From Pro-Poor Policies to Biometrics and Demonetization – The Prominence of Women in the Digital Economy

Beth Rhyne, Managing Director of the Center for Financial Inclusion at Accion, engages her table in a conversation around the importance of financial and technological literacy as well as education for the banking sector.

The second regional session of The Digital Finance Future: Inclusive and Global Economic Growth series took place on February 16, 2017, gathering over 30 individuals from foreign embassies, U.S. government agencies, multilateral development organizations, financial inclusion NGOs and business community for a conversation on the financial inclusion gender gap, digital identification and the impact of demonetization in South and Central Asia.

The session took place over two hours and was structured by three segments comprised of two parts. The first segment was a short presentation by Leora Klapper, Lead Economist in the Finance and Private Sector Research Team of the Development Research Group at the World Bank, who illuminated the gender gaps in financial inclusion. This presentation set the stage for simultaneous small-group discussions among attendees at their respective tables. The second segment was another brief presentation by Vyjayanti Desai, Program Manager of Identification for Development (ID4D) at the World Bank, who addressed the opportunities to advance financial inclusion through digital identification and biometrics – as well as the barriers to full adoption of these emerging technologies. Following Desai’s presentation, a second round of small-group discussions examined digital IDs. Beth Rhyne, Managing Director of the Center for Financial Inclusion at Accion, led the last segment on India’s demonetization followed by a full-group discussion exploring the implications of this country’s economic shake up on the future of digital finance.

Defining Parity in Digital Finance

Before diving deeper into the gender gaps in financial inclusion, most participants sought to define parity. In particular, there was differentiation between parity in terms of both assets and access. One participant hypothesized that while statistically 90% of women could have accounts, 80% of them might have minimal amounts of money in those accounts compared with men who often have much more due to a variety of factors ranging from earned wages to inheritance.

Discussants also explored parity of economic growth, particularly in the realm of loans. While women have equitable – if not prioritized – access to microloans, they have far less access to commercial loans. What will it take to move business loans for women entrepreneurs from $500 to $1,000 and beyond? Against the cultural and legal backdrop of South and Central Asia, women often lack the collateral necessary to acquire commercial loans. Many participants from think tanks and financial inclusion organizations offered examples of inheritance laws, cultural notions of ownership and patriarchal decision-making as barriers to moving the needle on economic parity.

Probing further into the definition of parity, participants examined the binary gender groupings of “men” and “women.” They identified different subgroups of women, broken down by socioeconomic status, employment status, marital status, religion and age, among other categories. On employment, one participant raised a question about whether employment and financial independence are choices that shape and/or are shaped by cultural tolerance. This thought exemplifies many conversations had about the role of societal norms and cultural mores, often country- or region-specific, that influence conceptions of parity.

Designing Inclusive and Culturally Specific Financial Products and Systems

In further discussing the role of customs and traditions, participants explored how culture, convenience and development can go hand in hand to advancing women’s financial inclusion – rather than hindering it. An example that best demonstrated this marriage of culture and finance was shared by an attendee who started a self-help group for women in rural India and helped advance their financial inclusion by leveraging existing social norms in their village. With males being the primary, if not sole, decision-makers in the community, these women had to rely on one of their sons to open a bank account that the group would be able to manage. This example demonstrates the interplay of gender and trust, and how long-standing cultural conceptions around them can still serve to benefit women seeking greater financial inclusion in communities where the shift toward digitalization and parity are slow.

Cultural context was also central to a discussion around the “how” of financial inclusion: How will products and services be designed to meet the unique needs of specific populations – in particular, women and the subgroups among those women? How will economic inclusion programs help increase access to these products and services? How will the technologies, services and programs be rolled out? While many of these questions were rhetorical in nature, they prompted participants to think about the systems and processes necessary for not only adoption but also implementation, integration and full operation of digital financial services.

The diplomats were particularly concerned about designing policies and regulatory systems that meet the needs of women and the poor. One diplomat from a Central Asian country advocated for pro-poor policies that could help to overcome some of the legal barriers related to ownership and inheritance. A few individuals from multilateral organizations and representing European perspectives presented remittances as one arena to make more pro-poor. One idea offered was reducing fees that are often incurred through money transfers and currency exchange, which make a significant dent in the total income earned by low-wage, poor people. Noting that laws in many South and Central Asian countries are linked to traditions, customs and histories that often compound the disadvantaged position of the poor, discussants contemplated whether changing social norms and cultural mores, or changing laws and policies should come first when developing pro-poor strategies for financial inclusion.

