A few months ago, my colleagues and I visited a number of factories in India to launch BSR’s new HERfinance initiative, which aims to bring low-income workers into the formal financial system and help them better manage their incomes.
During one visit, a woman told us that her husband waits for her at the factory gates on the seventh day of every month and then takes her salary. In her view, he spends the money on unnecessary items, and she told us she wants a private, secure place where she can save and control access to her money.
Another factory employee told us he used informal means to send nearly his entire salary to his family in a neighboring state. This was his way of saving to fulfill his dream of paying for his sister’s wedding, but it was prone to loss or theft along the way.
These stories are common in the developing world. According to the World Bank, more than 2.5 billion adults, or 75 percent of the world’s poor, do not use formal financial services (PDF) to save or borrow money. Three systemic challenges are primarily responsible for this:
- Awareness: Many people who are accustomed to a cash-based economy are unaware of the benefits of using formal financial services. Conducting electronic transactions can seem risky, especially when an urgent need for cash arises.
- Physical access: Traveling to the nearest access point to conduct a bank transaction can take an entire day—time that is often better spent at work or with family.
- Eligibility: Even for basic bank accounts, the minimum balance may be too high for those with an unreliable income or an income that is mostly spent on basic necessities. In addition, documentation requirements may be too strict for people who are part of the informal economy.
With the majority of the world’s working poor employed in global supply chains, businesses have a unique opportunity to address these barriers to financial access. At the same time, businesses can benefit by deepening their relationships with suppliers and assuring that supply chain workers are paid on time, thereby directly improving their livelihoods. By vesting factory employees with knowledge and skills related to financial management, and connecting them to financial products and services, companies can empower workers in their supply chains to make sound financial decisions, make their incomes go further, invest in their futures, and manage risk.
With the launch of our HERfinance pilot project in India (which includes brand partners Ann Inc., Levi Strauss, Talbots, Li & Fung, Primark, andTimberland), this is a good time to explore one model for business to solve this challenge.
A Cross-Sector Partnership Approach
Based on BSR’s successful HERproject model, HERfinance links global brands, their suppliers, and NGOs to deliver a peer-to-peer education program on financial literacy to the world’s working poor. Like HERproject, which focuses on factory workers’ health, HERfinance is based on the premise that investing in worker livelihoods leads to tangible benefits for all involved. Participating brands see improved relationships with key suppliers; factory managers witness higher worker morale, lower administrative costs, and reduced turnover; and factory employees are able to make their incomes work better for them.
The program works by providing employees with practical information about personal finance in a culturally relevant manner through a series of brief workshops. These employees are then selected to serve as peer trainers for the rest of the workforce and for members of their communities. This peer-to-peer model creates a powerful ripple effect along existing communication networks.
Each partner in HERfinance has a distinct role: The brands provide access to suppliers and assist in obtaining commitments from the factories’ management. The factories provide access to their workforce, as well as time and space to conduct the training. And local NGO partners, which are familiar with the cultural and social environments of each region, conduct training for the employees and mentor the peer educators on an ongoing basis.
The HERfinance curriculum—which BSR developed based on globally recognized best practices in financial literacy training—has been reviewed by experts such as Microfinance Opportunities, Better Work, and Women’s World Banking.
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