Dissecting Financial Inclusion with a UNCDF Policy Analyst

Dissecting Financial Inclusion – Part I

At the beginning of June this year, UNCDF’s policy advisors traveled to Addis Ababa to see the establishment of the Women’s Digital Financial Inclusion (WDFI) Advocacy Hub in partnership with Women’s World Banking. The event brought together regulators, government bodies and private sector players who discussed ways to enhance women’s financial inclusion in Ethiopia. K-flip had the opportunity to interview with one of the participants, Sophie Falsini, a policy analyst at the UNCDF. Sophie Falsini is a researcher and policy analyst at UNCDF’s Policy Accelerator, working at the intersection between digital finance and women’s economic empowerment. Prior to this role, she worked as a gender and research fellow for the UNCDF in Gambia as well as for the CGAP in Kenya, where she focused on rural development and access to finance for women and girls in least developed countries.

The conversation focuses on understanding financial inclusion, the level of inclusion in Ethiopia, key metrics, and the recently formed advocacy hub. In part one of this interview, she explains what financial inclusion means, its importance, and how to measure it. 

K-flip: To understand and address women’s financial inclusion, we know having sufficient data and research is vital. Do you see enough research being conducted in Ethiopia? Is there a thorough understanding of the problem?

Sophie: Collecting and analyzing sex-disaggregated data is essential to understand the needs and constraints faced by women in accessing and using financial and digital products and services, assessing possible measures to close gender gaps and addressing ongoing financial inclusion challenges. Yet, global data on women’s financial inclusion and its implication is lacking. Ethiopia is no exception, and so far, most recent financial inclusion data go back to the 2017 World Bank’s Findex survey and the G20 Financial Inclusion Indicators (2017).  To better understand the size of the gender gap in Ethiopia as well as the effectiveness of policies designed to maximize inclusion, both regulators and financial service providers in Ethiopia would profit from gathering demand-side and supply-side data. Beyond showing who is included and excluded, sex-disaggregated data can provide them with greater insights on who is accessing what kinds of products, what kinds of behavior are exhibited in various product categories, what kinds of channels (e.g., branch, ATM, POS) are used by whom, who are financial services providers reaching. During the WDFI Advocacy Hub launch, several stakeholders highlighted the importance of leveraging data to understand the challenge, set targets and measure progress. This is a key action to take to accelerate the advancement of women’s financial inclusion in Ethiopia.

The global average gender divide is 9%. According to recent studies, Ethiopia stands slightly higher at 12%. Why do you think that is?


There are many factors contributing to the gender divide in financial inclusion:

Demand-side barriers; which include limited financial capability and financial literacy; lack of assets for collateral; geographic distance from a financial institution; lack of formal identification; limited ownership of mobile phones and sim cards, and access to the internet, among others.