Those favoring policy-led change provided examples of government incentivizes that are working to include underprivileged groups. In Kazakhstan, government workers receive wages digitally – essentially direct deposits to their bank accounts – which has helped accelerate inclusion simply by providing access to accounts. For the female workers in particular, the government’s mandate helped circumvent any possible cultural barriers that women typically face to opening and managing their own accounts. The Bangladeshi diplomat shared how their government recently took a monumental step forward in addressing the financial inclusion gap by opening accounts for all unbanked citizens, which according to the diplomat was nearly 70% of its 110 million population. Beyond setting up these bank accounts, the diplomat said the Bangladeshi government worked with the central bank to place one ‘taka’ (local currency) in each one. While the long-term impact of this initiative has not yet been felt, the short-term outcomes include a narrowing financial inclusion gender gap in a country with a significant parity deficit, particularly among older women. Diplomats and other experts who have worked in Bangladesh nodded to the country’s Internet access and technological literacy, which trail behind other countries in South and Central Asia.

A few provocations followed these examples of government incentives. Of note was one participant who inquired whether any fellow discussants considered ways for private sector to incentivize wage earners in non-governmental sectors to go fully digital. Along these lines, other attendees emphasized the need for greater financial and tech literacy programs, specifically for women and the poor, as well as campaigns to educate local banks and finance ministries on the barriers to economic inclusion that poor women face. A majority of discussants recognized that, in order to address the financial inclusion gaps and catalyze parity, all sectors must mobilize time and domestic resources toward strengthening female agency. Research has shown time and again that when women have greater power and agency over their income, the benefits trickle down to improved education for their children and family health.

Digitizing IDs for Greater Inclusion

One arena where the private sector is playing a significant role in advancing economic mobility is the digitization of national identification. Demand-side, digital IDs have benefits of increased security over personal information, compliance with 'Know Your Customer' regulations, and SIM registration compatibility. Supply-side, the dramatically decreasing costs of technology make digital IDs an attractive option for managing personal information. As more governments work with tech and data management companies to digitize citizen identification – everything from birth certificates and health records to proof of residency – more opportunities for economic inclusion are afforded to the underprivileged. For poor women in particular, digital identification is helping them overcome cultural barriers to accessing the financial tools and services that could lift them out of poverty.

In South Asia, dominant cultural conceptions of women as inferior to male authority often prevent women from acting independently, especially over financial matters. Poverty further marginalizes women, as the financially disadvantaged often lack the proper documentation or merely the agency to access and operate many products and services – inclusive of and beyond the digital finance realm. In rural villages, for example, women who possess some form of identification oftentimes are denied services because business owners or financial agents, who are predominantly men, do not view them as truly independent and thus qualified to make economic decisions or manage financial resources.

Against this societal context, participants discussed the potential for digital IDs to circumvent cultural challenges. One attendee prefaced this conversation by distinguishing between two types of identity data: technical/legal information and social/political information. Biometrics, the analysis of a person's physical and behavioral characteristics, have emerged as the leading technology for providing neutral “identity data” used mostly for authentication purposes. They have been particularly beneficial for women, the poor and other marginalized groups that are often subject to discrimination and manipulation, because of the social and political constructs around their identities. As 'foundational' identification, biometrics lower barriers to entry and access for these disadvantaged groups by utilizing de-politicized personal information only.

In some countries, governments are linking biometrics and digital identification to social services, specifically aimed at helping women and the poor. Participants shared examples from India, where social safety net programs are linked directly to bank accounts, which required a digital ID to access. The Pakistani government takes this one step further by depositing welfare payments into the accounts of female heads of households as a means to ensure that funds are being used for appropriate social supports. The spillover effects of this initiative include more enrollment of unbanked Pakistani women and thus increased female agency and decision-making power over family matters.

The uniqueness afforded through DNA also provides a safeguard to security gaps in the digital space. Participants explored what a fully digital health system would look like, with many reacting positively to the revolutionary potential of biological technology and others fearing the outcomes of security breaches or data blackouts around personal information. One optimistic participant shared a vision of universal application of biometrics, specifically by leveraging midwives to catalyze the shift toward digital documenting of births. If each midwife was given a mobile phone to log births, they could build the foundation for a biometric database containing all personal and health-related data that could be integrated with other information, like citizenship or residency, on one digital identification platform.

Other participants zeroed in on the unknowns, particularly around data security. Assuming that governments will be leading the charge for national digital ID systems, like India has, attendees questioned, Who will have the key to data if the government changes or pushes back? One participant postulated that digital IDs could be disadvantageous in nations with dissonance between government and citizens. This participant argued that citizens should have the right to speak out against government, but when government holds the key to its citizens’ information the potential for manipulation still remains. Discussants emphasized the need for safeguards that ensure balance between ease of using digital IDs and the access they afford, along with balancing between the private space and the private court, and between the right to be your own person and to manage your own information. Foreign diplomats actually presented the United States as an interesting case study when it comes to balancing citizen rights and identification. As a country where citizen and state rights triumph, a national ID system – albeit a digital one – is less important because citizens have the right to choose identification and what types. All IDs in the U.S. – whether local, state or federal – come with varying advantages and levels of access to particular services and opportunities. Examples discussed range from a state driver’s license, which grant driving permission on national roadways, to federal passports allowing for international travel.

