A growing market for financial inclusion: low-income factory employees

January 27, 2014

Women’s World Banking financial education lead Cathleen Tobin recaps the low-income salaried employees panel at last November’s “Building Women-Focused Finance” in Amman, Jordan.

  • Moderator: Cathleen Tobin
  • Panelists: Nadine Chehade, MENA Representative, CGAP
  • Chhavi Ghuliani, Manager, Partnership Development & Research, BSR

This panel discussed the financial lives of low-income salaried employees around the world, and how this segment approaches saving, spending, and planning for financial goals.  Salaried workers comprise a large and growing segment of the global economy: 40 million people work in garment factories alone.  Yet they are often overlooked by banks and other financial service providers.  As Women’s World Banking strives to deepen financial inclusion among all low income women in the developing world, salaried employees, with positions in factories, private homes, hotels, farms and shops, represent a critical piece of the puzzle.

Nadine Chehade presented a recent CGAP study conducted in Mexico called Savers, Planners and Entrepreneurs</i rel=”nofollow”>, which brought to life the different approaches to saving and spending between salaried workers and small business owners.  The study showed that while small business owners, who typically do not have a steady cash flow, rely on a mix of informal loans from family members and other sources, and some savings to meet their financial goals, salaried workers take a different approach.  With a predictable income stream, this segment tends to plan around the money they have, and avoid stretching beyond their means.  Salaried employees are more likely to save up for a large purchase, such as a household appliance, than to seek a loan.

Chhavi Ghuliani reported similar findings among garment factory employees in India. Women’s World Banking collaborated with BSR earlier this year to research the financial behaviors and needs of this segment as a first step in developing a financial education curriculum and training program under BSR’s HERfinance pilot.  The research found that as larger factories in South India begin to open salary accounts for employees, these accounts are often the first introduction to banking for an employee and his or her entire family.  Chhavi highlighted the opportunity that banks and employers have to help make the transition from informal to formal savings a smooth one.  The HERfinance financial education curriculum is designed to introduce employees to basic money management techniques, such as planning and budgeting, as well as how to use their new accounts and ATM cards.  The training uses a peer-to-peer model, in which a select group of employees participates in a periodic training of trainers, held by a local NGO.  The employee trainers then have several weeks to work with their peers on each topic.

Both Nadine and Chhavi cited the lack of existing data on salaried employees in developing countries.  As the MENA representative for CGAP, Nadine asserted the need for more data on the segment in her region.  As Women’s World Banking and others begin to focus on the financial needs of low-income salaried employees, we hope to continue to build on early insights to offer them basic yet transformational financial services at scale.