Financial literacy enables achieving personal and professional goals
Financial literacy can help women and men access a wider range of efficient financial services and products suited to their needs, allowing them to achieve important personal and professional goals, such as planning and saving for retirement, starting a new business or acquiring a home.[i] When equipped with financial literacy, women and men can save more and invest in more diverse assets, and make better borrowing decisions. Hence financial literacy is good for the people who acquire it, as well as for the overall economy.
Financial literacy gender gap starts after school
Worldwide, 33 percent of adults are considered financially literate; with 35 percent of men being financially literate compared with 30 percent of women. The gap is around 5 percent across the BRICS, and 8 percent for the G7 countries.[ii] According to the OECD, the gap exists in terms of knowledge, interest and confidence in financial knowledge and skills. Young women, widows, the less well-educated and low-income women lack financial knowledge the most.[iii]
Financial education is correlated with socioeconomic levels, [iv] as well as education in STEM, in which women also lag behind in the EU[v]. By contrast, there is no gender gap in financial literacy among schoolchildren, underlining the need for financial education from a young age and integrated into the general education curriculum.
Banks have an innate interest in financially literate clients and employees
Any gap in literacy constrains women clients’ access to banking and bank-intermediation of capital market finance. Thus, banks have an innate interest in greater financial literacy in all their potential clients, including women. Financial literacy is also relevant in banks’ internal human resources policies or broader community engagement. For example, some banks which have financial education programmes for employees may specifically target their women employees,[vi] or may sponsor awareness campaigns for the general public targeting financial literacy. There are many best practices among the EBF-represented national banking associations’ financial literacy programmes in the EBF’s Financial Literacy Playbook.[vii]
Financial literacy can help reduce the gender gap in access to finance – but not its own
Of the 1.7 billion unbanked adults around the world, 56 percent are women[viii]. While worse in developing countries (women not being allowed to open an account in some countries!), problems exist in advanced economies as well. Only 2 percent of venture capital is invested in women-led start-ups; women-led SMEs are 30 percent less likely to access sufficient funding;[ix] [x] pension products may not be suitable to parents who take time off; hidden bias might be replicated in automation; and digitalisation might cut off more women from basic services due to the digital literacy gap.[xi]
Broad factors affect access to finance that go beyond financial literacy (including systemic inequalities such as the gender gap in terms of pay, wealth, or entrepreneurial opportunities). To do their part, banks have sought to improve the supply and demand of women’s banking in different ways, such as adapted products and services (such as mentoring or networking for entrepreneurs). Whatever the specific approach, banks can do a lot for – and have a self-interest in – a better adaptation of their offer to women clients.
Gender-Neutral Banking supports the bottom line – and the economy
Beyond financial literacy and other efforts aimed at equal access, banks can contribute to a gender-neutral economy by creating gender-neutral banking across all the dimensions of women’s interactions with banks.[xii] In finance, we need more women in top positions as managers, as shareholders, as investors, and as supervisors; we need inclusive products and services; and we need an inclusive culture. All these efforts are in banks’ own interest. Using talent more smartly not only boosts a bank’s profitability and safety, but it also helps banks serve their clients better and make more money.[xiii]
Moreover, diversity makes the whole economy more competitive at both a micro[xiv] and macro[xv] level. Diverse banks serve more diverse clients who in turn employ more people and open new businesses. Exactly what we need as we try to recover from the crisis. According to the World Bank, the world stands to gain 172 trillion USD in a “gender dividend” by closing gender gap in lifetime labour earnings.[xvi] The EU estimates that GDP per capita would increase by 6-10 percent (€2-3 trillion) if we have gender equality.
We need a comprehensive approach
In the fight to achieve equality, women’s financial literacy can be a powerful game changer, especially as part of a broader strategy to create equal opportunities. Banks are a critical part of this journey. European banks, individually and collectively through their national associations and the EBF, have launched valuable initiatives.[xvii] Women’s financial literacy can generate tremendous opportunities for banks to do the right thing and to amplify trends of progress in society – ultimately to ensure that no one is left behind.
