Date: 04/05/2023

Relevance: GS-1: Role of women and women’s organization

Key Phrase: Pradhan Mantri Jan Dhan Yojana ,credit history, Reduction of Gender Gap, Gendered Lens, Promoting Digital Payments, Digital and Financial Capabilities, Financial literacy, Socio-cultural barriers, Lack of collateral.

Context:

• India has made significant progress in the last-mile delivery of banking services to underserved communities, thanks to the Pradhan Mantri Jan Dhan Yojana (PMJDY).

About Pradhan Mantri Jan Dhan Yojana (PMJDY)

• Launched on August 28, 2014.
• Objective: To provide universal access to banking facilities to every household, and access to credit, insurance, and pension facilities to every adult individual.
• Unlike previous initiatives on financial inclusion, PMJDY targets households and sub-service areas comprising 1,000-1,500 households.
• Covers both rural and urban areas.
• Other Services:
  • RuPay debit card with inbuilt insurance cover of ₹1 lakh.
  • Life cover of ₹30,000.
  • Overdraft facility of up to ₹5,000.
• Note: Financial inclusion is the process of ensuring access to financial products and services needed by vulnerable groups at an affordable cost in a transparent manner by institutional players.

Key Highlights:

• Since its launch in 2014, the number of bank accounts open in the country has risen from 147 million in March 2015 to 462 million in June 2022.
• According to a report by the Bank for International Settlements, this is the largest increase (45%) in bank accounts opened by any country in the same period.
• 56% of all these new bank accounts are owned by women.
• Reduction of Gender Gap: India managed to achieve remarkable financial inclusion and significantly reduce the gender gap, from 17% in 2011 to 6% in 2017.
• Actual Usage of Bank Accounts: Most women only access their PMJDY accounts to withdraw the benefit transfers that they receive from the various government initiatives that they are eligible for.
• Most of them do not use these accounts for savings, to build a credit history, or avail of any financial products such as insurance and loans.

Reasons for Limited Engagement:

• Most women tend to work and shop within a four-kilometre radius of their homes.
• Privacy and Confidentiality: Women also tend to have concerns about privacy and confidentiality and as a result hesitate to discuss personal financial matters with strangers.
• Socio-cultural barriers: Women may face social and cultural barriers that prevent them from accessing financial services, such as restrictions on mobility, gender norms, and discrimination.
• Financial literacy: Women may have limited financial literacy skills, making it difficult for them to understand and navigate financial systems and products.
• Lack of collateral: Women may not have sufficient collateral to obtain loans, making it difficult for them to access credit and other financial services.

What Can Be Done To Increase Woman’s Participation In Financial Markets?

• Promoting Digital Payments:
  • One way to increase the participation of women in financial markets is to actively promote the use of digital payments among women.
  • If financial services can be provided over mobile devices, women would have no need to actually travel to a bank branch to avail them.
  • Digital payments offer a level of privacy and confidentiality that far exceeds what would have been available at a bank branch, offering women a greater sense of control over their financial information.
• Active Design of Services:
  • Fintech firms and financial institutions need to make a concerted effort to actively design their services to address the needs of women across all levels of society.
  • The financial services industry leaves roughly $700 billion of revenue on the table every year by not making more of an effort to serve women customers.
  • Market participants need to better understand the specific challenges that women typically face and design products to address them head on.
• Gendered Lens:
  • They will need to bring a gendered lens to each stage of the product delivery cycle to make sure that they are not just superficially repackaging a generic financial product and serving it to women by actively taking into consideration their genuine concerns around limited mobility and access to information.
• Specific Challenges for Women:
  • There is a need to recognize that what women have to deal with can affect their financial lives in ways that are different when compared to men.
  • For example, even though women tend to live longer, they have higher medical expenses, which renders traditional retirement planning poorly suited to the needs of the average woman.
• Digital and Financial Capabilities:
  • It is also important to ensure that women have the digital and financial capabilities to use digital payment tools effectively.
  • In rural environments, this would include nurturing the ecosystem of business correspondents by training them to better handhold their customers and offer them a broader range of services than just plain banking.
• Redesigning Digital Payment Solutions:
  • Digital payment solutions can be easily redesigned to enable privacy and confidentiality and to specifically address the challenges of mobility and access to information that are key stumbling blocks to the financial inclusion of women.
• Partnering with women's organizations:
  • Financial services firms can partner with women's organizations to provide financial education and services to women.
  • These organizations can help to build trust and relationships with women in the community and provide a platform for financial services firms to engage with them.

Conclusion:

• Financial services firms can definitely play an important role in addressing the financial inclusion gap for women by developing products and services that are tailored to their unique needs and by providing education and support to help women become more financially literate and engaged in the financial system.

Source: Live-Mint

Mains Question:

Q. Despite the increase in the number of bank accounts opened by women in India, they are not actively engaged in the formal financial industry. What are the reasons for this and how can it be addressed? (250 Words).