There is no doubt that savings are a critical tool for navigating financial emergencies, managing day-to-day expenses and planning for the future. And for low-income and rural women who run informal, micro-enterprises from their homes, savings are not only used to serve household needs but they are also necessary to finance their businesses. For these dual purposes, women entrepreneurs have been saving through a variety of well-known, albeit informal, methods.

However, despite their preference for using bank accounts for business development or expansion purposes, women are not using the savings products currently offered by the market. For instance, according to the Global Findex Survey 2021, in India where financial inclusion covers almost 80% of women, only 13% are saving their money through formal means.

So what is holding back women entrepreneurs from sufficiently participating in formal savings? How can the design and delivery of savings products become more gender-conscious in developing countries to promote women businesses? This blog seeks to address these questions with observations from an exploratory research study in Odisha, India.

Women entrepreneurs have specific requirements from saving products.

Even with low-cost bank accounts (like a government-associated Jan Dhan Account in India), women entrepreneurs in rural areas may still choose to save informally due to several social, structural and behavioural barriers, including irregular incomes, inadequate infrastructure to travel to the bank (particularly to save small sums of money), lack of privacy and safety when making the journey, as well as an already existing array of non-bank savings methods.

For low-income rural women entrepreneurs, these problems are compounded as they juggle their savings between household expenses and their business investments. These businesses tend to be small income-generating activities such as selling home-grown produce like mushrooms, making ground spices, or cooking school meals as part of the SHG collective activity that typically earns them USD 25 to 60 in a month. These modest cash earnings can be erratic and don’t provide these women a regular source of income. Any savings are usually held in cash which generates social pressures that incentivize women to share their earnings with their families. Consequently, many rural business-women struggle to separate their business savings from their household expenses.

In this context, a 2021 report from the Bill and Melinda Gates Foundation found that digital financial services (DFS) can be huge enablers for women-led businesses as they offer women the privacy of saving, money management choices, new networks to expand businesses and opportunities for capacity building. However, research demonstrates that low digital literacy and a lack of confidence and trust in DFS (despite access to smartphones) continue to be demand-side barriers to increasing women’s savings. From the supply side, Financial Service Providers (FSPs) also need to account for women’s social and behavioural contexts when designing and delivering saving products in order to increase uptake of formal methods and boost savings.

In 2022, UNCDF’s Centre for Financial Health and Common Cents Lab at Duke University collaborated to analyse observations from a 2022 exploratory study conducted by UNCDF with women collectives in Odisha, India. Here, we offer insights from the study that FSPs can utilize to improve low-income women entrepreneurs’ savings in developing economies.

1. Making the bank reach their doorstep is key to boosting women entrepreneurs’ savings

Instead of having to travel far to the bank, with the agent banking model, business-women can save in a secure and convenient manner despite their irregular incomes and small deposit amounts, which in turn promotes saving in higher frequencies. This model supports low-income female customers who are less digitally savvy, as it provides them an accessible way to moderate their household spending: Leaving cash at home may trigger overspending and may make saving more difficult, compared to storing money in an account or digital wallet. Strengthening the cash-in/cash-out (CICO) networks through the banking agents is therefore paramount to helping women entrepreneurs achieve their savings goals.

For instance, Meena – a member of a women’s collective called a Self Help Group (SHG) we interviewed - often spends her cash savings from selling mushrooms on day-to-day expenses, which prevents her from saving enough to grow her business. She voiced this issue in her SHG meetings where several other members echoed her concerns. With the help of the SHG president and the block community officer, she now calls the local banking agent to the SHG meetings where all members can make their financial and saving transactions on-site. Meena’s savings frequency and amount have both increased since the change.

Several women collectives in Odisha’s Bhubaneshwar, Ganjam and Sambalpur districts narrated similar stories where women members saved their money with the banking agent in a secure, hassle-free, and familiar environment. Women’s testimonies show that depositing money with the banking agent weekly or bi-monthly helped them capitalize on their ‘savable moments’ (moments when they are flush with cash and have the monetary resources available to save). Doing so allowed them to put away money into savings as soon as any income came in, thereby curbing excessive spending and contributing to their financial goals. The converse also proved true: many women entrepreneurs pointed out that even in low-earning seasons, they could continue to save money with the agent.

2. The CICO/banking agent model needs to address its own gaps and challenges to serve women entrepreneurs

UNCDF’s research indicates that agent networks work well in cities and towns that are closer to the markets and have steady internet availability. But, in remote areas, this model struggles with issues such as lack of electricity, data connectivity or the inability of banking agents to travel long distances. Here, women often reverted to their informal ways of saving.

Another barrier in the agent banking model is the lack of female agents. Several studies across emerging economies indicate that women feel more comfortable and prefer to transact with women banking correspondents. However, the restrictive norms and rules that apply to women in developing countries also apply to female banking agents who come from the same communities. A 2022 study conducted by MicroSave Consulting in India showed that a key challenge in recruiting women agents is the time and effort it takes to convince the female candidate’s family to allow them to participate in such professions. Without their family’s consent, it is usually difficult for women to take up these jobs. Hiring women banking agents also requires more investment in women’s digital literacy which is likely to be lower than that of men in their peer groups.

