Karina Azar
Ejecutiva de la Dirección de Análisis y Evaluación Técnica del Sector Privado
This blog was published by Karina Azar and Diana Mejía
The COVID-19 crisis has led to disruptions in economic and social dynamics, exacerbating the gaps that have existed long before the pandemic. It also poses a challenge in women’s access to banking during and after the pandemic, especially in low-income families. Risks to women in micro-enterprises, a business segment in which they represent and largest share, as well as in the informal sector, remain high, as income generation has been impacted by lockdown measures.
In this connection, gaps in women’s financial inclusion are also at risk of widening as a result of the health care crisis. To mitigate this risk, it is important to put financial inclusion into perspective as a multidimensional concept and, based on each component, reflect on which opportunities arise and can be leveraged by governments and financial institutions to improve women’s financial inclusion.
First, it is important to highlight the four dimensions of financial inclusion: access, use, quality and impact on financial well-being or health. The first of these, i.e. access, refers to the fact that everyone must have access to an account, whether transactional, savings, or an electronic wallet. According to figures fromGlobal Findex, 57.4% of men have a bank account, compared to 51.4% of women: This means that 304 million women in Latin America do not have an account at a banking institution. Having access to the financial system is crucial, especially in the context of the COVID-19 pandemic, where most governments in the region are providing subsidies to the population and most recipients of these money transfer programs are women. While governments in the region have made significant strides in access of money transfer program recipients to banking services, the current crisis demands additional efforts to aid millions of additional beneficiaries, many of whom are informal working women, through electronic transfers that, in turn, minimize face-to-face contact and cash exchange—thus reducing another risk of contagion. Another opportunity is to create or strengthen partnerships with fintechs with payment solutions through e-wallets, in an effort to further improve women’s access to financial products and services.
From a usage perspective, it is important to design effective financial literacy programs that consider gender differences and focus on behavior changes. CAF Financial Capacity Measurement Surveys conducted in seven countries in the region, show that, on average, women have a different financial behavior profile than men: They have less confidence in financial matters and more risk aversion; they have different strategies for dealing with extreme situations, for example, women tend to cut spending, while men prefer to find ways to earn extra money; and are more prone to save money through informal mechanisms. However, also noteworthy is that there multiple segments of women, and therefore, profiles and needs may vary. Financial literacy programs need to be focused on women’s segments in order to provide solutions to their needs in the short and long term. These financial literacy programs must, for example, allow women who are beneficiaries of subsidies or money transfers to make an adequate use of the funds received with financial well-being in mind, but these programs will also be key to the post-pandemic economic recovery measures of MSMEs, which are mostly owned or managed by women.
As for the quality component, evidence shows the need to develop financial products that take gender differences into account and that they can operate as a vehicle to convey some of the critical knowledge to improve women’s financial decisions. In other words, it is important to take advantage of the context during and after COVID-19 to provide access to different financial products with features that can lead to changes in behavior. We recommend that financial institutions migrate to the provision of products and services designed for women. In this sense, the collection of data on women’s behavior within their portfolio can shed light about women’s financial behaviors and help come up with new lines of business. Issues such as default or repayment rates, use of loans, for men and women, can serve as a baseline to assess the impact of COVID-19 on women as customers in the financial system. Also, women’s MSMEs should receive customized support from institutions, such as advice on digital transformation, in order for their business models to migrate to digital standards, to ensure profitability in a post-COVID-19 context.
The financial health outlook is also relevant in the COVID-19 context. Understanding this issue as a priority in public policy is key, by making systematic measurements to make efforts to get individuals and companies to devise and implement strategies to improve their financial health. This will help them become more resilient and less vulnerable in shocks such those created by COVID-19. This is the case in some countries in Africa, where financial institutions expanded their range of services and began to venture into the niche of micro-insurance for pandemic-related issues. This was inspired by the fact that health planning is crucially important for women, and this is in fact one of the three main uses of the loans for which they apply from financial institutions in Latin America.
In addition to the analyses of opportunities that COVID-19 may represent for women’s financial inclusion issues, it is important that stakeholders in this ecosystem can respond in a timely manner to the risks that the health crisis poses to women.
CAF—development bank of Latin America—is supporting the region in an expedite and timely manner through a series of financial and technical instruments in addition to the measures being taken by governments, and has the resources and technical expertise to assist them in the urgent need to improve women’s financial inclusion, as a cornerstone for a comprehensive recovery and development strategy.
