Small savings, big impact: Building low-income women’s financial resilience will have wider economic benefits for everyone

March 5, 2021 4:45 AM

While Covid-19 exposed financial vulnerabilities of individuals and households across the globe, it was women and particularly low-income women who remained more disproportionately affected during the crises.

The pandemic has underscored the importance of saving for emergencies, making it an opportune time for FSPs to enable low-income women’s engagement with savings products.The pandemic has underscored the importance of saving for emergencies, making it an opportune time for FSPs to enable low-income women’s engagement with savings products.

By Sriraman Jagannathan & Pallavi T Madhok

Covid-19 taught us the importance of saving money over discretionary spending. While it exposed financial vulnerabilities of individuals and households across the globe, it was women and particularly low-income women who remained more disproportionately affected during the crises. Low-income women working in the informal sector remained especially vulnerable to job insecurity with little to no measures to protect them from the economic shocks of the pandemic.

In this setting, identifying the power of ‘Savings’ as a financial tool that can help low-income women restore their financial resilience, becomes important. The same presents a vital opportunity to reflect on the need for savings mobilization among low-income women post- pandemic and the role that Financial Service Providers (FSPs) can play in empowering them financially.

According to a national survey conducted by an Indian life insurance company in 2019 covering 5,000 low-income women, nearly 75% respondents (aged 26-41 years) preferred putting money in savings bank accounts as opposed to 12% who opted for life insurance, hinting at greater affinity towards the former medium.

Against the backdrop of the pandemic, the security that savings offer can bolster both personal and professional growth. A bank account can help women accumulate interest through regularised savings, hedge against financial shocks and therefore stand to be provided an impetus to, to encourage formal savings.

As per a more recent pilot work, it was also found that bundled financial products that offer savings account alongside credit can positively help women customers become financially resilient. Moreover, the pilot established that when women customers open a formal savings account and build a habit of depositing into it, even in small amounts, they have the power to impact the savings habits of family members. Their savings habit, if carefully nurtured, can make millions of households financially resilient.

While the pandemic may induce certain predictions about low income women’s savings behavior, for instance, that they would be less likely to save on an average now, existing data depicts otherwise. A recent research found that low-income women’s targeted savings activity continued even after the lockdown. The likelihood of skipping a deposit during the pandemic remained much lower for those who were saving for emergency fund (pre-pandemic), than those saving for less urgent needs such as home improvement, making Covid-19 a great opportunity to help lay foundations of lifelong savings habit.

The pandemic has underscored the importance of saving for emergencies, making it an opportune time for FSPs to enable low-income women’s engagement with savings products. Here are three ways in which they can do that:

Awareness: To build awareness regarding savings products, it is necessary to establish robust touchpoints for women and educate them about saving tools in a language they understand. Women need to see the value in changing their established habits of using informal banking methods and are more likely to adopt formal banking options once they believe the service is relevant for them.

Active usage: To keep women using savings on a regular basis, it is necessary to have well-trained agents that women trust. Building robust literacy programs to familiarize women with formal financial services is key. Since women feel more comfortable learning from women agents, FSPs must nurture more women business correspondents for last mile delivery of financial services to low-income women.

Retention: FSPs must treat women as a distinct segment served by solutions designed to respond to their unique challenges. This can be done by adopting a women-centric approach in designing and delivering their tailored services. When treated with respect and with well-designed products, women can be nurtured as loyal and profitable customers.

Regardless of where women work, within the four walls of their home or outside, regardless of their employment status, savings enable women to imagine a better future for themselves and their communities, manage financial risks, and participate in the economy.

Jagannathan is executive vice-president, Asia, and Madhok is director, advisory services (India), Women’s World Banking

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