb.org/articles?id=10.1257/aer.103.4.1138" target="_blank" rel="noopener noreferrer">safe box</a>, or a second mobile money account labelled for “emergency expenses” increased women's savings, control over savings, and better management of shocks. Can simple behavioral features be incorporated in DFS to help women have better control over their financial life? We still do not know.

Finally, the anonymization of client data and data availability on financial transactions can help reduce discrimination against women as potential lenders (for example, cultural bias against women as potential borrowers or lack of information on their creditworthiness). Can DFS reduce discrimination, as hypothesized here? And how can DFS providers become more pro-women?
<h3>Why do we need evidence on these causal mechanisms, anyway?</h3>
We realize DFS will not automatically reduce gender bias in access to finance or empower women economically, despite its immense possibilities, and may even impose new risks on women, as demonstrated in the case of mobile transfer of microcredit and access to ATMs.

Digitization of financial services will continue, and once they are mature, it would be much more difficult to retrofit the services to eliminate the surfacing of negative consequences for women and use DFS as a positive force for WEE. That is why we need to know exactly how DFS impact WEE. To this end, the <a href="https://bigd.bracu.ac.bd/" target="_blank" rel="noopener noreferrer">BRAC Institute of Governance and Development</a> (BIGD) in Bangladesh has recently started an initiative, <a href="https://bigd.bracu.ac.bd/all-projects/womens-economic-empowerment-and-digital-finance/about-wee-difine/" target="_blank" rel="noopener noreferrer">WEE-DiFine</a>, to fund rigorous research studies to understand the causal pathways between DFS and WEE across South Asia and Sub-Saharan Africa. Initiatives like these can help us better understand these causal mechanisms and help policymakers maximize positive impacts of DFS on WEE and pre-empt possible adverse effects.

Digital Finance and Women’s Economic Empowerment: Possibilities and Pitfalls

<img class="alignright wp-image-40142 size-thumbnail" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/10/grateful-emoji-283-150x150.jpg" alt="grateful " width="150" height="150" />
<h2>Grateful</h2>
I am feeling an incredible level of gratitude to all the people who participated in Financial Inclusion Week last week. We had more than 1,200 people register for FIW’s various events. The agenda featured more than 40 sessions covering a broad spectrum of topics, time zones, and regions. Each and every session required planning and coordination. A huge thanks goes to all of our partners who chose to participate and share their learning and experiences during FIW.
<h2><img class="alignleft size-thumbnail wp-image-40143" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/10/monocle-5-150x150.png" alt="" width="150" height="150" />Curious</h2>
I am already a major advocate for women’s financial inclusion and believe the inclusive finance industry needs to get more sophisticated on this topic. The CFI <a href="https://youtu.be/MxXWHaNhYcY" target="_blank" rel="noopener noreferrer">podcast on social norms</a>, the Caribou Digital session on <a href="https://www.youtube.com/watch?v=SbIBJO_7cJs&amp;feature=youtu.be" target="_blank" rel="noopener noreferrer">features that drive women’s usage of DFS</a>, and the Pinbox session, "<a href="https://youtu.be/b2ulPv9INEA" target="_blank" rel="noopener noreferrer">Saving the Next Generation from Old Age Poverty</a>" (especially women, who live longer) were eye-opening. I am curious to see where our collective focus on this topic will take us.
<h2><img class="alignright size-thumbnail wp-image-40144" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/10/tempted-heart-eyes-emoji-150x150.png" alt="heart eyes emoji " width="150" height="150" />Tempted</h2>
There were so many sessions to choose from that there were moments I felt like a kid in a candy store. Fortunately, the sessions have all been recorded and I can go back to the ones I missed and catch up on them (and I will have a full year to do that). I’ve even mapped out a plan of action for when I’ll get up to speed on what I missed. This week, I plan on listening to the Inclusive Finance India <a href="https://youtu.be/E0Snagg7TYM" target="_blank" rel="noopener noreferrer">session on remittances</a> and GSMA’s session, "<a href="https://www.youtube.com/watch?v=B3Khho7Bgac&amp;feature=youtu.be" target="_blank" rel="noopener noreferrer">Beyond One Billion: Exploring the State of Mobile Money in Africa</a>."
<h2><img class="alignleft wp-image-40145" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/10/connected-emoji-300x268.png" alt="connected emoji" width="184" height="164" /></h2>
<h2>Connected</h2>
We have all been struggling to adjust to our new, social-distanced and Zoom-based world, and I was worried that more virtual events might be difficult. I was surprised at how connected I felt to the inclusive finance industry. I learned so much from the various panelists, whether it was the elaborate -- yet achievable -- <a href="https://www.youtube.com/watch?v=FLWs9JMdj7M&amp;feature=youtu.be" target="_blank" rel="noopener noreferrer">ideas posed by Sarah Gammage</a> on the role of financial services in mitigating climate risk and supporting livelihood adaptation, or <a href="https://www.youtube.com/watch?v=qjVT1EaN3QE&amp;feature=youtu.be" target="_blank" rel="noopener noreferrer">David Medine’s insightful explanation</a> as to why consent-based systems are no longer relevant for addressing data usage and data privacy concerns. There’s been a lot of talk that this industry has become more fragmented as we each dig deeper into specific silos, but this week showed me the power of coming together. It takes some effort, but the results are evident.
<h2><img class="alignright size-thumbnail wp-image-40146" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/10/tired-emoji-150x150.png" alt="tired emoji" width="150" height="150" />Tired</h2>
But, alas, I am human and not a complaints bot or <a href="https://www.youtube.com/watch?v=9tXAN0oicVE&amp;feature=youtu.be" target="_blank" rel="noopener noreferrer">algorithm</a>, like the ones covered in some sessions. This means by the end of the week I was tired after an incredibly packed agenda and so many interactive sessions.
<h2><img class="alignleft size-thumbnail wp-image-40149" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/10/cry-emoji-4-150x150.png" alt="cry emoji" width="150" height="150" />Sad</h2>
That’s why my next emoji is complex. Despite my tiredness, I am sad to see FIW 2020 come to an end. I hope that this community that has come together to share and learn from one another can somehow keep the momentum going. At CFI, we will certainly do our best to engage and learn from our partners.
<h2></h2>
<h2><img class="alignright wp-image-40150" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2020/10/lightbulb-emoji-2-300x292.png" alt="inspired lightbulb emoji " width="161" height="157" />Inspired</h2>
My final emoji is my overwhelming sense of inspiration. I hope you found FIW as inspiring a learning event as I did. From our first day with the panel, "<a href="https://www.youtube.com/watch?v=im7EP5TtGdA" target="_blank" rel="noopener noreferrer">Serving Low Income Households Impacted by Climate Change</a>," to the last day with Aspen Institute’s session, "The Road to 2030: An Action Agenda for Inclusive Financial Systems," I am inspired that so many organizations are already thinking about and taking action on some of the toughest challenges that poor people face during this extraordinary time in history.

