The difference in inactive bank accounts between men and women is very telling:
Women’s World Banking (WWB) is dedicated towards economic empowerment through financial inclusion to the one billion women in the world without access to formal financial services. Using its sophisticated market and consumer research, WWB turns insights into real action to design and advocate for policy engagement, digital financial solutions, workplace leadership programs and gender lens investing. According to WWB 742 million women remain outside the formal financial system today.
Kalpana Ajayan is the Regional Head, South Asia and comes with 25+ years of experience in retail banking and insurance. She has worked at Citibank, HSBC and Edelweiss Financial Services in various roles across functions such as strategy, sales & distribution, HR and customer experience. Kalpana is passionate about supporting women’s empowerment and in an individual capacity is a certified mental health counsellor to low-income women and an advisor to key not-for-profits in India.
Mehul Dani: What’s your understanding of the level of financial inclusion (FI) among women in India today? Would you say that FI is becoming mainstream and women are the biggest beneficiaries of those efforts?
Kalpana Ajayan: India has led a successful financial inclusion journey dominated by two parallel efforts. The first is the self-help groups (SHG) and microfinance industry (MFI), which very effectively reached and provided access to credit to low-income customers by leveraging collective social capital. The second, and the more recent, is the PMJDY accounts journey that started in 2014, driven largely by the public sector bank. Today, over 450 million Indians have access to basic banking services, and this is a tremendous achievement. The next logical step is to ensure fruitful usage of and engagement with these services.
Undoubtedly, FI is becoming mainstream and there is massive potential for women to become beneficiaries of it. The Mahila Samman Savings Certificate announced in this year’s budget is a step in this direction too, which aims to protect her income and empower her financial decisions. India has successfully narrowed the gender gap in formal account ownership and over 50% of all PMJDY bank accounts are owned by women. However, women do not necessarily engage with their accounts. They face several barriers such as mobility, banks being an unfamiliar space for them, and restricted access to digital offerings. Existing evidence demonstrates clear benefits to saving in formal financial accounts as it enables women, especially from low-income groups, to have greater access to other services like healthcare, medicine, and food, and make more investments in education.
What has been the efficacy of programs like PMJDY on women’s FI, especially with regard to savings among low-income women?
PMJDY is credited to be one of the world’s largest inclusion schemes. The JAM trinity of Jan Dhan bank accounts, their linkage to Aadhaar, and the digital and mobile infrastructure have created an enabling ecosystem for vulnerable communities to be identified, have formal banking services and can benefit from social benefit schemes seamlessly and timely. For example, all DBTs have been converged through PMJDY, which was a necessity during the pandemic. So, it is confirmed that the stage is set for FI, we now have to unlock its potential by being gender-intentional. The inactive ratio of bank accounts in India is among the highest in the world and the difference in inactive accounts between men (23%) and women (32%) is very telling. So, there is an immense opportunity for the country to create more awareness among women about existing banking services and their offerings and also facilitate their digital financial literacy. In the current economic scenario with rising inflation, saving in formal financial accounts remains the best way for low-income women to keep their money secure and build long-term assets.
Please share insights from your work with PSBs in increasing account usage among PMJDY users, especially women.
We have uncovered 4 insights. Our theory of change was that women needed a small savings solution that welcomed them to the bank, encouraged them to save small amounts, and rewarded them for doing so. We partnered with a PSB to create a ‘Jan Dhan Plus’ solution with the very insights of reaching women and educating and supporting them in banking. The savings solution encouraged low-income women to save Rs500 each month in their bank accounts, which, after 5 months of saving, could unlock an overdraft of Rs10,000.
The habit of saving formally also built their credit histories and made them eligible for loans. We first piloted Jan Dhan Plus in Mumbai, Delhi, and Chennai, and then at Uttar Pradesh’s Meerut and Shahjahanpur regions. We can confirm that the solution can be scaled across all geographies.
The second key insight was around banking correspondents (BCs) – they are best positioned to communicate this solution as they were trusted by women. Our pilot projects revealed that 32% of women who engaged with BCs considered saving with the bank and 18% of them maintained the habit of saving formally.
The third insight was that inducting more women BCs into the network and supporting them with training, rewards, recognition, and supervision proved valuable – women BCs were 3 times more successful in managing their customers, engaging with their clients and cross-selling more financial products. Finally, the critical insight that building the financial capabilities of women is key to women’s FI.
Is FI only the responsibility of PSBs? What role can others play or are currently playing?
While the journey of FI in India started through SHGs, MFIs and social ventures, today there is the realization that women’s FI is profitable too. FI is not just a social impact mandate which is to be fulfilled only through government programs or non-profits. FI becomes an outcome when any product or financial service is gender intentional while also having commercial value. Women are disadvantaged as they have less access to independent incomes that they could use to save money than men. Despite that, women hold a 30% higher average balance than men in PMJDY accounts.
For any financial service providers (FSPs) to improve their portfolio mix, or have stickier customers, or have lowered NPAs, investing in women makes commercial sense and every FSP should reap the benefits. As per WWB estimates, enabling at least 100 million low-income women to initiate a habit of small-scale savings can potentially unlock an estimated inflow of Rs250 billion in deposits, while disbursing Rs100 billion in overdrafts to 20 million beneficiaries, confirming that investing in women can power banks’ balance sheets and the overall economy.
In context to the G20 and with India’s focus on Digital Public Infrastructure (DPI), what kind of benefits do we expect for women?
There is little doubt that when a woman saves formally, it goes towards the welfare of her family and community. It also builds resilience and gives women greater adaptability to external shocks such as economic challenges, climate crises, and personal upheavals. With the blueprint of the DPI in India, the goal is to build resilience among women so that they can access services across multiple sectors easily. FI is a critical chain in this ecosystem as it ties her to the larger economy. There is immense opportunity in women’s access to cashless transactions, building credit history, and making them savvy in digital banking. Access to banks enables her to safely send and receive payments. Formal savings helps her save to achieve her identified goals. Available credit can help her invest in and grow her income. Finally, gaining access to more complex products like insurance provides her with the tools to manage risk.
How can savings be a gateway to reaching women customers with other financial products and services in a commercially viable way?
With inclusion, millions of women can have the agency to manage their finances, experience its benefits, aspire to advance their ambitions, invest in their family’s future, and even encourage other women to take up banking. When women are engaged in banking, they can also reap the benefits of the bouquet of resilience products (Jan Suraksha) like insurance, pension, and credit. This will financially empower women and at the same time, make business sense for banks and FSPs.