Supply-side barriers; which include inappropriate product offerings, the lack of gender-specific policies and practices for product design and marketing as well as inappropriate distribution channels, especially in rural areas.  Legal & regulatory barriers; which include policies that do not address the barriers women face to access and use digital financial services. For example, account opening requirements disadvantage women who are more likely to lack identification; legal barriers to owning and inheriting property and other collateral; lack of gender-inclusive credit reporting systems, and more generally, a lack of focus on women in national strategies and regulations.
Social and cultural barriers; which can restrict women’s mobility and time availability, and reduce women’s access to education and ability to participate in the labor force.
Those barriers contribute to the 12% gender gap in bank account ownership in Ethiopia. In particular, those barriers might be exacerbated by the overall low levels of financial inclusion in the country as well as by the fact that a high percentage of the population resides in rural areas and lacks strong financial and digital literacy skills. Moreover, products and services which do not respond to women’s specific needs, do not only increase the burden on women but also undermine their trust towards the formal financial system as well their overall understanding of the potential value of digital financial services. As a result, many women tend to rely on informal institutions to satisfy their savings and credit needs, keeping money at home or with friends or using informal saving clubs, like Equb.
Why is financial inclusion for women a relevant goal? Why is digital financial inclusion important?
By financial inclusion we mean that individuals and businesses have access to useful and affordable financial products and services that meet their needs and that they are delivered in a responsible and sustainable way. Yet, according to the World Bank’s Global Findex 2017 data, in developing economies women are less likely than men to own a bank account and actively use it, to profit from digital financial services, and to own and use mobile phones as well as mobile internet. Similarly, women are reported to save less than men with formal financial service providers, and to prefer informal solutions instead. Women-led or owned enterprises also lag behind in getting access to finance, and women are often unrepresented at leadership positions. The fact that despite recent advancement on financial inclusion rates worldwide women are still left behind, speaks for the relevance of putting women at the center of our strategies and in working towards closing the gender gap in financial inclusion.
Financial inclusion is a fundamental component for reaching the Sustainable Development Goals (SDGs). Providing low-income women worldwide with effective and affordable financial tools to save and borrow money, make and receive payments, and manage risk matters because it not only leads to women’s economic empowerment and gender equality, but it is also a catalyst for economic growth and development, poverty reduction, improvements in the resilience of communities, better education and health. To achieve full financial and digital inclusion for all, women need to both benefit from innovation and to drive the transformation, thereby shaping products and services that fulfill their needs.
Digital financial inclusion is particularly important because it has the potential to better reach and serve low-income and isolated customers, thereby moving them from cash-based transactions to formal financial services. Digital financial services allow customers to benefit from cost-saving digital means, which makes access to finance more affordable and addresses mobility barriers. By accessing digital transaction platforms, customers can perform payments, small transfers, store value and, in some cases, access credit or insurance products using their devices (mobile phones, etc.).  Digital financial services have also proven valuable in allowing the financially excluded to receive G2P transfers such as conditional cash transfers, whose relevance has grown during the COVID-19 pandemic. Digital financial solutions also have the advantage of helping reduce risks linked to loss, theft, and other financial crimes, increasing a sense of safety and security. This is especially relevant for women, who often face greater security threats than men. It should be, however, mentioned that digital financial services and products carry some risks linked to the fact that vulnerable customers might be exploited due to their lack of familiarity with the products, services, and providers. Similarly, digital technology-related risks linked to disrupted service and loss of data as well as consumer and data protection risks shall also be taken into account. This speaks for the need for tighter regulation around digital financial services, as well as ongoing cooperation among all stakeholders to ensure an enabling, inclusive and safe environment for digital financial services and products to prosper.
When we say women’s financial inclusion, how is it measured? What do we want to achieve? Is it just opening an account, or are there other metrics?


To measure financial inclusion, we rely on specific financial inclusion indicators to diagnose the state of financial inclusion, identify barriers as well as monitor the presence and impact of policies and strategies.The rates to which accounts are opened is certainly one of the indicators to measure financial inclusion. Yet, it is not the only one. When measuring financial inclusion, we refer to access to formal financial services, which includes the penetration of bank branches or points of sale (POS) in urban and rural areas, number of e-money accounts, interoperability of points of service as well as demand-side barriers that customers face to access financial institutions.


Secondly, we look at the usage, which means who, how and how often clients use financial services, including through mobile transactions. Thirdly, another important component is the quality of financial products, which ensures that financial products and services match clients’ needs, respond to their challenges and are clear and understandable. Here we look for instance at financial knowledge and behaviors, disclosure requirements and dispute resolution. Several global surveys analyze demand-side and supply-side data on financial inclusion, as for instance by the World Bank Global Findex or the Global Partnership for Financial Inclusion, which contains the G20 Basic Set of Financial Inclusion Indicators to help countries set financial inclusion targets and monitor progress.

These indicators, which go beyond having a bank account, are central to designing targeted reforms as well as to roll-out products and services which respond to their needs.


Do you see this divide as a result of a deeper problem with gender equity? If so, will it be possible to attain better women’s financial inclusion without addressing those problems?


Financial inclusion is conducive to women’s economic empowerment and gender equality. Yet, financial inclusion alone cannot close gender gaps if not paired with a broader agenda to support and empower women in all aspects of their lives.


As a result of social norms and cultural barriers, women are often less likely to have access to education and more likely to work in the informal sector, being subject to lower pay, worse working conditions and being more vulnerable to economic shocks. Women are also much more likely to live in poverty, and face malnutrition and unsecure livelihoods, which affect their ability to provide for and safeguard their families. For women to benefit from being financially included, it is important to create an enabling regulatory and market environment where women trust and feel confident in raising their voices and to provide them with the right incentives to profit from better education and skills to access economic opportunities and overcome some of the social and cultural barriers which prevent them from participating actively in society and the economy. For instance, ensuring women’s physical and psychological safety, enhancing their participation in decision-making roles, guaranteeing their rights and fostering their opportunities for financial autonomy and independence can significantly enhance women’s ability to access and use digital financial services. Women’s lower levels of financial and digital inclusion not only reflect existing gender inequalities but also threaten to compound them. If this gap is not addressed, women risk being left behind as societies and economies digitize. The gender gap in digital financial inclusion is also not going to close on its own and requires concerted action by stakeholders working together to address women’s needs and barriers to mobile access and use. k-flip