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Financial Inclusion Week and My Emoji Roller Coaster Ride

Financial Inclusion Week 2020

Pensions and Retirement Saving

Imagine a woman living in a village near Arusha, Tanzania. Let’s call her Carla. She lives in a small home with three young children and her husband. They have a small plot of land behind their house where they raise vegetables, chickens. When income is steady and predictable, they buy a few goats. She learned to make cheese from a local NGO, so she sells goat cheese and milk, along with her vegetables or crafts, and she puts her earnings into her savings group. Her husband is a day laborer and farmer, but work can be hard to come by, so he often travels into town looking for work and can be gone for weeks at a time. School expenses, sending money to her parents and mother-in-law, and keeping up with her microloan repayments from her savings group weigh on her mind from the moment she wakes up to the time she finally gets to rest after everyone else has gone to sleep.

Carla’s not alone. Nearly two billion low-income people around the world, 56 percent of whom are women, remain <a href="https://globalfindex.worldbank.org/" target="_blank" rel="noopener noreferrer">excluded from formal financial services</a>, along with millions more dormant bank accounts worldwide. Carla could benefit from financial products that keep her money safe, access to government schemes to support her and her family with money and food, insurance for when the unexpected happens, and carefully designed credit products when she needs them.
<blockquote>Most financial products were not designed with someone like Carla in mind.</blockquote>
These types of products exist on the market today. But Carla doesn’t have access to them. And even if she did, most of these products were not designed with someone like Carla, her family, and her community in mind. Despite the fact that Carla is careful and committed to her savings group and inventive when it comes to livelihood opportunities, most, if not all, formal banks would consider her, and others like her, too risky to bank.
<h2>Are We Listening to Women Enough?</h2>
The persistent global gender gap in account ownership, mobile phone ownership and usage speaks to this misperception. The existing financial system – including <a href="https://www.ifpri.org/publication/beyond-access-gender-transformative-financial-inclusion-agriculture-and-entrepreneurship" target="_blank" rel="noopener noreferrer">aspects</a> of the inclusive finance industry – was not designed with women’s needs in mind, low-income women in particular. Gender roles and norms – behavior based on social expectations – determine men’s and women’s caregiving duties, mobility, livelihoods, education, and access to economic opportunities and financial services. By and large, women who are able to participate in paid labor are also expected to care for dependents. They choose livelihoods that allow them to also perform care work – most often livelihoods that are underpaid and contingent, where the individual worker is dispensable. Frequently, women are unable to choose their occupation or claim ownership over assets as gender norms are also <a href="https://wbl.worldbank.org/" target="_blank" rel="noopener noreferrer">embedded</a> within the legal and banking systems. Women the world over are subject to these norms.
<blockquote>Frequently, women are unable to choose their occupation or claim ownership over assets.</blockquote>
We bring gender assumptions and expectations with us into every aspect of our lives, including when designing and delivering financial products and services. For example, basic bank requirements have assumptions embedded into the very forms and documents meant to help banks get to know customers. Who is the person who can complete a know-your-customer (KYC) form? Not people like Carla. Who is the person who can show valid state-issued identification? Likely not people like Carla. Who is the person who can show proof of ownership over their land? Unfortunately, it’s unlikely Carla has a deed in her name.

It is time we ask ourselves if the current system work for everyone? And if not, what needs to change? Can we as an industry claim that we are listening to women?

