Realizing Women’s Financial Inclusion: from Access to Usage of Bank Accounts

Credit and Finance for MSMEs: Given the penetration of banking services to every Indian household, being unbanked is no longer an issue - the PMJDY has enabled women’s access to bank accounts. Now, the focus is to get women to use them.

February 12, 2023 11:00 IST

Realizing Women’s Financial Inclusion: from Access to Usage of Bank Accounts

By Kalpana Ajayan and Radhika Agashe

Credit and Finance for MSMEs: India has set the stage for financial inclusion with national drives like the Pradhan Mantri Jan Dhan Yojana (PMJDY), the Aadhar biometric infrastructure, and mobile and digital penetration. This has helped India make significant strides in providing last-mile delivery of banking services to underserved communities. The PMJDY has facilitated the opening of millions of bank accounts – since 2014, over 46 crore bank accounts have been opened with a deposit balance of Rs 1.74 lakh crore. Fifty-six percent of PMJDY bank accounts are owned by women.

Given the penetration of banking services to every Indian household, being unbanked is no longer an issue – the PMJDY has enabled women’s access to bank accounts. Now, the focus is to get women to use them. While many of these women are actively using their PMJDY accounts, they are doing so only to access direct benefit transfers and not to deepen their financial engagement through savings, building credit histories, or accessing financial products like microinsurance, pension, or micro-loans.

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In India in 2021, 42 per cent of women had an inactive account compared to only 30 percent of men. The difference of 12 percentage points is much higher than the global average of a five-percentage point gap. This is because low-income women continue to save informally, which translates into other pain points. Given that women are natural savers; how do we encourage them to save in the formal financial space?

Barriers to women bank customers

A pertinent question is why low-income groups and rural women feel reluctant to come to banks. The answer is multi-fold. Women underestimate their contribution to household incomes, even if they partake in family occupations like agriculture or small businesses. They feel that banks are places for high savers and their meagre savings are best kept in homes. Women face greater barriers when it comes to access like traveling to banks, owning phones, or using the internet. Additionally, there is a dearth of information among low-income and rural women about the bouquet of Jan Suraksha products, like insurance and pension, that they can avail of.

Making banks welcoming for women

While India is on the path to financial inclusion, deploying gender-focused products and services can accelerate women’s real engagement with the banking sector. Simply ensuring that banks and banking become welcoming spaces for women customers is a critical point to start with. Women’s World Banking collaborated with a Public Sector Bank (PSB) to launch the Jan Dhan Plus savings solution that encouraged low-income and rural women to save Rs 500 each month in their bank accounts, which, after five months of saving, could unlock an overdraft of Rs 10,000. Building a habit of saving formally can also help build their transaction histories and make them eligible for loans.

By training and mentoring Business Correspondents (BC) and BC Sakhis (women banking agents) with a focus on gender sensitisation, banks can ensure their services reach women customers effectively. Some PSBs are now also working towards reserving 30 percent of BC opportunities for women to serve women customers.

Building financial capabilities of women

Building financial awareness and capabilities of women to understand and access financial services is a critical enabler for facilitating their engagement with banks. The Reserve Bank of India is scaling up the Center for Financial Literacy (CFL) initiative in a phased manner and plans to cover all blocks of the country by March 2024. In addition to awareness building activities, women from poor and low-income background need individualised hand holding and counselling which the financial intermediaries, particularly the BC agents, can provide. Training BC agents as financial advisors that share information about various financial products and entitlements with women and encourage them to use financial services including saving and digital transactions, and to meet their financial goals is important for achieving real outcomes.

Taking India’s financial inclusion model to the world

Basis the findings from the Jan Dhan Plus programmes across urban, peri-urban, and rural areas, we have significant proof that financial service providers can accelerate their efforts toward comprehensive financial inclusion by taking a gender-intentional approach. This is even more relevant now as India takes on the helm of G20, and advancing women’s economic empowerment and entrepreneurship identified as a priority area. The country’s experience in mainstreaming financial inclusion, through savings, micro-insurance, micro-pension, and micro-credit, can be a replicable model for other developing countries participating in the G20.

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Because when a woman saves formally, her family and community benefit. Savings helps build resilience and provides women greater adaptability to external shocks like economic challenges, climate crises, and personal upheavals like the death of family members. We need to target policies and initiatives that address systemic barriers to her social and economic participation, and lead to her empowerment. Mainstreaming women’s financial inclusion is the need of the hour.

Kalpana Ajayan is the Regional Head- South Asia at Women’s World Banking and Radhika Agashe is the Executive Director at ACCESS Development Services. Views expressed are the author’s own.