The Fintech Beat podcast, hosted by Dr. Chris Brummer, brought another brilliant episode to listeners shedding light on financial inclusion and global efforts aimed at providing low-income women in developing countries with access to the financial tools necessary for achieving financial security.
Headlined by Mary Ellen Iskenderian, the President and CEO of Women’s World Banking (‘WWB’) – a global nonprofit devoted to giving low-income women in the developing world access to financial tools and resources—the episode centered on the business case of banking for the world’s underserved.
Iskenderian is not a newcomer to the podcast. She appeared as a guest in 2020, providing a history on microfinance—from founding principles articulated by Mohammad Yunis to the plight of microfinance institutions at the height of the pandemic. Here she extends her thoughts, and contextualizes them against the backdrop of her new book There’s Nothing Micro About a Billion Women: Making Finance Work for Women. The book—which is narrative, case study, and investment thesis all in one—articulates as a set of principles Iskenderian’s broader philosophy concerning the untapped potential of 1 billion unbanked women, and why the financial sector should view their inclusion as necessary to promote sustainable and inclusive economic growth.
There’s Nothing Micro About a Billion Women introduces some novel, and even controversial questions—like whether or not financial inclusion in effect subjects women to more or less physical danger. An influential and well-established body of literature has begun to promote the reduction of the gender gap within financial inclusion. Research shows that this will aid in lowering financial risks and costs, increase security, and facilitate new business ventures. Iskenderian is a veteran in the field of financial inclusion, who looks to prove why unbanked women should be seen as an opportunity, as well as define what barriers deter them from becoming a part of the wider drive towards financial inclusion.
According to Iskenderian, barriers to entry can be placed at three broad levels.
- Women either feel a perception of or are in fact less financially and digitally literate. A combination of financial and digital literacy is crucial to financial inclusion.
- There are challenges present at the level of financial service providers, where most providers fail to see a business case for serving this particular client base. This challenge is further exacerbated by the lack of sex-disaggregated data, which if collected by developing country regulators and financial service providers, would allow providers to market products to women that they regularly use.
- The third barrier Iskenderian mentions is the outdated credit infrastructure for women. The vast majority of banking systems throughout the developing world require physical property or land to be the only acceptable collateral for a loan. Women in these societies are more often than not, denied the right to own or inherit property, making it impossible for them to seek a loan.
This combination of challenges stemming from a lack of data, infrastructure, and policy, come together to create an environment in which women are excluded from accessing financial tools to aid in their security and prosperity.
Iskenderian also spoke about how digital transformation spurred financial inclusion. She believes that financial service providers have nowhere to hide, now that the average unit cost of delivering financial services has entered the realm of being possible. WWB has done some fascinating work in this regard, partnering with fast-moving consumer goods companies, to enable them to provide financial services. These companies have direct access to remote villages and into the lives of both women and men. Rather than following the traditional route of financial service providers, these companies can sometimes be better suited to provide financial services.
Microfinance has been lauded as an economic lifeline for women in underdeveloped nations, but Mary Ellen Iskenderian demonstrates that it takes more than micro-loans to empower women and create inclusive, sustainable economic growth.
Dr. Brummer was fascinated by how the WWB was able to engage a diverse client roster, and stakeholders. He was also interested to know where the opportunity lies for microfinance given the technological shift, especially in a post-pandemic world. Microfinance, after all, had started as a very high-touch enterprise. In order to deliver services, individuals routinely had to visit rural areas in person, engage potential clients and customers face to face, and then connect them with opportunities made possible through pools of capital WWB and its network made available. The pandemic, he observed, would throw these techniques out of whack.
Iskenderian agreed and explained how the level of digitization of a financial service provider has become a dividing line demarcating which institutions did or did not prosper during the crisis. Institutions that leveraged digital tools while investing in clients, whether through the disbursements of loans or collections of loans, were able to stay closer to clients even during shut-ins. Moreover, once many countries began to implement moratoriums on the repayment of loans, institutions that were digitally connected to their clients throughout this moratorium fared the best and had greater chances of having loans repaid.
Digital transformation was supercharged during COVID. Getting financial assistance out to entrepreneurs and communities in need required new payment rails in many countries, accelerating inclusion. For example, in India, Iskenderian, noted, that the first round of COVID relief payments was paid out only digitally, and within three weeks of the first lockdown in March 2020, there were 25 million new digital bank accounts opened mostly by women. The question then became how to retain these women within the system they had just entered, and to build out an ecosystem that met their needs.
Brummer and Iskenderian also discussed the concept of insurance in financial inclusion and how WWB is using traditional tools to facilitate women. Iskenderian mentioned how a microfinance institution in Jordan, called Microfund for Women, approached WWB to help design a loan called a maternity loan. It was designed to provide a loan for women who had banked with the institution for a minimum of three years—and if they became pregnant. By delving further into the reasons behind why such a loan might be needed, WWB helped redefine the loan which would result in more debt for the women, to an insurance product, which would have a much lower premium and provide greater benefits to clients.
The episode ended with musings by Brummer on why Iskenderian makes such a great host. “It’s not because she’s an internationally acclaimed legend—though that is pretty cool—but because she cares enough to put herself in the shoes of so many different people: whether it be the underbanked, women in rural areas, their husbands, and yes, global investors. And this is reflected in page after page in her book, and bolstered by data, and a keen eye sharpened from years of work on the ground.”
The comments caught our eye. As others have noted, Brummer is not new to microfinance. Not only is he married to Rachel Loko, a securities lawyer who herself helped establish some of the first offices of the Grameen Bank in Uganda, but he runs Georgetown’s Institute of International Economic Law, a think tank of sorts that serves as a hub for conversations on financial inclusion, including microfinance. But there seemed to be something more to the statement, an observation about not only the guest but the paucity of open-mindedness more generally. If that’s the case, it’s worth perhaps a second listen to the episode. Experimentation in finance and technology will be necessary to unlock its potential for not only the unbanked but also the underbanked and badly banked. We can only hope that views like Iskenderian’s get the attention they deserve in emerging capitals—and developed countries to boot.