§ Join our event ‘Addressing the Gender Gap in Financial Literacy as Part of a Broader Strategy for Economic Empowerment’ on 24th March 2021, 16:00-17:00 CET.
[i] https://www.bruegel.org/wp-content/uploads/2018/05/PC-08_2018.pdf
[ii] https://gflec.org/wp-content/uploads/2017/07/The-Gender-Gap-in-Financial-Literacy-A-Global-Perspective-Report.pdf
[iii] https://www.oecd.org/daf/fin/financial-education/OECD_INFE_women_FinEd2013.pdf Women have lower financial knowledge than men in a large number of countries, in both developed and developing ones.
[iv] https://www.bruegel.org/wp-content/uploads/2018/05/PC-08_2018.pdf
[v] Women only represent 17 percent of people in ICT studies and careers in the EU and only 36 percent of STEM graduates, despite the fact that girls outperform boys in digital literacy.
[vi] For an international example of gender differences in financial literacy among bank employees, see:
https://www.researchgate.net/publication/326881738_Financial_Literacy_of_Women_Employees_in_Banks
[vii] https://www.ebf.eu/ebf-financial-literacy-playbook-for-europe-2/
[viii]https://globalfindex.worldbank.org/sites/globalfindex/files/chapters/2017%20Findex%20full%20report_chapter2.pdf
[ix] https://ec.europa.eu/info/sites/info/files/economy-finance/dp129_en.pdf
[x] https://www.oliverwyman.com/our-expertise/hubs/gender-diversity-in-financial-services.html
[xi] eg by offering adapted products and services to women and addressing unconscious bias (growing the supply), and creating opportunities of networking and other non-financial services for women clients (growing the demand). In fact, some banks have taken the view that – due to differences in the circumstances of women –gender-neutral banking requires the design of certain products and services specifically for women, which is called “women’s banking.”https://www.womensworldbanking.org/insights-and-impact/how-to-create-financial-products-that-win-with-women/
[xii] To take one example, compared with the available talent pool, women’s share in leadership positions in finance is low. Women hold less than 20 percent of board seats of banks and banking-supervision agencies worldwide. Women represent less than 2 percent of bank CEOs. (For example, women represent about 30 percent of economics graduates and about 50 percent of graduates in business and the social sciences). By making themselves better employers of women, banks not only do the right thing, but they also improve their performance and contribute to better financing opportunities for women. https://www.imf.org/en/Publications/WP/Issues/2017/09/07/Banking-on-Women-Leaders-A-Case-for-More-45221
[xiii] Recently Oliver Wyman estimated that if banks were better at equality globally, they could make an additional $175 billion in revenues a year – among which $30 billion in new net interest income from SME loans and $65 billion from loans to retail clients. Gains for the insurance sector would be even bigger. https://www.oliverwyman.com/our-expertise/hubs/gender-diversity-in-financial-services.html
[xiv] https://www.mckinsey.com/business-functions/organization/our-insights/why-diversity-matters
[xv] https://www.mckinsey.com/featured-insights/employment-and-growth/how-advancing-womens-equality-can-add-12-trillion-to-global-growth
[xvi] https://www.worldbank.org/en/news/press-release/2020/03/03/world-could-achieve-gender-dividend-of-172-trillion-from-closing-lifetime-earnings-gaps#:~:text=WASHINGTON%2C%20March%203%2C%202020%20%E2%80%94,earnings%20between%20women%20and%20men
[xvii] https://www.ebf.eu/ebf-media-centre/ebf-adopts-the-womens-empowerment-principles/ An important milestone is the EBF’s signing of the Women’s Empowerment Principles in 2019, a comprehensive global framework aimed at empowering women economically. Gender equality was a natural extension of our work on the UN’s Principles for Responsible Banking, which we signed in 2019. Building on this project, we are broadening our work into diversity and inclusion across other dimensions, with a special focus on COVID this year.
