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Women’s financial inclusion in Pakistan

Efforts for women’s financial inclusion need to pay attention to the gendered aspects of their life experiences.
by Lubna Razzaq and Samia Ibtasam

Pakistan is considered all set by experts to introduce digital financial services, given the extensive documentation of citizens’ data, widespread telecommunication connectivity, and the increasing penetration of smartphones. Despite meeting these criteria, the country still has the lowest financial inclusion ratio in South Asia. The growth in financial inclusion has been modest, with a mere increase from 7.7 percent in 2013 to 14 percent in 2017  at an annual growth rate of 1.23 percent. This is in stark contrast  to the 50 percent target set for 2020 by the State Bank of Pakistan (SBP) in it’s National Financial Inclusion Strategy (NFIS).

The statistics for women are even grimmer. Though they constitute over half of the Pakistani population, women largely largely remain excluded from formal financial institutions. Only 2.9 percent of Pakistani women are financially included, compared to 17 percent men. NFIS envisions to raise this figure to 25 percent by 2020.

The Consultative Group to Assist the Poor’s (CGAP) analysis of the 2017 FINDEX report reveals that only 37 million mobile accounts have been created in Pakistan even after a decade of investment in mobile money systems. Of these, only 22 percent belong to women, with a mere two percent point increase from the 2014 level as compared to 13 percent point increase for men. Thus, men are five times more likely to have an account than women.

Women’s financial inclusion efforts need to include the basic realization that life experiences are highly gendered in the Pakistani society. WHO defines gender as the culturally and socially constructed differences between men and women that vary from place to place and time to time. These differences also include perceptions and self-efficacies about women’s capabilities to use technology and their financial decision making.

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Thus, the adoption and use of DFS is more likely to succeed if these are designed in consideration of the daily lives of their intended users. While one cannot deny the importance of the favorable environment in terms of infrastructure, innovation, and regulatory framework, it is equally important to develop an empathetic approach to service and product design. This requires developing an understanding of women’s needs and capabilities, and the highly-gendered environment in which they operate.

In this backdrop, we propose a human-centered approach to increase Pakistani women’s financial inclusion – focusing on understanding, building and designing for target users.

Understanding users means understanding their environments and working with available affordances. In the case of Pakistani women, this can be done by exploring three main dimensions of financial inclusion: technological, social and financial.

The gender gap in phone ownership in Pakistan is 37 percent, one of the highest in the world. At least in the low-income segments, this is driven by the societal perception that phone ownership may have a bad effect on women’s morality, especially those without a husband (including single, divorced or widowed regardless of age). Besides, the limited income in itself is a constraining factor, making it possible only for the head of the household to carry a phone, who’s most likely a male member. However, there’s a widespread tendency to refer to the statistic that 70 percent of the Pakistani women can access a phone if not own it. This misses the important point that when it’s about the use of financial services on shared phones, privacy becomes a huge challenge, unless the design is adjusted to cater for a shared-device model while maintaining privacy for women.

Another aspect of technological design for inclusion is designing services that convince low-income users to sign up for mobile money services. Ignacio Mas, an expert on financial inclusion, suggests that mobile money services have to be closer to what potential customers are familiar with, requiring minimal adjustments to their existing behavior. We supplement this view by additing that services should also consider existing technology profile of users and should not require any sort of mental, financial or emotional investments other than what users are currently making in analog processes.

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Thus, digitization for mobile money platforms could start by simply digitizing the existing practices among low-income segments while mobile wallets provide a payment mechanism. Digitization of rotating savings and credit associations (ROSCAs) is a relevant example. Most of the ROSCAs participants are women with one woman participating in as many as five different ROSCAs simultaneously, juggling them as her savings and risk protection instruments. One such example of context-aware digitization is the Digital ROSCA developed by a team of experts–that Lubna headed–at the Information Technology University (ITU). It’s based on the existing structures and workflows of ROSCAs in Pakistan, and takes the best of the social groups and removes pain points like record-keeping difficulties while creating a transaction trail for financial institutions.

A human-centered approach needs to be followed for financial products’ design as well. Our research  shows that one of the major financial needs of low-income micro-entrepreneurs is house construction. The Government of Pakistan (GoP) has set a target of building five million homes in five years  that will require financing in the form of house building loans. When we took a deeper look into the prevalent dynamics in the real estate sector, we discovered that the living conditions of the low-income groups are a lot different than the ideal client envisioned by mainstream financial institutions when designing home loan products. Low-income groups do not have enough financial muscle to build the entire house as a single project. The process is divided into small chunks spread over multiple years. For them, the acquisition of land and construction are two separate elements. During our research among low-income segments, we also came across instances where families owned the house in which they dwelled. In these cases, the houses were constructed either on inherited land or on land purchased with inheritance money coupled with ROSCA savings. Those without inheritance saved up gradually by participating in multiple ROSCAs to accumulate the amount required to purchase the land, and struggled all the while as they needed to reduce their consumption for this purpose. Since the construction takes a number of years to be completed, the under construction houses frequently endure damage from adverse weather conditions like heavy rains. Thus, we need to not only rethink the housing finance instruments to suit the financial capabilities of low-income families but also the house building process. The latter needs to be modular or low cost than it is today. In the west, there’s already a tendency towards low cost construction which makes use of such new technologies as 3D printers.

The unbanked Pakistanis are fulfilling their financing needs through informal channels which make up all or most of their financial portfolio. The human-centered approach suggests that we ought to pay attention to what works and what does not work for low-income people. This means that our technological interventions should aim to complement, rather than destroy, the social capital of low-income households which is a key support component in their lives. This also means understanding the existence of gendered spaces and mobility constraints for Pakistani women, and designing our products to help them overcome these constraints.

Even the most well-intentioned and well-reasoned customer cannot use a product or service that they don’t understand. For example, we have observed low-income women reluctant to take interest-bearing loans as they cannot calculate the accumulated interest and the roll over cost.

Therefore, the support offered to mobile money users through different channels and customer touchpoints (be it mobile money agents, loan officers in field, call centers or application interface) should be designed to suit the customer’s capability and literacy.

To conclude, we would like to reiterate Dr. Kentaro Toyama’s amplification theory to suggest that if the DFS aren’t designed in view of the effect of gender on social, cultural, economic and technological factors, our efforts may lead to exclusion, instead of inclusion, of women.

Lubna Razaq is Director ITU FinTech Center, a FinTech enthusiast and researcher curious about solutions to DFS adoption challenges in Pakistan.

Samia Ibtasam is a Ph.D. student at the Paul G Allen School of Computer Science & Engineering at the University of Washington in Seattle. Ibtasam was named a Google Women Techmaker (North America) Scholar in 2019.

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