For some reason, the government appears to have developed last-minute cold feet about delivering the coup de grâce to the Bharatiya Mahila Bank, started with much fanfare a few years ago as a bank of, for and by women, which has been going nowhere in a hurry since its launch. For a government headed by Prime Minister Narendra Modi, who has often reiterated that he is not one to shy away from tough decisions (and who amply demonstrated this strength of will with the demonetisation decision), this reluctance is puzzling. Because killing the Bharatiya Mahila Bank is not a very difficult decision to take. Tokenism has never achieved anything much anywhere, let alone in the field of gender equality in financial inclusion.
Closing the gap
If simply having women running the show was the answer to addressing the vast gender imbalance prevailing in the financial services sector, the issue should have been solved without taking recourse to creating a special bank run by women. After all, India’s largest nationalised bank is run by a woman. So is India’s largest private sector bank. In fact, women-led banks in India – both nationalised and private sector – control an estimated 40% of assets in the banking sector. This is the highest proportion in the world – no other country comes even close. So, if having women in charge was the answer, the issue of gender inequality in financial services should have been solved. Long ago.
In fact, the biggest measure this government – or indeed any government that we have had so far – has taken towards redressing the gender imbalance in financial inclusion has been simply ensuring that more women have a bank account to start with. From 39% of women having bank accounts before the Pradhan Mantri Jan-Dhan Yojana kicked off, the figure jumped to 61% of women within a year of the PMJDY being operational. This has been the largest single-year narrowing of the gender gap in banking achieved in any country in the world.
This is a terrific beginning, but only the first step. Simply opening a bank account for a woman does not make her financially independent, or even any greater a part of the financial system than she was before. Unless the women actually start using these accounts, and banks actually start serving them as customers in their own right, even this spectacular achievement promises to remain no more than a tick in the tokenist checklist. At the moment, more than a third of PMJDY accounts are dormant. And 86% of women PMJDY account holders, according to a Financial Inclusion Insights study, have only used their bank accounts for basic activities like deposits.
Lack of financial literacy is one big factor. A 2015 Standard & Poor’s survey on financial literacy found that 80% of female respondents in India were financially illiterate. There is a also a huge ‘digital divide’ – only 44% of women have a cell phone compared to over two-thirds of men in India. With ‘Digital India’ driving digital delivery of financial services, this means that six out of ten women are automatically excluded.
A question of perception
But these are solvable problems. Accounts can be opened, cell-phone connections can be issued. But perceptions and attitudes cannot be changed by physical intervention. They need attitudinal change.
This cannot be achieved through fiat or token affirmative action. Whether or not there is a woman at the top in the banking system, and regardless of the number of female customers, the formal financial sector simply does not see women as economic agents worthy of taking financial risk on. For instance, according to a report by the IFC and McKinsey (‘Scaling up access to finance for women entrepreneurs’), women own one-third of small and medium enterprises (SMEs), but only 6% of the SME banking portfolio is allocated to women. According to the report, women in emerging markets face a global credit gap of $260-$320 billion. According to a 2014 Goldman Sachs report (‘Giving credit where it is due’), other things being equal, the rejection rate for loan applications from women-run SMEs was twice that of male-run ones.
Seeing an opportunity
Contrast this with the microfinance sector, especially self-help groups, where a majority of the customers are women. By simply viewing women as being worthy of taking a financial bet on, the fortunes of millions of poor families have been transformed. An astonishing 97% of the customers of Bandhan Financial Services, India’s largest microfinance institution which has just turned into a bank, were women. The MFI sector’s bad loan portfolio is smaller by several multiples than that of the traditional banking sector.
What’s the difference? They saw in these women what organised banking – regardless of whether it is run by women or not – did not: an opportunity.