Exploring the systemic barriers women face and the innovative solutions that can empower them financially
Author: Unnimaya Raj, Senior Consultant at Tarutium Global Consulting

Did you know that globally, 76% of adult men have an account at a financial institution, while only 71% of adult women do? Or that 59% of men can muster $500 for an unexpected expense within 30 days, compared to just 50% of women? These striking disparities highlight a pressing issue: women often find themselves at a financial disadvantage.

Why do so many women lack confidence in their financial skills? Could it be that the perception of finance as a male-dominated field discourages women from engaging in financial matters? The OECD/INFE 2020 survey reveals that women often lack confidence in their financial skills, impacting their financial behaviour.

According to the World Bank, one in six women aged 15 and older report not having a bank account due to a lack of documentation. These statistics are not just numbers; they represent systemic barriers that hinder women’s financial resilience.

Understanding Financial Resilience

Financial resilience is crucial in today’s unpredictable world. The OECD defines it as “the ability of individuals or households to resist, cope, and recover from negative financial shocks.” It means managing daily expenses, planning, investment and saving for long-term needs, as well as handling unexpected emergencies, which requires financial inclusion and financial literacy.

It encompasses having the necessary resources to manage everyday expenses, plan for long-term needs, and handle unexpected emergencies. Financial resilience is essential for maintaining stability in uncertain times, such as illness, job loss, or unexpected expenses, and allows individuals to navigate financial disruptions without derailing their long-term goals. However, building and sustaining financial resilience depends on several key factors, including financial inclusion, financial literacy, and socio-demographic characteristics.

The Building Blocks of Financial Resilience

When it comes to financial resilience, having financial knowledge is extremely important. Those who understand financial products and management and are exposed to investment and savings opportunities, are better equipped to make informed decisions that protect them during crises. Imagine being able to navigate unexpected expenses, job loss, or health emergencies with confidence. Higher financial literacy leads to better control over money, careful spending, and the ability to save for emergencies. This proactive approach reduces the risk of engaging in risky financial behaviours—like overborrowing—that can leave individuals vulnerable when life throws them a curveball.

Economic resource factors and financial inclusion play a pivotal role in financial resilience, as they provide access to essential services like bank accounts, credit, savings, investment, and insurance. Access to saving and investment opportunities allows individuals to build a financial buffer and accumulate wealth over time, providing immediate liquidity and ensuring long-term stability. These tools are critical for managing expenses and planning for uncertainties. Those with a diverse range of financial products are often better equipped to weather financial storms, while those without face increased risks and challenges. Stable jobs and income sources are also fundamental, as they empower women to save, invest, and access financial services. Employment not only provides financial independence but also opens doors to benefits like health insurance and pensions, which are crucial for building resilience. Conversely, income insecurity can make it difficult for women to plan and build a safety net.

Social demography also plays a significant role. Factors like income level, education, and gender influence how well individuals navigate financial disruptions. Education and empowerment are particularly crucial for women, as they equip them with skills and knowledge to access better job opportunities, negotiate wages, and make informed financial decisions. Empowerment through education not only boosts income potential but also enables women to actively participate in household financial decisions, enhancing their financial resilience.

Additionally, social capital—the support of family and friends—can be a lifeline during tough times, providing both emotional and material assistance. This network is especially vital for those with fewer financial resources, as a strong support system can make all the difference in building resilience.

Persistent Gender Gap: Need for Solutions

Despite the importance of these factors, a significant gender gap persists in financial resilience. Women often face unique challenges that heighten their financial vulnerability, such as lower financial literacy, persistent wage gaps, and differences in labour market participation.

Addressing these challenges is not just a matter of fairness; it’s crucial for enhancing women’s financial resilience and achieving economic equality. We must explore the obstacles women encounter in building financial resilience and seek out innovative solutions to bridge this gap. While some gender gaps lessen with demographic adjustments, the disparities that exist still limit women’s economic participation and access to essential services.

The Challenges Women Face

Despite progress in many areas, traditional cultural norms and gender roles continue to pose significant barriers to women’s economic opportunities and financial independence. These societal expectations limit access to education and employment, hindering overall participation in the economy. Let’s explore the specific challenges that contribute to these disparities and affect women’s financial resilience:

