Dissecting Financial Inclusion Part II

Dissecting Financial Inclusion – Part II

This is part two of an interview with Sophie Falsini, a policy analyst at the UNCDF. In this part, we delve into the role of the government and the private sector in financial inclusion efforts and the work of the WDFI Advocacy Hub that was launched in June this year.

Part one of this interview can be found here.

k-flip: Some believe digital financial services (DFS) can work better than traditional ones to ensure inclusion. Do you think that would work in Ethiopia as well?

Sophie: DFS can help women overcome longstanding barriers which prevent them from gaining greater control over their finances and their lives. Innovative digital financial products and services can provide low-income women with more targeted and affordable solutions and tools to save and borrow money, access credit, make and receive payments, and address many social and cultural norms around time poverty and mobility restrictions. For instance, when enabled to use mobile phones and access digital financial services, women can engage in financial transactions without having to travel far outside their community, use the opportunity to transfer money to pay electricity bills, receive international remittances, access savings and even obtain credit. 

In Ethiopia particularly, digital financial services and products could have great potential given the need for more accessible, reliable, and affordable services which can be both accessed in urban and rural areas. The great wealth of small- and micro-enterprises would also provide fertile terrain for DFS to flourish, in particular given the advantages that P2P (person-to-person) and B2P (business-to-person) transactions can have in scaling up businesses, as well as opportunities linked to easier access to digital credit and insurance products.

G2P payments are another key area where DFS can play a role, enabling low-income customers to digitally receive social and pension schemes. Moreover, DFS also unlocks innovation such as pay-as-you-go (PAYGO) rural solar home systems.

For the potential of these services to become a reality, modernizing the digital and payments infrastructure of the country and creating a regulatory environment, are central and key to better reach those segments of the population that remain underserved. In this sense, interoperability in particular is key to allow users to send and receive money with and from other users irrespective of the service provider they use. This is particularly relevant for women, since interoperability gives them the opportunity to expand their choice of financial services, easily transact with one another and verify who is on the other side of a given transaction.

Regarding on-ground action, the government and industry stakeholders play different roles. In working towards women’s digital financial inclusion, whose role do you see as critical? Is it the government’s commitment or the private sector’s willingness to re-think its products and services?

Both the government and the private sector play a key role in re-thinking financial products and services, even though this translates into different responsibilities. 

Financial authorities are responsible for creating an enabling regulatory environment for inclusive digital financial services to prosper, promoting women’s financial inclusion as a specific policy objective. This means for example revising entry requirements and risk-based proportionate regulation to enable women’s access to the financial sector while managing risks. Similarly, financial authorities are also responsible for strengthening the digital and payment systems infrastructure in the country, promoting interoperability and addressing risks linked to digital financial services. Consumer and data protection strategies and supervision mechanisms are essential, as well as promoting financial and digital literacy to close capability gaps in the use of DFS. Strengthening the national data systems is also key to allow a swift and transparent information flow between FSPs and regulators, enforcing the collection of high-quality sex-disaggregated data.

The private sector is also heavily reliant on sex-disaggregated data, and is responsible for both conducting market analysis and assessing data gaps to ensure that financial products and services respond to the needs of the customers. This also requires a tight collaboration with regulators in enabling a seamless share of information and complaints management systems. Similarly, the private sector has a key role to play in advancing the expansion of financial literacy campaigns and providing customers with the adequate amount of information in order to reduce frauds and increase access. While strengthening the capabilities of their customers, FSPs must also reinforce the skills of their internal staff, sensitizing them about the different needs of their customer base and improving customer care. 

In addition, alongside regulators and the private sector, civil society also plays a role in researching, addressing and elevating the voices of women through participative models which include different types of female customers and groups that represent them.

The root causes of the mobile gender gap are complex, diverse and inter-related and cannot be addressed by one stakeholder alone. Targeted intervention is needed from the private sector, policymakers, the development community and other stakeholders to ensure that women are no longer left behind.

Many new Fintechs are joining the market soon. What do you advise them to design their business with women’s inclusion in mind?

Sophie: Innovations in financial technology are rapidly disrupting the global financial services industry. Fintechs have been leading some of these advancements, spurred further along by the global pandemic and the need to fill gaps left by traditional financial service providers. Fintechs have the potential to tackle challenges in various sectors of the economy, thereby supporting people in becoming more productive, healthy, and resilient. The potential benefits that such innovations could have for women are great, yet women worldwide are at risk of being left further behind from digital transformation. To ensure that the gender gap does not increase as technology advances, it is important that Fintechs do not see women as just beneficiaries of innovation, rather as agents of change. To achieve that, there are several aspects to be considered:

In order to ensure that innovative products and services respond to customers’ needs, especially women, and to avoid unintended discriminatory consequences, cooperation between regulators and private sector stakeholders is essential. To test products and solutions targeted to women before they’re release into the market, Fintechs can benefit from regulatory sandboxes.

