Gender-Sensitive Financial Design To Boost Inclusivity: Kalpana Ajayan

Achieving gender equality in financial inclusion is a pressing challenge. Women's World Banking, a stalwart in this field for over four decades, stands at the forefront of empowering women in financial inclusion. Kalpana Ajayan, the Regional Head for South Asia at Women's World Banking, brings her profound insights to the forefront in this interview. She delves into the key challenges women face in accessing formal credit, the critical issue of algorithmic bias in financial services, and the multi-stakeholder approach needed to bridge the gender gap in financial inclusion.
 
Furthermore, she sheds light on the paramount importance of enhancing consumer protection in the ever-evolving realm of digital financial services. Join us as we explore the strategies and initiatives that are transforming the financial landscape for women around the world. Excerpts from the interview:
 
What are the key challenges women faces in accessing formal credit?
 
It's not that women don't know how to save, borrow, or access insurance. The key issue is whether they utilise formal financial products, thus creating a digital footprint. This digital footprint helps establish a clear identity, like Rekha, who has a savings account with Bank X and maintains a certain balance, or Sonia, who borrowed Rs 10,000 from a financial institution with a reliable repayment record, and so forth.

What's particularly challenging for most women is accessing formal credit. There's a significant gap because there aren't many institutions willing to lend to women due to incomplete KYC information and the lack of collateral in their name. This is where fintech companies play a crucial role. They employ innovative methods to determine your creditworthiness, allowing them to assess your risk profile and provide loans accordingly.
 
How has Women's World Banking addressed algorithmic bias in financial services?
 
Women's World Banking has been working extensively in the credit space, particularly with microloans. We have been addressing algorithmic bias in financial services. While fintech can play a crucial role in reducing bias, it can inadvertently introduce biases as well. For instance, if 92 per cent of a portfolio consists of male clients, the machine learning algorithms might favour profiles similar to male clients, which further perpetuates bias.

To combat algorithmic bias, Women's World Banking conducted research in countries like Mexico, Colombia, and India in collaboration with partners like Lendingkart. They aimed to identify and rectify bias in algorithms used for credit assessment. Initially, some organisations were unaware of the bias but were open to addressing it once it was brought to their attention.

The root causes of bias often lie in the sourcing process, communication strategies, and language used. For example, sourcing through agents who primarily interact with men can lead to a biased portfolio. Additionally, the language and approach used in product communication may not be female-friendly. Women's World Banking's research highlights that women may have more questions and require more support during their initial interactions, but once onboarded, they tend to adopt digital financial services enthusiastically, often outperforming men in transaction volumes.

The key takeaway is that designing financial products and services with a gender-sensitive approach and addressing algorithmic bias can lead to more inclusive and effective financial solutions for women.
 
How can financial institutions and policymakers work together to address the gender gap in financial inclusion?

Indeed, addressing the gender gap in financial inclusion is a significant challenge. It involves overcoming various roadblocks. Let's explore the steps that need to be taken to bridge this gap.

The biggest hurdle, as you can imagine, is smartphone ownership. Access to the internet begins there. Data shows that many women do not have smartphones; they are more likely to have feature phones. Even if they do own a smartphone or feature phone, their ability to access the internet is limited, often due to lack of confidence and experience.

Other barriers stem from social norms. In many cultures, financial matters are expected to be discussed with husbands or elder male family members. These norms can discourage women from taking the first step toward financial independence. Lack of knowledge and confidence can also play a role in this reluctance.

To address these challenges, we advocate for a concept beyond mere financial literacy: digital financial capability. This approach goes beyond basic knowledge and focuses on building practical skills and confidence in using digital financial services. It's about empowering women with the ability to navigate the digital financial landscape effectively.

In summary, building trust and confidence is vital for women's financial inclusion, alongside providing the necessary skills and knowledge. Awareness campaigns, regulatory support, and the involvement of women agents can all contribute to achieving this goal.

How to enhance consumer protection in the digital financial services landscape?

Consumer protection operates at three distinct levels. The first level involves ensuring that the customer, particularly women, is fully aware of her rights and educated about safe ways to use digital financial services. This includes being vigilant against risks such as phishing attacks, spam, and other potential threats.

Moving to the second level, it's crucial to focus on the responsibility of financial service providers. These providers need to operate with transparency and fairness. This means being upfront about all terms and conditions of their products and services rather than burying critical information in lengthy legal clauses. Practicing fair lending and ensuring openness in product offerings are essential elements in ensuring consumer protection.

Finally, at the third level, we find the regulator. Regulatory bodies play a crucial role in overseeing the financial industry and ensuring that consumers are protected from predatory practices, fraud, and other risks. They establish guidelines and enforce regulations that financial service providers must adhere to in order to protect consumers' interests.

In summary, achieving consumer protection in digital financial services involves raising customer awareness, ensuring responsible practices by financial service providers, and effective regulation by authorities to safeguard consumers' interests.