• Win-Win: Financial inclusion of Women Could Boost the GDP

    Research by the International Finance Corporation (IFC) shows that greater participation of women in the economy could mean GDP gains of 2-3.5%. It’s simple math -– a country cannot realise its full economic potential if 50% of the population is excluded from productive economic activity.

    Access to financial services is at the core of this economic participation. Studies show that female participation in the formal financial ecosystem enables them to invest in their own future and that of their children by saving, putting money in education and businesses and empowering themselves. Yet, there is a massive gender gap in financial inclusion globally – 65% of men have bank accounts, as opposed to just 58% women.


    But let’s talk basics.

    Only 53% of Indians have a bank account. Though the percentage of financially included women i.e. those having a basic savings bank deposit account, has increased from 26%[1] to 47%[2] between 2014 and 2016, it is still not sufficient.

    Financial Inclusion

    The Government of India’s Pradhan Mantri Jan Dhan Yojana (PMJDY) — the world’s largest financial inclusion program which focuses on opening at least one account per household — encourages these accounts to be in the name of women, and has done well to push these numbers.

    However, opening a bank account does not guarantee access or usage of financial services and many accounts remain inactive or are accessed by men, who invariably are the main decision makers on financial issues within a household.

    A recent Mastercard study found out that 58% of all women in India report facing difficulties in accessing savings and credit because of their gender. The government’s new endeavour, MUDRA bank, which was meant to give loans to small and medium enterprises (SMEs) has only (roughly) 20% female borrowers[3]. Even where women have access to their accounts, institutional savings by women in banks are low and only 13% of total deposits belong to women[4]. This situation exists even though statistically women have better repayment rates than men.


    While improved financial services for all are being pushed by the government, schemes and programs are not specifically tailored to the needs of female customers. Structural issues such as limited awareness, lack of bargaining power within the household, lack of mobility, gender gap in mobile ownership and usage, etc. hamper women’s access to finance.

    There are other issues like lack of assets in the name of women, which prevent women from getting individual loans. All of these issues are further compounded by the fact that a small number of villages have a bank branch within 5KM. The government has been pushing bank correspondents (BCs) to reduce the distance between banks and customers but the model is currently not sustainable as the incentives for BCs are not sufficient. The RBI increased commissions recently, but these have also not proved to be enough.


    So what does needs to be done to improve access to finance among women? The government and financial institutions like banks must understand that women are profitable customers and that it is necessary to invest in them. There is a need to understand the factors that limit access for women and design products and schemes to overcome these challenges.

    Ensuring that efforts are effectively marketed to women, to ensure uptake is extremely important. Finally, the government should invest in financial literacy so that women can make the most of the schemes and products available to them. The Government of Rajasthan started the Bhamshah scheme, a multi-benefit card linked to a bank account placing women at its core.

    If an investment is made to bring women within the fold of organised financial services i.e. if we put money in the hands of women — the sky is the limit!

    [1] Findex Report, World Bank, 2014

    [2] http://www.financialexpress.com/india-news/pmjdy-helped-more-women-financially-empowered-report/307902/

    [3] SBI claims 23% of all MUDRA loans are to women, this has been extrapolated as SBI is one of the biggest lenders in MUDRA. http://indianexpress.com/article/opinion/columns/jan-dhan-aadhaar-mudra-loans-rural-women-empowerment-sbi-2926451/

    [4] RBI

    Astha Kapoor is a strategy consultant at MicroSave working on public policy issues. Views expressed here are personal. She can be reached @KapoorAstha

    Women Entrepreneurs in India