These issues, though complex, can be tackled with the right incentives, resource allocation, and policy measures through public and private investments. Zoona’s Girl Effect pipeline in Zambia launched in 2016, for example, has established an award-winning training program to help female high school graduates become Zoona tellers, kiosk owners and community leaders. By providing young women with training in digital services, customer service and life skills, as well as Zoona’s operating systems, this 2-week program led to 41 young women becoming tellers and earning incomes at Zoona kiosks. Similarly, Haqdarshak’s model in India empowers women by training them as field agents and has thus far built a cadre of over 7000 female banking agents across the country.

While the banking agent infrastructure in emerging markets and developing economies (EMDEs) needs critical attention from both policy and the private sector, savings products themselves need to accommodate women’s needs and challenges. Involving more women in the decision-making can go a long way in catering to their specific needs.

3. FSP’s need to design savings accounts that protect and further women entrepreneurs’ savings goals

Even with access to banking agents, women entrepreneurs need products that are designed for their savings goals. In UNCDF’s field work, several women entrepreneurs hinted at the lack of financial products that served the functions of goal-based saving or commitment devices such as locked savings accounts that allow people to voluntarily impose restrictions until they reach their goals, or penalities for failing to reach their goals. Narayani Devi, the head of her women collective federation in Bhubaneshwar explained to us that most women need different pockets to save or store money for a variety of household expenses and to also keep money aside for their business. While expenses like school fees are recurring monthly expenses, events like a marriage or festival celebration occur occasionally. Buying inputs for their business might be a quarterly or semi-annual expense, but one that requires significant planning and investment.

Formal savings products should capitalize on these goal-based mindsets of low-income women entrepreneurs. Soman and Cheema (2011) found that people tend to save more when money is earmarked for a specific purpose and partitioned into different accounts. Further, several studies by JPAL show that savings accounts that provide commitment devices or that are costly to withdraw from better protect women’s savings against the demand of others. Such tools improve women’s agency at home; JPAL’s research in global south countries has found that there is a demand for commitment savings products and that these accounts also increase formal savings. It is important, however, to ensure that the strength of the commitment account is appropriate for these women entrepreneurs, allowing users to access part of their money in case of emergencies.

The combination of doorstep banking and goal-based digital wallets can allow women to track their savings progress and achieve their savings goals. And given the small, irregular and multi-goal nature of their saving deposits, besides keeping everything digitally, it would also be helpful to provide users tangible ways of tracking savings; for example, Akbas, Ariely, Robalino and Weber (2016) conducted a study in Kenya through which individuals were given a golden metal coin that they could use to track their savings. The coin had the numbers 1-24 engraved on it, and each time the individual made a savings deposit, they could scratch out one of the numbers on the coin. The researchers found that at the end of the study, individuals who received a coin had higher savings, even when compared to those who were given monetary incentives to save.

Digital products can leverage these insights by providing ways to help women visualize their small deposits, keep track of their savings goals, and build their long-term savings. Similarly, Amret, a financial service provider in Cambodia’s Goal+ savings product designed applications that visualized both the customer’s savings goal (e.g., a cow) as well as their progress toward that goal, thereby increasing the tangibility of the service and of their goal.

4. More research is required to understand the needs and aspirations of different segments of women to improve the design and delivery of services

The financial inclusion initiatives mentioned above show potential but require strong cross-sectoral support to be tested and refined for populations such as low-income, women entrepreneurs. To this end, women-centric digital and financial education programs are essential for advancing women’s financial capabilities. However, the true success of these education programs will only be realised when they are complemented by gender-conscious savings products.

Mobile services are gaining traction in the financial inclusion space because they overcome physical and social barriers that traditional banks cannot. However, more investment in mobile banking infrastructure and digital financial products is critical for their impact to be universal in accelerating women’s financial inclusion outcomes. Pilots such as Jan Dhan Plus in India that promote financial institutions to highlight women customers and design products and services to fit their behaviors need attention from governments, regulators and market facilitators for scaling and policymaking. Moreover, UNCDF’s research shows that the trust and familiarity offered by government institutions such as the India Post Payments Bank add value to women’s savings mindset and capability.

All of this is only possible when we listen to different segments of women, analyse data on women entrepreneurs’ financial needs and aspirations, test assumptions with women customers, iterate products based on their feedback and monitor their effect on women’s economic and social lives. Similarly to this project, UNCDF is investing in women’s economic empowerment and digital financial inclusion. For more on our work in relation to women’s economic empowerment, visit our page here

References

Soman, D., & Cheema, A. (2011). Earmarking and partitioning: Increasing saving by low-income households. Journal of Marketing Research, 48(SPL), S14-S22.

Abdul Latif Jameel Poverty Action Lab (J-PAL). 2021. "Designing financial services and social protection programs to enhance women’s economic empowerment."

J-PAL Policy Insights. Last modified Feburary 2021. https://www.povertyactionlab.org/policy-insight/designing-financial-services-and-social-protection-programs-enhance-womens-economic

J-PAL Policy Bulletin. 2021. “Commitments to Save.” Cambridge, MA: Abdul Latif Jameel Poverty Action Lab. https://www.povertyactionlab.org/sites/default/files/publication/Commitment-Savings-Bulletin-5.21.21.pdf

Tiwari, A., Jaitly, S., Pandey, G. (2022). Women’s agent network—the missing link in India’s financial inclusion story: A supply-side perspective. MicroSave Consulting. https://www.microsave.net/wp-content/uploads/2022/02/PB-26_MSC_Female-BC-agents.pdf

Women’s World Banking. (2021, August 18). The power of Jan Dhan: Making finance work for women in India. https://www.womensworldbanking.org/insights/the-power-of-jan-dhan-making-finance-work-for-women-in-india/