Can India fix gender gap in digital financial inclusion?

Increase in the scale of financial literacy needs to be preceded by digital literacy. There is need to create infrastructure and training facilities at Panchayat level to make women conversant with digital apps, wallet, portals, e-commerce websites

With India taking over the G20 Presidency in 2023, there is a growing interest to focus on both the achievements and issues related to the digital financial inclusion (DFI) of women and MSMEs in India. The report titled "Digital Financial Inclusion of Women in MSMEs: G20 and

India" supported by the National Bank of Agriculture and Rural Development (NABARD), focuses on India's success and gaps in digital financial inclusion of women and the growing prioritization of DFI for women at a policy and programmatic level across G20 countries and in the G20 forum.

This report presents findings from a pilot survey of 308 women MSME owners and employees across four Indian states (Rajasthan, Gujarat, Karnataka, and West Bengal). During Covid- 19 pandemic, women-led businesses experienced an approximately 73 per cent drop in revenues; 46 per cent of these relied on savings to cope financially, 50 per cent of the business closures were permanent and 62.5 per cent required financial capability building support.

ICRIER's report reveals that despite rapid digitalization in G20 countries, there is still a significant gender gap in access to mobile and internet usage. In India, although the percentage of women owning mobile phones increased from 45.9 per cent to 54 per cent between 2015-16 and 2020-21, nearly 7 in 10 women in India have never used the internet due to patriarchal socio-cultural norms, women are discouraged from owning mobile phones which results in lack of access to technology. In developed countries like Australia, Canada, Japan, and Germany, over 95 per cent of the women made and/or received digital payments in both 2017 and 2021. In comparison, less than 50 per cent of women in developing countries like India used digital payments in 2021. The report further stated that although account ownership by women in MSMEs is high, the use of bank accounts and other financial services is limited. Also, while younger women are more likely to own a smartphone and make online payments through apps like Paytm and Google Pay, they are less likely to have a bank account, take a loan, or buy any kind of insurance. The Government of India has introduced several schemes, targeting women-entrepreneurs' DFI over the past few years. Schemes such as the PMMY, have extended almost 68 per cent of their total sanctioned loans to women. Despite these, India is considerably lagging behind DFI of women in MSMEs, among the developing G20 countries

The report suggests that there is considerable scope for MSMEs to gain from a more inclusive digital financial system. For example, a shift of MSME owners from cash-based transactions will save them money and time and their employees can receive wages in their accounts. This requires onboarding of owners into e-commerce platforms through training and capacity building. With improved access to information regarding schemes and policies, the policies should have a clearly defined program cycle to avoid implementation issues. Regular monitoring and evaluation activities to measure the effectiveness of the program and identify subsequent gaps needs to happen. There is also a need to understand and examine the effect of the Covid-19 pandemic on women and come up with a toolkit for policymakers in developed and developing countries in the G20 to enable the DFI of women in post-pandemic recovery plans.

Talking to Bizz Buzz, Dr Arpita Mukherjee, Professor, ICRIER, says, "There are several reasons for gender gap in digitalization and the low usage of mobile banking. First, women are less likely to own a smartphone compared to men. In our survey, over 26 per cent of employees did not have a smartphone. Second, digital literacy is low. In our survey, only around 3 per cent of employees and 14 per cent of owners have attended a digital literacy programme. Thus, gender bias and a lack of support and knowledge are adversely impacting digital financial inclusion. While the account ownership by the woman in MSME is high, the use of bank account and other financial services is limited."

The women MSME owners are more likely to use banking and other financial services than employees, due to higher levels of education and awareness. Thus, education and awareness building is important as it can lead to greater use of technology and financial services. On what could be the reasons for low use of mobile/internet banking/online financial transactions, she replies, "One of the core reasons for low level of online transactions has been lack of trust and faith in mobile banking. More than 55 per cent of the employees and 25 per cent of the owners did not feel safe while transacting through mobile banking."

"While 92 per cent have a bank account, only 37.4 per cent of MSME employees in our survey used internet banking and 52.7 per cent of our sample of employees said that they prefer to do transactions by visiting the bank physically. This is again related to lack of trust on the process of or lack of knowledge about digital transaction and/or ability to do the same online. While many MSME owners support digitalization, the most preferred mode of acceptance of payment from customers continues to be cash, leading to low level of digital transactions. The presence of women entrepreneurs in e-commerce platform is low. Presence in e-commerce platform leads to increase in online financial transactions," she added.

What are some of the key issues of financial inclusion when it comes to MSME women entrepreneurs? Describing it, she says, "Many MSME women entrepreneurs believe that it is difficult to get a loan if the owner is a women vis-a-vis men. They lack knowledge about the schemes and programmes and women in MSMEs may not have access to technology. The most common issue faced by women MSME owner is access to finance. The other issue is access to market through use of technology like onboarding into an e-commerce platform." She has suggested some of the key areas where policies and schemes can be introduced. There is need for policy/programmes targeted at women for digital financial inclusion starting from financial literacy programmes to awareness building and enhancing access to credit and financial services, particularly for women in the MSME sector. Government support in the form of simplified procedures for loan approval, faster approval, will benefit the women entrepreneurs along with digital literacy and digital financial literacy training programmes. It is important to build awareness of the schemes and programme and remove information asymmetries. Information about the schemes should be available online. MSME owners would need training for on-boarding into e-commerce platforms and targeted training programmes and modules can be designed for them. Increase in the scale of financial literacy needs to be preceded by digital literacy. There is need to create infrastructure and training facilities at panchayat level to make women conversant with digital apps, wallet, portals, e-commerce websites.