Sub-Saharan Africa’s financial inclusion has surged to new heights. In 2017, the number of adults with a bank or other financial account increased to 43 per cent, up 9 percentage points from 2014. The take-off of mobile money on the continent has largely driven this strong growth, as ownership of such accounts doubled to 21 per cent.
However, while Africa’s improved financial inclusion is cause for celebration, its growth has been lopsided, with women significantly trailing men.
Despite holding promise, mobile money is not a silver bullet to closing Africa’s financial inclusion gender gap. Not only do 14 per cent fewer African women own a mobile phone than men, but phone ownership does not automatically translate into mobile money use.
Commercial banks in Africa — given their presence in different markets, their adoption of technologies enabling wide distribution and their legacy in providing trusted financial services — should take the lead in serving unbanked women by offering gender-sensitive products.
While a financial inclusion gender gap is present in all emerging markets, averaging at 9 per cent from 2011 to 2017, sub-Saharan Africa has the second highest gender disparity of any region, with the global average doubling in countries such as Zambia and Mozambique.
READ ALSO: Bridging financial inclusion gender gap: A policy priority
Roughly 35m women in sub-Saharan Africa are excluded from financial services. Compliance and regulatory procedures are partly to blame. In Uganda, know-your-customer (KYC) requirements often prevent women from opening bank accounts, as they are unable to provide formal documentation such as a government-issued ID, phone number, or utilities payment history. Given that most women are unable to provide traditional forms of collateral such as a land title, they struggle to borrow money.
beyondbrics is a forum on emerging markets for contributors from the worlds of business, finance, politics, academia and the third sector. All views expressed are those of the author(s) and should not be taken as reflecting the views of the Financial Times.
The adoption of collateral registries, which accept a broader class of assets as security including tangibles (inventory, livestock, vehicles and machinery) and intangible (intellectual property, stock, deposit accounts), can help women access credit as they are more likely to own moveable assets. Liberia and Ghana have developed modern registries while Malawi and Rwanda have reformed laws to meet international accepted standards. Collateral registries are a step in the right direction, representing the type of reforms that banks should support to help increase women’s financial inclusion.
Alongside efforts to eliminate barriers to entry, African banks must tailor banking services and products to women in order to address their specific needs.
Financial products that claim to be gender-neutral are far from it; they are often designed to fit men’s needs, inadvertently alienating women. But, research suggests that women’s banking products do not put off men, as men are equally if not more interested in them.
Banks should consider women’s lower financial and digital literacy levels and offer financial literacy training as an added service to attract women. In Uganda, Centenary Bank offers literacy and digital programs as part of its SupaWoman Club, having trained 20,000 women since launching in 2015. Under its Fanikisha brand, Kenya’s Equity Bank has adopted a segmented approach, offering a range of women’s credit products with discounted business trainings, flexible collateral, and adjustable repayment periods.
Moreover, banks need to conduct more gender-segmented market research in order to design products that meet women’s needs. For instance, women are more discerning customers, asking for more information before buying products and services than men. Women are also more price-point sensitive. As current financial services and products fail women, banks need to design new offerings that meet women’s needs, providing added services and doubling down on gender-segmented market research.
Increasing women’s formal financial inclusion will yield knock-on effects for African economies. Despite other lower gender indicators, sub-Saharan Africa punches above its weight in the number of its women entrepreneurs. In 2018, Ghana led a global list of women business owners (as a percentage of total business owners) at 46.4 per cent. Uganda came in third place with 33.8 per cent.
As small and medium sized enterprises (SMEs) are the critical source of jobs in Africa, representing over 90 per cent of all businesses outside of agriculture, women-owned SMEs, accounting for a third of all total registered SMEs on the continent, represent a source of untapped economic potential. Credit starved, women-owned SMEs have lower sales and annual revenues, smaller payroll, and are smaller in size than SMEs owned by men.
If banks closed the credit gap, women-owned SMEs could invest in their businesses, boosting both sales and hiring. Moreover, providing credit to women-owned SMEs could increase income per capita an average of 12 per cent by 2030. These numbers are compelling reasons for banks to extend credit lines to women entrepreneurs.
Closing the gender gap should represent an integral pillar of African banks’ efforts to increase their bottom line. Not only will increasing women’s access to financial services boost overall financial inclusion, it will unleash significant economic growth, leading to the take-off of women-owned SMEs.
Banking on women is in the interest of banks. As Africa’s commercial banks grapple to differentiate themselves from mobile money and fintech providers, women represent an untapped customer base worth potentially billions of dollars. Banks should lead the charge in developing Africa’s women’s economy.