This is a massive opportunity for the industry to rethink our work. In fact, there are numerous examples of providers and funders exploring these questions and thinking critically about how successfully and sustainably to reach women.
<ul>
 	<li>Grameen Foundation created a <a href="https://www.prnewswire.com/news-releases/in-midst-of-rural-poverty-nearly-1-3-million-gain-access-to-financial-services-through-grameen-foundation-womens-networks-300845966.html" target="_blank" rel="noopener noreferrer">network of female agents</a> in India and the Philippines – training low-income women to bring financial services to rural communities.</li>
 	<li><a href="https://www.tymebank.co.za/" target="_blank" rel="noopener noreferrer">TymeBank</a> is a fully digital bank based in South Africa that provides basic banking services and financial guidance to its customers. It <a href="https://juntosglobal.com/tymebank-launches-new-conversational-education-service-to-support-customers-during-covid-19/" target="_blank" rel="noopener noreferrer">recently launched</a> a financial literacy service for its first-time banking customers to help them navigate their financial lives during the COVID-19 pandemic.</li>
 	<li>JazzCash, a mobile money provider based in Pakistan, <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">designed a marketing campaign</a> specifically to address potential female-clients. They also embedded a gender lens using behaviorally informed text messages to encourage current users to refer more women.</li>
 	<li>IDRC-funded research is <a href="https://www.idrc.ca/en/research-in-action/harnessing-transformative-potential-womens-financial-inclusion" target="_blank" rel="noopener noreferrer">improving our knowledge-base</a> of what women need and how financial services can transform their lives.</li>
 	<li>Researchers out of Innovations for Poverty Action (IPA) -- Kyle Holloway, Zahra Niazi, and Rebecca Rouse -- <a href="https://www.poverty-action.org/sites/default/files/publications/Womens-Economic-Empowerment-Through-Financial-Inclusion-Web.pdf" target="_blank" rel="noopener noreferrer">analyzed specific supply- and demand-side gender based barriers</a> to financial inclusion. Their research highlights more providers using a gender lens to improve their services to female customers.</li>
</ul>
<h2>Are Women's Lives Actually Improving?</h2>
CFI’s <a href="http://reflecting-on-the-past-and-charting-a-new-direction/" target="_blank" rel="noopener noreferrer">new strategy</a> puts advancing women’s financial inclusion at the foreground, where our research and advocacy will center around the question: do financial solutions improve women’s lives? This work focuses on three critical elements seen in Carla’s story: social norms, the digital divide, and gaps in gender data. Knowing how to design products to serve Carla’s needs – and how to rethink financial systems – begins with understanding her aspirations, limitations, and resources. At CFI, we will gather data to understand her life, which will inform providers and policymakers to better meet the Carlas of the world where they are.
<blockquote>Knowing how to design products to serve Carla’s needs begins with understanding her aspirations, limitations, and resources.</blockquote>
Women are not a single market segment; a deeper understanding of the lives of women – for example, their livelihoods and the social norms that shape their lives – will help inform providers of their financial service needs and how the sector can better serve them. CFI is leading research to understand the necessary components for building women’s financial and digital capability as well as the key normative constraints impacting providers and limiting women from improving their lives through financial services. The hope is that evidence will catalyze knowledge, innovation, and initiatives to embed norms-transformative work throughout the inclusive finance field.
<h2>Join Us</h2>
CFI's <a href="http://financialinclusionweek.org/event-calendar-2020" target="_blank" rel="noopener noreferrer">Financial Inclusion Week lineup</a> includes a lively podcast conversation with three experts on gender norms and gender transformative financial services and a live webinar that unpacks design principles for building women’s financial capability. We hope participants walk away with a deeper understanding for why and how to build women’s financial inclusion.