Most of the privacy concerns were shared among US Government and corporate-sector representatives, who hypothesized that a massive security breach would be the fastest way to undermine a national ID program. Interestingly, the diplomatic corps actually dismissed their privacy concerns, noting that while security is important people in countries like Africa and South Asia just want to have an identity. “Think of all we could do if we had an ID … We don’t all feel like we count right now,” stated one participant. By the end of this discussion, the consensus was that the opportunities afforded with a digital ID outweigh the privacy concerns, and entrepreneurs in the room proposed access as the challenge to focus on, not privacy.

As such, the conversation steered toward the need to carefully measure and monitor the effectiveness of digital IDs through impact evaluation. Participants suggested devising a common set of principles on identification in order to foster collective knowledge- and resource-sharing, to design systems for global interoperability, and to make smart investments. One of the financers in the room proposed the idea of fiscal savings invoices that could link the impact of digital IDs on addressing challenges such as ending child marriage, advancing financial inclusion, curbing forced displacement, and reducing costs of ID infrastructure, among other suggestions.

India’s Demonetization: The Economic Shock toward Digital

The timeliest conversation of the session was around India’s demonetization, which was effective November 8, when India’s Prime Minister Modi made a surprise announcement that ₹500 and ₹1,000 denomination banknotes – 85% of all the currency in circulation – would no longer be legal tender. Featured presenter Beth Rhyne explained how Modi originally sold the public on demonetization by framing it as a story about curbing corruption – going after bad guys running India’s illicit market and financing terrorism. After the initial announcement, a new narrative emerged and began emphasizing the push toward a fully digital society.

While there were previous efforts to digitize India’s economy, many participants felt that demonetization was the “shock therapy” needed to catalyze and accelerate the shift. Interestingly, they withheld from qualifying this shock, which many financial inclusion experts have publicly criticized as “poorly executed … an unnecessary shock to India’s financial system and the economy as a whole … a setback for Indian women’s financial inclusion …” Participants who were on-the-ground during demonetization and/or closely following the immediate aftermath admired how despite the short-term inconveniences of chaotic banks, ATM incompatibilities and abandoned lorries on the streets, there was no political outcry. Some discussants presumed the majority of Indian citizens bought into the anti-corruption narrative while others suggested it forced a nationwide adoption of mobile platforms as means to access and move money.

Overall, the conversation revealed how important payments are for managing an economy – it is not the inconvenience factor as much as the actual breaking of the ability to make economy transactions. Participants acknowledged that while the long-term impacts are unknown, the outcomes of demonetization indicated a positive signal for future of digital which, if sustained, could further advance inclusion overall and deepen trust in government. This could be especially monumental for the lower-income segments of India’s population, which were hit hardest by the country’s economic hit – a 1% drop in GDP (equivalent to $20 billion), increased housing and unemployment rates, and more diligent tax collections.

For poor merchants in particular, a fully digital payments system may compound pre-existing challenges and barriers to inclusion. Policymakers in the room reinforced the role of ‘Know Your Customer’ regulations, which require specific types of documentation to accept digital payments. Others addressed the disparities between those with access to large sums of cash who engage in ‘white-collar’ crime activities like money laundering and individuals who operate daily in illicit market trade, trying to fly below radar – but who could perhaps be more traceable and therefore more frequently penalized in the digital economy.

In further exploring the unknowns of demonetization, financial inclusion experts questioned the impact it could have – if any – on India’s gender gap. According World Bank’s Global Findex, financial account ownership in India increased from 35% to 53% between 2011 and 2014; meanwhile, the financial inclusion gender gap increased from 17% to 20%. Much of India’s financial inclusion was driven by mobile technology but, rather than serving as a fast track to financial inclusion for everybody, the digital drive actually widened the divide between men and women. Discussants wondered whether demonetization would widen the gap further or create a ripple “shock” that prompts the government to pay specific attention to the economic needs of its female citizens. Despite having more questions than answers the implications of India’s demonetization, attendees remained optimistic about the future of digital finance.

Project Partner

Bill & Melinda Gates Foundation


Project summary

From Pro-Poor Policies to Biometrics and Demonetization – The Prominence of Women in the Digital Economy | February 2017
Number of Attendees: 34
Regions: South and Central Asia
Countries: Bangladesh, Kazakhstan, India, Afghanistan, Malawi, Tanzania, Sri Lanka
Impact Areas: Empowering Women and Girls, Security and Defense, Science and Technology
Program Areas: Diplomacy
Partners: NGOs