What women want

| Updated on January 13, 2018 Published on February 21, 2017

Financial inclusion for women requires innovative credit assessment and breaking away from stereotypes

After the initial announcement that the Bharatiya Mahila Bank would participate in the mega-merger of State Bank of India and its subsidiaries, the fate of this bank is now in limbo, with the Cabinet undecided on its merger. The reason for this flip-flop is unknown. But it is clear that the bank, launched just three years ago to promote women’s empowerment and financial inclusion, is still a long way from attaining its lofty objectives. With just 100 branches and a business of ₹1,548 crore (March 2016), its operations are nascent.

That the cause of financial inclusion and economic empowerment for women in India needs urgent policy intervention is brought home by several statistics. The World Economic Forum’s 2016 Gender Gap Report ranked India a lowly 136 out of 144 countries in terms of economic participation and opportunities for women. Official statistics suggest that, even after a brisk pace of account openings under the Pradhan Mantri Jan Dhan Yojana, fewer Indian women (61 per cent in 2015) own bank accounts than men. Research studies show that women-run small and medium enterprises face great difficulty in accessing formal credit, and if they do, are forced to fork out higher interest rates than male-run firms. If women in business and lower-income brackets face out-and-out discrimination, affluent ones have to make do with sub-optimal products from financial services firms due to stereotyping. Banks vending ‘special’ women’s savings accounts and credit cards seem to think that discounts on apparel, cosmetics and spa treatments, with the odd ‘well-woman’ check-up thrown in, is all that is needed to customise their offerings for women. Even Bharatiya Mahila Bank’s initial suite of loan products for women focussed mainly on kitchen renovations, beauty parlours, daycare centres and catering services. All this runs contrary to the experience that women borrowers tend to be more disciplined with savings and timely with loan repayments. This is indeed why much of the lending by microfinance institutions and self-help groups is deliberately targeted at women of the household. If women face high barriers to bank finance despite this, it can be attributed not just to gender bias, but also to their lack of access to collateral (property titles are mostly held by male members) and financial literacy constraints. On these counts, financial institutions and policymakers need to do far more than engage women employees. They need to drive financial literacy among women borrowers and explore innovative means to assess their credit-worthiness in the absence of collateral. Digital footprints and transaction data mined by new-age alternative credit scoring platforms can be of great help to assess repayment ability, and banks must leverage these for innovative alternatives such as flow-based lending.

Overall, women face different financial challenges from men and have unique financial planning needs. It is time both policymakers and financial services firms tried to understand the financial needs of women through serious grassroots research, instead of relying on stereotypes to bridge the gender divide in finance.

Published on February 21, 2017
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