The conversation doesn’t stop after Financial Inclusion Week concludes. CFI hopes to continue to learn from the industry to better shape our work. Want to tell us about what you’re doing? Please contact Julia Arnold, Senior Director, Gender and Financial Inclusion at <a href="mailto:jarnold@accion.org">jarnold@accion.org</a>.

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Reimagining Inclusive Finance With Women In Mind

Financial Health

Financial Inclusion Strategy

Resilience

Just over one year ago, I joined the Center for Financial Inclusion (CFI), and what a year it has been. <a href="http://financialinclusionweek.org" target="_blank" rel="noopener noreferrer">Financial Inclusion Week</a> presents a great time for me to reflect on this past year and to share with you CFI’s plans for our next chapter. We are using Financial Inclusion Week to feature the work of so many of our partners. And we are also using the week to focus attention on the themes we have identified in our new strategy as the pillars for this week’s <a href="http://financialinclusionweek.org/event-calendar-2020" target="_blank" rel="noopener noreferrer">calendar of events</a>.

CFI emerged from the rubble of the financial crisis to spearhead the most pressing issue the inclusive finance field needed at the time: improved consumer protection. We are now well into our second decade and our industry is reeling from the ravages of the COVID-19 pandemic. It is perhaps the right time for CFI to reenergize its mandate and spearhead what we believe is needed to “build back better” as the saying goes. As tragic as the pandemic’s consequences have been and continue to be, it has at least laid undeniably bare the failures of the status quo and has created a heightened sense of urgency, for financial services to build back better.

CFI was founded at a particular moment when it was becoming more apparent that market forces alone would not ensure positive outcomes for financial inclusion, and that sustained intentionality would be necessary. The coronavirus pandemic has, at the September 2020 time of writing, infected more than 33 million people and killed nearly 1 million. Beyond the rapid and catastrophic spread of illness and death, the pandemic has devastated global economies. Millions of micro, small, and medium enterprises (MSMEs) around the world have seen revenues plummet and have suspended operations or gone out of business altogether. Hundreds of millions of families have lost jobs and incomes, and many of them live in countries where social safety-net protections are patchy at best. The pandemic also reversed, seemingly overnight, social and economic development gains that had taken decades to achieve: the World Bank estimates that 70 million people are at risk of falling back into poverty. Women and children have been among those most affected: children because schools around the world have been shuttered, and women because they are more likely than men to lose their jobs and to shoulder the responsibility of supervising and homeschooling children.

For CFI, the pandemic has reenergized our purpose. Financial services are critical to reducing low-income populations’ vulnerability and helping them to recover from this and other recurring crises in their lives. We believe we have a leadership role to play in this intensified global effort. We have more than a decade of recognized global leadership in understanding the financial needs and behaviors of low-income vulnerable populations. Complementing this demand-side expertise, our recent <a href="https://content.centerforfinancialinclusion.org/mix-and-cfi-announce-strategic-integration-to-drive-industry-knowledge-for-inclusive-finance/" target="_blank" rel="noopener noreferrer">integration</a> with MIX brings supply-side expertise to the table, as they have been studying and reporting about financial service providers for the past 20 years. These complementary strengths, combined with our history of thought leadership and our role as conveners, positions CFI to pursue an ambitious three-year strategy made all the more urgent in the context of the pandemic.
<blockquote>The pandemic has reenergized our purpose.</blockquote>
The strategic plan which will guide CFI’s work through 2024 focuses on four thematic areas. All of them, to significant degrees, have either been exacerbated by the pandemic or have been revealed by this crisis as urgent and under-attended priorities. The common thread among the themes is that progress in these areas is essential to ensuring that all people have the financial tools needed to improve their lives and to prosper.
<h2>Financial Services to Respond to the Risks of Climate Change</h2>
Just as the pandemic’s effects have been most severe on those who were already the most vulnerable, so too are the effects of climate change. Low- and moderate-income countries (LMICs) in the Global South are likely to experience longer, hotter heat waves and more extreme storms which in turn will create income loss, food insecurity, adverse health effects, and displacement that will hit already-vulnerable LMIC populations hardest.
<blockquote>Financial services are an indispensable tool to help prepare for climate-related shocks and recover.</blockquote>
CFI recognizes that climate change is ultimately an issue requiring long-term systemic changes to entrenched patterns of production and consumption. In the short term, however, financial services are an indispensable tool to help low-income vulnerable people prepare for climate-related shocks and recover from them when they happen. Our work in this theme will focus on understanding what those people need and the constraints they face, uncovering product innovations that can help, and then pilot testing such innovations and scaling-up lessons learned.
<h2>Women’s Financial Inclusion</h2>
Around the world, in many different geographies and socioeconomic contexts, women occupy a “last in, first out” position of vulnerability. The fall-out from the pandemic has made this abundantly clear. Whether it is a workplace where the more recently hired woman is let go before the more senior man, or a financial system that only prioritizes women’s needs when times are good, women’s economic inclusion is seen as a nice-to-have rather than a must-have. Women’s financial inclusion is powerfully shaped by broader societal norms, the unspoken assumptions and values governing men’s and women’s roles. CFI believes that efforts that focus solely on process fixes or product design will not succeed in women’s financial inclusion unless those efforts also seek to transform, rather than merely acknowledge, the underlying norms.