• Unequal access to education: Women have historically faced barriers to accessing education, especially higher education, which restricts career opportunities and earning potential. Gender-biased curricula often perpetuate traditional roles, limiting exposure to subjects that lead to higher-paying careers. This unequal access stifles women’s ability to pursue economic independence.
• Limited economic opportunities: Women are frequently confined to lower-paying occupations due to occupational segregation. The persistent gender pay gap, where women earn less than men for the same work, compounds this issue. Discrimination in hiring, promotions, and salary negotiations further restricts women’s career progression and earning potential.
• Household responsibilities: Traditional gender roles often place the primary responsibility for household chores, childcare, and elder care on women. This caregiving burden creates “time poverty,” severely limiting their capacity to participate in the workforce and pursue income-generating opportunities. As a result, women often have little time or energy for personal development or financial management.
• Property and inheritance rights: In many cultures, women face restrictions on property ownership and inheritance rights, preventing them from using assets as collateral for loans or as income-generating resources. Traditional inheritance practices that favour male heirs reinforce women’s economic dependence.
• Financial decision-making: In patriarchal societies, financial decisions are often dominated by men, limiting women’s autonomy. A lack of financial literacy and confidence further exacerbates this imbalance, making it challenging for women to make informed decisions about budgeting, saving, and investing.

To build a more inclusive and resilient economic future, it is essential to address these challenges. This requires challenging societal norms, promoting gender equality, and equipping women with the knowledge and tools needed to manage their finances effectively.

Opportunities for Bridging the Gender Gap in Financial Resilience

1. Enhancing financial literacy

One of the most impactful ways to empower women is through targeted financial literacy programs. By addressing the specific needs of women, these initiatives can equip them with essential knowledge and skills. For instance, Finland has successfully integrated personal finance into its school curricula, preparing young women for financial independence from an early age.

In India, community-based programs like the Sakhi Financial Literacy Program demonstrate the power of local organisations in delivering financial education to women in rural areas. By making financial knowledge accessible, these programs help bridge gaps in understanding and access, fostering greater economic empowerment.

Real-World Example: Financial Literacy in Kenya

In Kenya, financial literacy programs have made significant strides in enhancing women’s understanding of budgeting, saving, and investing. Participants have reported increased confidence in managing their finances, leading to healthier financial habits. These programs have resulted in greater access to credit, responsible use of formal financial services, and empowered women to make informed decisions.

As a result, many women have been able to reduce debt, increase savings, and effectively manage financial shocks like job loss or health issues. This empowerment is vital for strengthening financial resilience and independence among women.

2. Women-focused financial products

To further support women’s financial empowerment, financial institutions can design innovative products tailored to their needs, like microloans, specialised savings accounts, and insurance plans.  Initiatives like Shea Yeleen in West Africa provide microloans to women entrepreneurs, helping them access markets and gain essential business skills. These opportunities not only improve incomes but also enhance livelihoods.

Additionally, programs like the Women’s Enterprise Fund in Kenya support female entrepreneurs with grants and business training. Creating safe, inclusive financial environments is equally crucial; Brazil’s Women’s Banking Program has successfully helped millions of women access credit, start businesses, and improve their financial situations, thereby reducing the gender gap in financial access.

Success Story: The Role of Women’s Self-Help Groups in India

In India, women’s self-help groups (SHGs) have emerged as powerful grassroots organizations. These groups enable women to pool savings into a shared fund, offering lower-interest loans compared to traditional lenders. The collective decision-making process within SHGs empowers women by giving them a substantial role in managing their finances.

Moreover, SHGs provide social support and enhance community cohesion. They improve access to credit and financial services that might otherwise be out of reach, while also offering essential financial education. This empowers entrepreneurial ventures and contributes to poverty alleviation.

3. Legal and policy reforms

Finally, addressing systemic barriers through legal and policy reforms is crucial. Countries like Morocco have made strides by reforming discriminatory laws to improve women’s inheritance rights. Strengthening legal frameworks and promoting gender equality—like the European Union’s directive on gender equality in the workplace—creates an environment where women can thrive economically.

Way Forward

In addressing the gender gap in financial resilience, it is clear that a multi-faceted approach is essential for bridging disparities and fostering economic security for women. Traditional gender roles and socio-economic barriers significantly impact women’s financial well-being, restricting their access to education, economic opportunities, and property rights. These limitations are compounded by lower financial literacy and confidence, which hinder their ability to make informed financial decisions and manage resources effectively. However, targeted interventions and successful case studies highlight potential pathways for improving women’s financial resilience.

Programs that enhance financial literacy, expand access to digital financial services, implement supportive legal reforms, and support women-focused financial products are crucial for closing the gender gap. Initiatives such as Kenya’s M-Pesa, India’s SHGs, and tailored financial literacy programs showcase the effectiveness of leveraging technology, community support, and innovative financial solutions.

It is time that organisations start prioritizing these initiatives to create a more equitable financial landscape that empowers women, fosters economic independence, and strengthens communities worldwide.