To respond to products which concretely target women’s needs while addressing their challenges, Fintechs should also rely on female expertise. Developing female talent and providing women with capacity building becomes essential to enhance their entrepreneurial skills in the tech world. This also includes reinforcing digital and financial literacy programs, that can build women’s capabilities from their early years. Additionally, gathering and analysing sex-disaggregated data provides Fintechs with useful information on priority areas where more investment is needed, as well as main challenges to be addressed in order for products and services to be successful. Such insights should serve for understanding urban-rural gaps, differences in women’s needs and financial behaviors in relation to their age group, and business necessities. For instance, online education platforms can support women entrepreneurs with financial literacy programs, increasing their market opportunities and providing them access to valuable information.

How did the initiative to launch the WDFI advocacy Hub in Ethiopia come about?

The WDFI Advocacy Hub chose Ethiopia as one of its pilot countries given the progressive improvements that the government of Ethiopia has done in recent years to accelerate its efforts to digitize payment streams in line with the current vision for digital transformation, economic prosperity and growth. The recently introduced National Digital Payments Strategy (2021) and the Digital Ethiopia 2025 Strategy marked milestones for leveraging technology to achieve inclusive prosperity and fostering resilience. The new National Financial Inclusion Strategy, currently under review, is another key achievement which can boost financial inclusion and increase core infrastructures and access points in Ethiopia.  The speed at which the country’s digital transformation is progressing is truly impressive.

Yet, as the country embarks on the next stage of this exciting journey, the test will be how quickly and effectively Ethiopia can implement its digital transformation strategies and create an environment where women can thrive. Today, women in Ethiopia represent a disproportionate share of the unbanked, and the gap is widening. Against this background, the Hub wants to leverage the commitments made to thrive women’s digital financial inclusion in the country, while elevating women’s voices and making sure that all women are able to access and benefit from better, more accessible, affordable and interoperable payments services.

What would you ideally want to achieve with the WDFI advocacy group that was just launched in Ethiopia?

The Women’s Digital Financial Inclusion (WDFI) Advocacy Hub is UNCDF’s new flagship gender initiative to promote participation in WDFI policy change and support the creation of gender-inclusive digital economies. The WDFI Advocacy Hub is enabled in partnership with Women’s World Banking and with the support of the Bill and Melinda Gates Foundation.

The WDFI Hub Ethiopia Coalition shall serve as a multi-stakeholder engagement platform which brings regulators, the private sector and women groups to the table, thereby enabling fruitful discussions and allowing all stakeholders to gain a better understanding of women’s needs, challenges, aspirations. More specifically, through the trainings, tailored support, and by channeling financial resources, the Ethiopia Coalition aims to help members of the Coalition to develop practical solutions that have significant potential to accelerate policy change and market solutions targeted to women’s needs.

Additionally, the Hub wants to create opportunities to showcase the work of local actors on global platforms, elevating the voices of female champions and advocates and ensuring they get recognition and support for the works that they lead. These new model for collaboration is designed to enable dialogue and synergies among diverse stakeholders and decision-makers in the country that can ensure the momentum around gender equality continues to grow in the right direction and yields benefits to all women in Ethiopia.

With similar initiatives in other countries, what learning can Ethiopian counterparts take in participating in the advocacy group?

Members of the Ethiopia Coalition will have the opportunity to be exposed to both local and global initiatives around women’s digital financial inclusion. Locally, coalition members will receive support to gain the skills, knowledge, and financial resources to collaborate on shared initiatives, as well as to develop accountability frameworks that sustain and enhance policy change. More specifically, through a training organized by the Fletcher Leadership Program for Financial Inclusion, participants will be provided with a framework which helps them design, implement, and analyze innovative, adaptive, and evidence‐based policies and consumer-centric initiatives. In Ethiopia, multi-stakeholder teams will come together to formulate and champion policy recommendations and market solutions, basing the work on data gathering and research assignments.

Additionally, coalition members will be exposed to the wider network of the WDFI Advocacy Hub, partnering with organizations worldwide, showcasing their work at international fora and learning from regional and international stakeholders. The WDFI Hub does not only encourage, but also fosters local-global advocacy connections. The objective is to enhance peer-learning and share lessons learned on how to empower women economically, financially and digitally. The participation to local and global campaigns is also an added value, which shall help members to come together with a unified voice to have greater impact at different global platforms, such as the Generation Equality Forum.

What roles do you expect members to play? 

WDFI Advocacy Hub members will be expected to attend and engage in regular virtual as well as in-person meetings and workshops throughout the year. Regular participation in advocacy activities is also key, including sharing advocacy campaign materials, volunteering for speaking engagements at national, regional, and global fora, co-authoring op-eds, and articles, participating in media interviews. Additionally, members will be empowered to continuously amplify women’s voices inside and outside their organisations by being open to listen and act on their input. Within the Hub, we have a culture of listening to and respecting diverse views of other members, not discriminating against gender, religion and cultural beliefs.