Our work in this area will accordingly include an intensive focus on research into successful norms-transformative initiatives, and how those might be scaled up. We will also work to improve the digital and financial capability of subsegments of women customers, and to influence the policy environment for women’s financial inclusion.
<h2>Data Risks and Opportunities</h2>
The pace of change created by the technology revolution is much faster than law, policy, or social mores can match. Although data privacy and protection regimes have begun to emerge, especially in wealthy countries, data by its nature is universal. To date, there is no universal framework setting forth who even owns personal data, much less governing how it can be used, by whom, and under which circumstances. The COVID-19 pandemic has provided a powerful illustration of both the risks and the opportunities of digitized data. The public health benefits of documenting and following diagnosed COVID-19 cases, and of tracing patients’ contacts, are obvious. But the risks to patients of stigmatizing, discrimination (whether of access to insurance, housing, employment, or otherwise), and other abuses are also very real.

Similarly, in financial services, data is the key that can unlock access to a full range of personalized, effective products that can help low-income people achieve their goals. The risk is that many LMICs have no effective consumer data protection regimes in place and that even where those exist, people with low levels of digital and financial sophistication may, in their eagerness to receive financial services, sign away their rights without even fully understanding them.
<blockquote>CFI will focus on means to bring transparency to data practices in DFS.</blockquote>
CFI’s work in this area will focus on means to bring transparency to the data practices of digital financial service (DFS) providers. We will also study how financial service providers use algorithms, which can be biased against already-underserved populations, in automated decision-making. We will monitor emerging frameworks around the world to document what does and does not work to advance financial inclusion while safeguarding data privacy, portability, and other consumer rights.
<h2>Consumer Protection in the Digital Economy</h2>
As the inclusive finance landscape evolves, so too must the approaches to consumer protection. Social platforms, ecommerce giants, fintechs, and pay-as-you-go providers are all relatively recent entrants into the field, and this means a multi-pronged approach is necessary to ensure safe practices are the norm. This is especially true since many of these business models fall beyond the scope of existing banking regulation. Consumer protection is an evergreen challenge, and one where CFI has long been active.
<blockquote>Consumer protection is an evergreen challenge.</blockquote>
We plan to devote intensive study to the practice of government-to-person (G2P) digital cash transfers, since these are often the on-ramp to digital financial services for low-income populations. We want to understand the risks that digitized G2P transfers present and how governments are mitigating those risks. We also want to document innovations around redress of grievances, financial capability-building add-on services, resolution of connectivity issues, and other relevant lessons learned.

In addition, CFI will partner with regulators and supervisors to test new technologies, such as chatbots or algorithmic audit tools, that can allow supervisors to be in direct dialogue with consumers, without consumer voices being mediated via the financial service providers. Such a dialogue can ultimately improve customers’ experience with financial services and democratize the financial sector by involving customers in the development of financial sector policies. To date, much of the recent work in regulatory technology (RegTech) and supervisory technology (SupTech) has prioritized the data reporting and compliance, but CFI believes its potential for advancing consumer protection has been underappreciated.
<h2>Conclusion</h2>
CFI developed its three-year strategic plan by weighing the needs of the inclusive finance industry against what we see as our own comparative advantages. We recognize that the four thematic priorities we intend to pursue are not an exhaustive list of everything that needs to happen to ensure positive outcomes for low-income people, and we also recognize that other individuals and organizations are doing excellent work in the areas we intend to pursue. We look forward to collaborating with all stakeholders who share the vision of a world where all people are able to equitably participate in the economy and are able to use financial tools to improve their lives and to prosper.

