Women’s World Banking: In Conversation with…

Ms. Pia Tayag is the Director of the Office of the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA). She leads a team that provides technical and operational support to Her Majesty Queen Máxima of the Netherlands, who has served as the UNSGSA since 2009, and is a leading global voice on advancing universal access to financial services.

The UNSGSA plays a critical role to raise awareness, encourage leaders, and support actions to expand financial inclusion, in close collaboration with partners from the public and private sector.

While the global community has made strides in advancing financial inclusion, according to the 2017 Findex report, nearly 1 billion women around the world still remain excluded from formal financial services.

We recently sat down with Ms. Tayag to discuss the importance of women’s digital financial inclusion to support COVID-19 response and recovery, as well as financial health as an emerging policy area.

Q: The COVID-19 pandemic has taken an immense toll on socio-economic well-being worldwide, disproportionately affecting women. What are some of these financial and economic challenges wrought by the pandemic and what are some specific challenges facing women?

Thank you for the opportunity to exchange on these critical issues.

I think there are two important points to help ground our discussion.

First, COVID-19 has intensified inequalities between developed and developing countries. The World Bank estimates that per-capita income in 90% of advanced economies is expected to bounce back to pre-pandemic levels by 2022. Only one-third of low-and-middle income countries are expected to do the same. During the pandemic many in advanced economies took advantage of robust digital infrastructure. They worked from home. They leveraged the internet to socialize, purchase goods, and receive services from the government. This is much less true for those in developing countries, where telecommunications connectivity is less ubiquitous, and where livelihoods are often dependent on physical and manual labor in frontline sectors.

Second, in both advanced and developing countries, women have been hardest hit. Faced with competing demands inside and outside of the household, women have exited the labor force in greater numbers than men. Recent data compiled by the World Bank demonstrates that female entrepreneurs have received less public support than their male counterparts, and that women-led businesses have seen larger declines in sales and profits than those owned by men. Women also face complex social norms that can deny them agency and access to productive resources. All these factors have placed women under significant financial stress and have negatively affected the wellbeing of their families.

Q: This year, the theme of the 76th session of the United Nations General Assembly was focused on resilience building and recovery from COVID-19. What role has financial inclusion played in the economic recovery? To what extent are these initiatives effectively reaching women?

Overall, the crisis has demonstrated that digital public goods supporting financial inclusion is no longer a luxury – it is a necessity.

There has been an unprecedented expansion of social protection measures to respond to the crisis. Many did so by leveraging the rails underpinning digital financial services. This offered the opportunity to deposit funds directly into the accounts of women, giving them more control and privacy. It also provides an on ramp to accessing savings, payments, and credit products.

Simply put, countries that have made the investments in digital public goods – including foundational ID systems, electronic and tiered KYC, and interoperable payment systems – were better positioned to support citizens. One prominent example is Colombia, which utilized a favorably regulatory framework for mobile money, tiered KYC requirements, and remote digital account openings to roll out ingreso solidario. In Africa, Togo, Namibia, Burkina Faso, and Benin – to name a few – have all accelerated such investments and delivered relief to citizens.

We also learned the importance of designing digital public goods with women users in mind. For example, developing payment services that work with a variety of mobile phones is important given the gender gap in smartphone ownership. Public goods in themselves are not useful unless we think of how they fit into the day-to-day reality of women’s lives. Women have multiple demands on their time, from managing a small business to raising children. Financial products that require multiple steps for authentication, or charges for basic transactions will not be widely used. This places a greater emphasis on user design, financial capability, data protection, and recourse mechanisms.

Q: Looking ahead, how can financial services support women with long-term economic recovery from the pandemic?

We have a real opportunity to build on the momentum of account openings during the pandemic towards digital solutions that support resilience and improved livelihoods for women. This implies a greater focus on savings and insurance – so women can protect themselves against risks and save for their futures. And, to build products that are tailored to support particularly vulnerable sectors, such as agriculture and small businesses.

This also means committing to support the recovery of women-led businesses. This can be done through targeted credit lines, well-designed business training programs, and working with providers on the business case for serving women. These services could increasingly be provided through more digitized MSME ecosystems. Local fintechs are also crucial. Fintech solutions play an important role at overcoming traditional geographic and informational barriers that prevent access to finance. Supporting the digitizing of legacy providers including microfinance institutions, will prove key in enabling more efficient service delivery. One example is that of Advans Côte d’Ivoire, which shared with the UNSGSA during a virtual country visit this past June about its commitment to using digital technology to improve rural service provision. In parallel Advans Côte d’Ivoire is investing in financial literacy to build the digital skills of women.

Q: The UNSGSA has promoted financial health as a shared responsibility and goal among governments, financial service providers, and individuals. How is financial health distinct from financial inclusion, and how do the two interconnect?

Financial inclusion has historically focused on expanding access to financial services. Yet, there has always been a recognition that it is not the end in itself, rather a means to attain positive development outcomes. We can see financial health as one of these key outcomes. Adopting a financial health perspective broadens the attention from access and usage to user outcomes, to ensure that consumers and small businesses obtain value from the use of financial services.

In December 2020, the UNSGSA convened a working group of experts from the public, private, and non-profit sectors to advance the focus on financial health globally. The group came up with the following definition:

Financial health or wellbeing is the extent to which a person or family can successfully manage their current financial obligations and have confidence in their financial future. The definition further notes that four elements comprise financial health: smooth day-to-day finances, resilience, ability to pursue long-term goals, and confidence (feeling secure and in control of one’s finances).

Having a shared definition allows us to identify how to measure progress and needed action to move the agenda forward.

Q: How can governments and the financial sector support financial health, particularly in the context of the COVID-19 pandemic?

When lockdowns cancelled jobs and incomes, people turned to resilience strategies to maintain a decent standard of living. Without income to make ends meet, some fell into vulnerability and some back into poverty. Financial health and financial inclusion can help mitigate these shocks.

Policy makers need to understand how financial health affects existing policy objectives. Measurement will be key in this understanding. For example, financial health should be an important agenda as increased financial health of households can relieve pressure on government safety nets. Deeper financial resilience can help a quicker turnaround when faced with an economic downturn. While links between financial health and macroeconomic stability have not been well-studied, widespread financial health challenges may affect financial sector stability. Financially unhealthy people default on their loans, placing stress on the balance sheets of providers.

Financial sector policymakers can integrate a financial health lens into oversight arrangements, including consumer protection. This can include studying how particular products – savings, credit, insurance – affect financial health and shape broader social outcomes. This oversight may point to issues around taking in too much debt, or revealing particular segments that are financially included but not financially healthy, such as gig workers. These insights can also inform regulatory standards which bolster financial consumer protection.

Q: What role can the private sector play to ensure greater financial health for women in emerging markets and help them prepare for future crises?

For private sector leaders, investing in the financial health of customers and employees could mean better business for their company.

Several financial institutions, notably in higher-income countries, have begun to track the financial health of their customers and to design products and services that support financial health. This interest is spreading to a growing number of banks, fintechs and other companies in middle- and lower-income countries. Companies have found wide-ranging benefits, from customer loyalty and profitability, broader opportunities to cross-sell, to attracting new customers, to improved employee morale and productivity. Moving forward, one key priority is to build a business case for engagement with financial health, particularly for traditionally under-served segments such as women.