When it comes to financial inclusion, women’s participation rate continues to lag in India. Financial inclusion is a key indicator of development and has been identified as a key component for at least eight of the adopted 17 Sustainable Development Goals (SDGs).
As per global studies, access to bank accounts, loans, insurance, and other financial services, results in direct improvements in outcomes of health, education, and employment.
But in India, the situation is far worse than at par economies. According to a 2020 study, women in India receive a credit equivalent to only 27 per cent of the deposits they contribute, while men receive credit equal to 52 per cent of their deposits. The lag might be due to women not taking advantage of their credit history by applying for loans, and it may be that financial institutions do not grant credit equitably to women.
Missing gaps
Picture this, in India, 42 per cent of women had an inactive account in 2021 compared to 30 per cent of men. The difference of 12 percentage points is much higher than the global average of a five-percentage point gap.
Low engagement and inactive accounts are possible explanations for women’s low credit adoption in India. One of the primary reasons for this lag is the lack of proof of identity or a mobile phone.
According to a Unicef report, as many as 90 per cent of the jobs in the world today have a digital component. These jobs, however, are available only to the digitally able, and to more men than women. The report highlighted that in developing countries only 41 per cent of women have access to the internet compared with 53 per cent of men.
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Women are 20 per cent less likely to own a smartphone and are more likely to borrow phones from a male family member.
Data from the Global Findex Database 2021 shows that Indian women and the poor are more likely to lack proof of identity or a mobile phone, live far from a bank branch, and need support to open and effectively use a bank account.
“One major factor is India’s patriarchal culture that emphasises on women being the primary caregivers and homemakers coupled with social norms that often restrict women's mobility, access to resources, and financial decision-making power. Financial constraints discourage them from owning mobile phones, especially smartphones, or accessing the internet and other digital financial services. Another factor is the dearth of targeted financial education and awareness campaigns that are tailored to women's specific needs and challenges,” said Rajsri Rengan, Head of development, Banking & Payments, India & Philippines, FIS.
Many Indian women, particularly in rural areas, are not exposed to the benefits of digital payments or how to use them. They also may not have easy access to financial institutions that provide digital credit services. Lack of financial independence and the knowledge to handle extensive forms, documentation, and so on, prevent women from taking advantage of the opportunities provided by digital payments.
"The gender gap in accessing financial support is one of the most pressing issues in India. This gap is particularly acute when it comes to owning financial instruments and using digital payments. Women are also significantly less likely than men to own credit and debit cards, and also lag in smartphone fintech usage, which in turn can limit their ability to access financial services that are essential for economic security and growth," said Jaya Vaidhyanathan, CEO of BCT Digital, division of Bahwan CyberTek (BCT).
Progress so far
The Central government, since PM Narendra Modi came to power, has invested heavily in Digital Public Infrastructure. The Centre introduced Jan Dhan Yojana (PMJDY) in 2014, and also adopted the linking of Aadhaar cards, which brought in a major change for women, both in urban and rural areas.
As per government data till February 2023, there were about 483 million PMJDY beneficiary accounts with an aggregate balance of Rs 190 lakh crore and 320 lakh crore RuPay Cards.
If we see women as a whole, the segment continues to be neglected. Banks and formal financial institutions are less keen on offering loans, credit or debit cards.
According to a survey conducted by the Securities and Exchange Board of India (Sebi), only 23 per cent of Indian women have knowledge of financial planning and investments. There is also a gap in terms of access to financial services in many parts of the country, particularly in rural areas. This makes it challenging for women who live in these areas to access financial services like banks and ATMs. This is further exacerbated by the lack of targeted financial products and services that cater specifically to women's needs.
In addition to this, there is a dearth of information among low-income and rural women about the bouquet of Jan Suraksha products, like insurance and pension, which they are entitled to.
“There is also a level of distrust in digital financial services among women due to concerns over security and privacy. This is often compounded by social and cultural norms that restrict women's mobility and decision-making power, making it challenging for them to engage in financial transactions, especially digitally or through credit and debit cards,” said Hardika Shah, Founder and CEO, Kinara Capital.
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Financial inclusion target
According to the Reserve Bank of India’s data, the banking system in India has been able to push forward financial inclusion since its initial steps in 2010. As per RBI’s FI Index, the financial inclusion penetration has increased to 56.4 by March 2022, up from 43.4 in March 2017 registering a compound annual growth rate (CAGR) of 5.5% during the period.
From 2011 to 2017, there was a vast initiative in India and some 80 per cent of the qualifying population now had bank accounts, a 30 per cent jump within a few years. Certainly, Jan Dhan was a wonderful initiative toward driving the financial inclusion of unbanked women consumers. The next steps in bringing them on board would be providing financial literacy training and education,” said Hardika Shah of Kinara Capital.
“Besides the government initiatives, fintechs with their custom-built API-based platforms and AI/ML algorithms can access numerous alternative sources of data, and analyse them through thousands of data points, making credit underwriting and assessment robust and easier for women lenders. Fintechs also have to step in to help in the rapid calculation of their creditworthiness, and thus let women access hassle-free and quick credit options,” said Rajsri Rengan of FIS.
A favourable policy environment to promote the digital empowerment of women is a step in the right direction.
“UPI is emerging as a major enabler for driving financial awareness in tier-II and beyond cities and towns. With women becoming more confident with their small ticket-size financial transactions, the ability to do other banking transactions is also coming about. As a nation, our digital payment adoption is on an accelerated path that will change the scenario in the coming years,” said Jayatri Dasgupta, Chief Marketing Officer, PayNearby.