We hope you will participate in the rest of Financial Inclusion Week, which is packed with amazing speakers, events and activities. And, we want to hear from you. Please participate and tell us what you think about CFI’s thematic priorities.

Reflecting on the Past and Charting a New Direction

Appropriate Product Design and Delivery

Human Touch

Responsible Digital Finance

Transparency

<a href="https://www.cdcgroup.com/en/" target="_blank" rel="noopener noreferrer">CDC Group</a>, the UK’s development finance institution, is one of the largest DFIs in the world. With nearly $6 billion invested in companies located mostly in Africa and South Asia, CDC is an impact investor that aims to drive development through commercial means.

CDC invests across a wide range of sectors but focuses on seven priority sectors that it has identified as having the greatest potential for development impact. Among these, the financial services sector currently represents a <a href="https://www.cdcgroup.com/our-impact/key-data#how-we-invest-in-sectors!" target="_blank" rel="noopener noreferrer">greater share of CDC’s portfolio</a> than any other sector.

As part of its exploration into how DFIs are responding to COVID-19, in particular with respect to the role of the financial sector, CFI connected with Machal Karim, an executive on CDC’s Development Impact team who focuses on financial services in developing countries.
<h2>For its COVID-19 response, CDC has laid out three areas of focus: ‘Preserve,’ ‘Strengthen’ and ‘Rebuild.’ Can you tell us more about those?</h2>
We prepared a briefing document with complete details that is available on our <a href="https://www.cdcgroup.com/en/covid-19-response/" target="_blank" rel="noopener noreferrer">COVID-19 response page</a>.
<blockquote>Our immediate priority has been to preserve the viability of our current portfolio of over 1,200 businesses that employ more than 800,000 people combined.</blockquote>
Our immediate priority has been to preserve the viability of our current portfolio of over 1,200 businesses that employ more than 800,000 people combined. This is particularly the case in those sectors most affected by COVID-19, where it’s been crucial to act to protect the positive environmental, economic, and social impact of these businesses. Our support has included providing working capital, technical assistance, and guidance to improve their resilience and protect jobs.

Our second area of focus is to strengthen the resilience of businesses by scaling up our response to the economic and health challenges of the crisis. On the economic side, we’re channeling much-needed liquidity to local banks to enable them to support their business customers. And to support those that have a direct role in combating the COVID-19 pandemic, we are assessing opportunities to invest in businesses providing healthcare or access to basic goods and services.

We’re now at a point where, alongside these more immediate actions, we’re thinking more about our third area of focus – to support economies to rebuild and recover once the worst effects of the pandemic have passed. As a DFI, our role to address the long-term challenges a crisis will bring – continuing to invest patient capital at a time when commercial investors pull back – is vital.
<h2>In terms of ‘Strengthen,’ CDC is looking to provide liquidity for local financial service providers. Have you identified opportunities for this type of support yet?</h2>
We’re giving priority to those who are in most urgent need of liquidity support. Over the last few months, we’ve committed just over $400 million to our program of systemic liquidity.

As an example, we’ve recently made an <a href="https://www.cdcgroup.com/en/news-insight/news/cdc-announces-additional-us75-million-trade-finance-deal-with-absa-as-part-of-covid-19-response/" target="_blank" rel="noopener noreferrer">additional $75 million commitment</a> to our existing trade finance facility with Absa Bank, an African financial services group. The pandemic has put significant pressure on African banks as international banks continue to withdraw from the continent.
<blockquote>What makes this facility particularly innovative is that it is aimed at boosting trade finance funding to some of Africa’s most vulnerable countries.</blockquote>
The investment will enable local banks to sustain the availability of trade finance, supporting supply chains during the crisis. And what makes this facility particularly innovative is that it is aimed at boosting trade finance funding to some of Africa’s most vulnerable countries and in sectors that are critical to serving people’s basic needs during the crisis – food and agriculture and health.
<h2>What about timeframes? What do you see as the medium-term needs beyond liquidity?</h2>
<blockquote>What we do know is that the crisis is shifting from an acute challenge to a chronic one, and this means that our role will be as a partner for the long-term.</blockquote>
CDC has identified various <a href="https://www.cdcgroup.com/en/news-insight/news/guidance-on-protecting-customers-during-covid-19/" target="_blank" rel="noopener noreferrer">short-term to longer-term risks and provided corresponding suggestions</a>, but we’re at a stage where it’s still very difficult to talk about timeframes. We still cannot predict what the ultimate impact will be. What we do know is that the crisis is shifting from an acute challenge to a chronic one, and this means that our role will be as a partner for the long-term, supporting businesses through the course of the pandemic and to rebuild sustainably.

