Part two of a series on Women’s World Banking research on the opportunity for factories to offer financial and non-financial services to drive deeper financial inclusion.
Anika* is a tailor in a factory in Coimbatore, India. She is married with two children, and her husband works in a nearby factory. They both put in long hours, but money is always tight and savings are hard to come by. When the family has any “leftover” money after paying rent and utilities, shopping for food, and covering school fees and other monthly expenses, Anika buys urgently needed items for the kids: clothes that fit, or shoes to replace the ones with frayed soles.
Anika’s younger colleague Dhruv*, who is single, also works long days and often has little money left after covering his expenses. Any remaining funds in his salary account might go toward visiting friends in Delhi, or getting money to financially struggling relatives – either through money transfers or even giving them his ATM card. Luckily, both Anika and Dhruv have health and life insurance provided through their government-backed accounts, as well as benefits from their employers such as clean water and free snacks. But for Anika’s family and for Dhruv, the dream of someday buying a home or land often seems like a distant fantasy.
In partnership with West Elm, Women’s World Banking conducted a study of workers at two Fair Trade Certified bedding factories in India. The research shows that most workers lack the support needed to build assets and make long-term financial plans. Salary accounts are meeting workers’ basic needs, and most do not prioritize opening savings accounts to allow small leftover funds to grow. During times when paychecks are not enough to cover necessary expenses, Anika will forgo buying new clothes or underwear. For emergency expenses, they will typically request a salary advance or ask relatives for a loan.
This study highlights opportunities for factories to play an active role in improving employees’ financial lives, while enhancing the value those workers already place in their employers. Anika and Dhruv both appreciate that their Fair Trade Certified workplace is well-run, clean, and free of the harassment that plagues many other factories. That sense of trust makes such workplaces an ideal location for provision of additional services. Based on our findings about what Indian factory workers value most, Women’s World Banking has identified three specific opportunities for factories to deepen financial inclusion for their employees:
Implementing a formal financial education program
Garment workers expressed openness to receiving a consistent program of financial education at work. One way to approach this is through customized trainings that include multiple touchpoints to reinforce concepts. Peer learning, as in the BSR HERfinance model, could be a key component to spur ongoing education and clear up confusion about formal financial services. Bank partners could also hold workshops about affordable financial products.
Offering digital literacy trainings
Despite the recent shift toward demonetization in India, and workers’ awareness of the growing digital opportunity, our study found that factory workers, like Indian women more broadly, largely do not use digital financial services. Factories could help coax workers into the e-money economy by providing digital training and providing access to tablets and smartphones.
Promoting a commitment savings product with a matched savings program
Since factory workers typically save only short-term, mostly via salary accounts, factories should jump on the opportunity to partner with banks to offer commitment savings accounts. This would leverage workers’ existing trust in bank products, as well as their experience with informal savings strategies, and would help employees build long-term assets. Factories could incentivize workers with matched funds for their savings accounts, derived from a portion of their Fair Trade Premium benefits.
As factories in India act on these opportunities to expand workers’ financial confidence, vendors elsewhere would be well-positioned to follow their example. By offering similar programs, factories in other regions can help make ever-greater strides in increasing financial inclusion for low-income factory employees everywhere.
*Anika and Dhruv are a composite stories based on profiles of factory workers interviewed for this study