Access to financial services can transform women’s lives – an expert explains how

The climate crisis is having a disproportionate effect on the livelihoods of rural women who rely on agriculture as a source of income.

Heat stress and flooding in low and middle-income countries means women are $53 billion worse off than men each year, according to The Unjust Climate, a new report from the United Nations’ Food and Agriculture Organization (FAO).

It also finds that a 1°C increase in long-term average temperatures would lead to a 34% drop in the income of households run by women, relative to male-headed households.

The report says there is “an urgent need to support female-headed households to better adapt their agricultural systems to climate change”. But they also need better access to financial services, including credit and insurance.

Women's World Banking is a global NGO focused on doing just that – making sure that all women have access to the full range of financial products and services.

President and CEO of Women’s World Banking, Mary Ellen Iskenderian, says: “We estimate there are roughly 780 million women who do not have access to formal financial services. And they are now overwhelmingly the very poor, the very rural or those living in quite remote areas.

“The good news is … remoteness is no longer a complete barrier, we're getting further and further out into remote areas with cell phone technology. And the price and cost of those financial services is coming down.”

Iskenderian spoke to the World Economic Forum about the work the NGO is doing to transform women’s lives. This is an edited version of the interview.

They need a safe place to save their money. They need to be able to make and receive payments conveniently, and not too expensively. And, yes, they need access to credit. Microfinance was very often small, expensive loans, so we want to make sure women are not being taken advantage of and that access to finance doesn’t increase their debt or other risks.

Let's not forget insurance, because the ability to mitigate and manage risks is essential to protecting all that a family and that a woman may have built through her business or her savings. Insurance is increasingly more important given all the climate risks many of the women we serve are now facing.

Access to the technology, literally the [mobile] handset, remains one of the biggest barriers and some of that is cost. The handset may not be too expensive, but the data package and all of the ongoing services attendant to that phone can be very expensive. Social norms in some places, particularly in South Asia, can be a real barrier to women's access to the phone.

During COVID, we saw some real strides forward in India, for example. The first round of COVID relief payments from the government were made available only to women and only digitally. In the first three to four weeks of the lockdown, 25 million new accounts were opened, primarily by women. You saw them getting access to the cell phone, which had been sort of a cultural taboo for many women.

It's not just a question of understanding how the numbers fit together and how the technology works, but having a sense of confidence in using it. We tend to talk about digital financial capability as opposed to literacy because that seems to be the turning point when a woman feels comfortable using the services; when she finally feels at ease with that phone.

Happily, we're seeing more and more governments who have always been big champions of financial literacy, now really recognizing this bigger picture of capability requiring financial institutions, such as to include training with any product. In Indonesia, for example, every woman who receives a loan must undergo training and have the capability and confidence to use the technology.

It has had such a profound impact on so many women's lives that we needed to measure it meaningfully. At Harvard, [public policy expert] Martha Chen developed a framework 30 years ago specifically for microfinance, but she worked with us to expand it. She talked about the changes in a woman's life as a result of access to finance, grouping them into four different types:

1. What kind of material change was there in her life? Did she have more income coming in? Did the family have more assets? Were more members of the family eating three meals a day? Easy, materially measurable things.

2. The second change was a cognitive change. Had she learned anything? Did she now have a skill or an understanding of something she didn't previously have because she hadn't interacted with this product?

3. The third is relational change. How does the woman's relations with others around her change by having access to finance? A woman's household decision-making power dramatically increases when she has access to finance and some control over how the money gets spent. Data indicates women are more likely to vote or even stand for a local village council or local office when they have access to finance. There's also quite conclusive evidence that shows that when a woman is able to accumulate assets, she can leave an abusive situation.

4. The last change is called a perceptual change. How does the woman feel about herself, her self-perception, her self-confidence? Is she planning for her future or is she still only thinking about her family's future? Those are probably the most subjective questions. But when you start to hear a woman talk about the plans for her future or the plans for her children and where she fits in in a way that's not just about planning for the day-to-day or the immediate hand-to-mouth need – there's been an important change that's taken place inside of her.

It's been a real learning for me to start to see the work we do through the lens of resilience. We had always looked through the lens of security, providing that safety net, but also providing prosperity. But now resilience, the ability to recover, is so closely linked to having financial access. We see women are very likely to be displaced in the case of a climate crisis. But more often than not, the male household member leaves to find work in a drought environment, leaving the woman at home to take on all sorts of responsibilities, as well as those of managing the household she already has.

She's got to be able to receive payments and remittances from him, and the rest of the family. She needs a safe place to save, to build that safety net. If she has a business or a farm, she needs to be able to borrow to climate-proof her property.

We're seeing some fascinating technologies, very small, reasonably priced, solar-based, drip irrigation pumps, and solar pumps for rural women. They need to be able to borrow to get access to that technology. And we're also starting to see some interesting micro-insurance products for smallholder farmers, crop insurance, and weather index insurance.

If a woman doesn't have a bank account, if a woman is not included in the formal sector, she won't have any access to those risk mitigation products. So all of the things we've been talking about for so many years just around inclusion have now become central to climate resilience as well.