In terms of needs beyond liquidity, our approach throughout has been to provide guidance for employers, investors, and financial institutions on issues ranging from <a href="https://www.cdcgroup.com/en/news-insight/insight/articles/how-can-investors-help-companies-protect-jobs-during-covid-19/?fl=true" target="_blank" rel="noopener noreferrer">job protection</a>, to <a href="https://www.cdcgroup.com/wp-content/uploads/2020/04/CDC-Group-Guidance-on-protecting-customers.pdf" target="_blank" rel="noopener noreferrer">customer protection</a>, to <a href="https://www.cdcgroup.com/en/news-insight/insight/articles/guidance-on-managing-a-remote-workforce-during-the-covid-19-pandemic/?fl=true" target="_blank" rel="noopener noreferrer">remote working</a>. As time has moved on, the nature of this guidance has evolved to include advice on <a href="https://www.cdcgroup.com/en/news-insight/insight/articles/returning-to-the-workplace-during-covid-19-labour-and-workforce-considerations/" target="_blank" rel="noopener noreferrer">returning to the workplace</a> and how to support women working from home with limited access to technology.

Another part of our approach has been to provide support to investee businesses through <a href="https://www.cdcgroup.com/en/covid-19-response-facilities/" target="_blank" rel="noopener noreferrer">our technical assistance facility, CDC Plus</a>. This has included one facility providing grants to businesses, so they can adapt or scale-up to form part of the response to the pandemic, and a second facility to support the development of guidance for companies on how to respond to the crisis.
<h2>Throughout the short and medium terms, CDC suggests businesses maximize their “digital footprint and channels” as much as possible. How are your investees working to accelerate digitization for consumers?</h2>
We’ve been supporting our investee businesses, including financial institutions, to proactively explore how they may want to pivot their current products or operations to better meet customer needs. Much of this has revolved around learning more about digital opportunities and maximizing their digital offerings so they can continue to operate under the changing environments and new types of customer interaction and behavior that the pandemic has brought about.

We continue to support our investees through various channels, including our technical assistance facility, to explore these opportunities and step up their activities as economies open up.
<h2>Consumer protection remains an important topic for CDC. How have consumer protection challenges shifted in the COVID era?</h2>
<blockquote>Consumer protection risks have become particularly heightened due to the pandemic.</blockquote>
We recognized that financial institutions and their customers would come under particular stress as a result of COVID-19. Consumer protection risks have become particularly heightened due to the pandemic, as financial institutions have had to balance the immediate stress on liquidity with the need to sustain support to their customers and abide by regulatory requirements.

Early on, we ensured that the financial institutions we’re invested in had the support they needed to make decisions and manage risks while protecting customers, such as by issuing this <a href="https://assets.cdcgroup.com/wp-content/uploads/2020/04/09165635/CDC-Group-Guidance-on-protecting-customers_9-April-2020.pdf" target="_blank" rel="noopener noreferrer">guidance document</a>. Mindful of the many stresses on employment, liquidity and cashflows, we urged our financial institution partners to continue to consider the needs of, and risks to, customers through the crisis.
<h2>How has this crisis shifted the perception of inclusive finance, if at all?</h2>
<blockquote>Now more than ever, support to financial systems is critical for economic recovery, particularly for the most vulnerable.</blockquote>
Now more than ever, support to financial systems is critical for economic recovery, particularly for the most vulnerable. Our work to provide systemic liquidity has been a concrete channel of support to the market, with an explicit focus on supporting the most vulnerable first and ensuring their liquidity needs are managed.

