GS Paper III

News Excerpt:

Gender disparities in India's financial inclusion emphasize the need for tailored services for women.

More details on the news:

• India has made great strides in financial inclusion. According to Global Findex 2021, bank account ownership in the country has grown to 78%.
• The value of Financial Inclusion (FI) Index, which captures the extent of financial inclusion across India, improved to 60.1 in March 2023 vis-à-vis 56.4 in March 2022.
• Delving deeper into gender-disaggregated data, however, reveals alarming facts.

Challenges to financial inclusion for women in India

       Digital Disparities:

• Women, despite increased bank account ownership, face a significant gap in digital literacy and usage.
• Women are 13 % less likely to use their accounts for digital payments. And while women tend to save more money than men, only 28 %  use savings accounts.
• Limited access to and familiarity with digital technologies hinder their ability to leverage the full spectrum of financial services.

      Loan Approval Hurdles:

•  If a woman applies for a loan to buy a two-wheeler, she is likely to be asked to bring along a male guarantor. This is commonplace in rural settings for banks to exercise caution when extending loans to women without the presence of a guarantor or collateral.
• What could potentially be a channel for mobility and independence is marred by dependence on male family members.

 Underrepresentation in Financial Management:

• Women make up a meagre 16 % of management roles in financial services, according to the 2022 ‘Mind the Gender Gap’ report by the CFA Institute.
• An industry that intends to serve women has so few of them in its ranks, and is missing valuable perspectives as a result.
• This leads to traditional socio-cultural norms and personal biases seeping into policy, product and process design.

       Business Correspondent Gender Disparity:

• The business correspondent (BC) model was introduced to extend banking services to unserved areas.
•  Originally seen as a supplement to brick-and-mortar banking, BCs have become the predominant delivery model for financial services. Unfortunately, less than 10% of the BCs are women.  

       Credit Invisibility and Denial:

• First-time women borrowers are often denied loans from formal institutions because they do not have a credit history.
• This credit invisibility keeps them out of the formal credit economy, pushing them towards informal sources with higher risks and interest rates, perpetuating financial exclusion.

     Educational and Technological Barriers:

• Women face financial exclusion due to illiteracy, absence of smartphones, and distant bank branches.
• This leads them to rely on cash, depend on friends/family, or resort to usurious moneylenders, making them susceptible to theft and exploitation and perpetuating the cycle of poverty.

  Gender-Neutral System Flaws:

• Many financial systems suffer from the 'shrink it and pink it' approach, lacking genuine understanding of women's needs and challenges.
• A gender-neutral design often fails to address the unique dimensions of financial inclusion for women.

Way forward:

• Women must be recognized as a distinct sector where we need to work on the entire fulfillment ecosystem – from hiring and distribution to technology, processes and policies.
• This might seem like a gargantuan problem but designing financial services for women is just good business sense.
• Women have lower defaults, tend to save more and make timely repayments compared to men.  Designing for the invisible half of the population is not an act of generosity;   it is a pathway to equitable economic prosperity.
• Use technology to simplify financial access, especially for women facing challenges like illiteracy and lack of smartphones.
• Introduce services that provide banking facilities at the doorstep, making it convenient for women, especially in remote areas.

 Mains PYQ

Q. Is inclusive growth possible under market economy? State the significance of financial inclusion in achieving economic growth in India. (UPSC 2022)