When we start to recover, it will be vital to remember all segments of the market to ensure that the most vulnerable and excluded groups are not left behind. It will also be important to continue to support financial institutions in reaching those customers that have historically been perceived as higher risk and harder to reach, as they are also the most vulnerable.
<h2>CDC’s head of Africa has argued that the banking sector is where DFI support is most crucial, but that private capital will be required in the longer term. Does CDC structure any direct support to MSMEs or does everything flow via the banking sector?</h2>
<blockquote>We know that our most effective way for getting capital to SMEs is through partners, rather than investing directly.</blockquote>
A key part of our <a href="https://www.cdcgroup.com/wp-content/uploads/2020/05/Financial-Institutions_11.pdf" target="_blank" rel="noopener noreferrer">Financial Institutions' Strategy</a> is to help intermediaries serve SMEs because SMEs are the growth engines of the economy in our geographies. We know that our most effective way of getting capital to this size of business is through partners, rather than investing directly.

This includes investing in non-bank financial companies so that alternatives to traditional bank financing become available to SMEs, as well as supporting microfinance institutions looking to extend their lending to SMEs. It also includes working with our bank investees to increase the finance they provide to SMEs. This can mean funding work to develop products and operations better suited to SME clients. And it can mean entering into risk-sharing agreements, which reduce banks’ capital cost of lending to SMEs, or trade finance agreements to bridge the ‘trade finance gap’ and support trade undertaken by local businesses. Finally, it includes investing through funds to reach SMEs with different types of capital.

That’s why an important part of our response has been focused on working with our investee financial institutions, so that we can quickly help them to increase the credit available in our markets. For example, by expanding our pre-existing trade finance programs, we can inject liquidity quickly and accurately, and ensure that domestic supply chains keep operating, which in turn supports SMEs within those markets.
<h2>Has CDC coordinated with other DFIs on its COVID-19 response? What’s been the nature of this inter-DFI coordination, and what more can be done?</h2>
DFIs came together very early on to find ways to collaborate in response to the pandemic. The <a href="https://www.cdcgroup.com/en/news-insight/news/development-finance-institutions-join-forces-to-respond-to-covid-19-in-developing-countries/" target="_blank" rel="noopener noreferrer">DFI Alliance</a>, involving organizations from 16 OECD countries, has been working together to bring liquidity to the market, support companies impacted by the virus, and promote new investment.

CDC has been working with both bilateral and multilateral DFIs. There are various working groups underway coordinating on areas ranging from technical assistance funding, to our approach to certain sectors, to supporting the liquidity of investment funds.

We’ve also been collaborating on how to support the rebuilding of businesses and economies in a way that is more inclusive. For example, alongside our peers, we <a href="https://www.cdcgroup.com/en/news-insight/news/2x-challenge-and-gender-finance-collaborative-response-to-the-covid-19-pandemic/" target="_blank" rel="noopener noreferrer">called for a gender-sensitive approach</a> among investors in both immediate responses and longer-term recovery solutions.
<blockquote>We will continue to stand firm to play our role at a time when commercial investors are pulling back.</blockquote>
We feel proud of what we’ve been able to achieve so far and recognize there is a lot more to do as the pandemic shifts from an acute to a chronic challenge. Our approach of providing much-needed liquidity through financial intermediaries is very likely to continue to be needed in the coming years. We will continue to stand firm to play our role at a time when commercial investors are pulling back, so that in the long-term, businesses and economies are able to successfully rebuild.

DFIs, Financial Inclusion and the COVID-19 Response: A Q&A with Machal Karim of CDC

South Asia

Test of a Lifetime: COVID-19 and Financial Inclusion

Digital Credit

Credit

Microfinance

Microfinance Institutions

MSME/SME Finance

Responsible Investing

Impact Investing

Supply Chain Finance

Julia Arnold

Senior Research Director, Women's Financial Inclusion

Mayada El-Zoghbi

Managing Director

Smriti Rao

Elizabeth  Anderson

Ezra Mannix

Rachel Heath

Munshi  Sulaiman

Nusrat  Jahan

Machal Karim

Camilla Nestor

Mark Pickens

Joanna Ledgerwood

David Ferrand

Eric Noggle

Maha Khan

Carrie Ruh

Richard  Greenberg

Laura Schroeder

Alreena  Pinto

Amit  Arora

Indonesia

India

Latin America and The Caribbean

Agricultural and Rural Finance

Smallholder Farmers

Entrepreneurs of MSMEs

Equity Investing

Valuation

Credit Provision

Underwriting

Many have compared the steps required to overcome COVID-19 with those taken in previous economic crises or <a href="https://centerforfinancialinclusion.org/pandemics-and-natural-disasters-what-can-we-learn-from-past-disasters-to-help-with-todays-pandemic/" target="_blank" rel="noopener noreferrer">natural disasters</a>, 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

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

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

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”

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”

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.

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

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

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