Banking System Access Eludes Women Globally

Women face literacy, geographic, and social barriers to banking.

Around the world, women in developing economies enjoy less access than men do to the banking system.

Bank account opening procedures, especially requirements to produce identity documents, are a major barrier for undocumented women in developing countries. These requirements aim at meeting anti-money laundering and counter terrorist financing (AML/CTF) obligations. But the barriers may be set unnecessarily high for women given their crime risk profile.

Economic well-being and development is supported by access to formal financial services to save money securely, facilitate the receipt of money sent by family members, insure possessions and responsibly access credit for small business. Yet 38% of adults, worldwide – nearly two billion people - still do not have a formal bank account. This exclusion weighs more heavily on women.

Globally, financial exclusion affects 1.1 billion women (55% of unbanked adults). The gender gap is particularly big in South Asia where only 37% of women have an account compared to 55% of men.

Women face financial, literacy, geographic and social barriers when they wish to open a bank account. It is an onerous process, which requires applicants to produce identity verification documents. Women in developing countries often enjoy less access than men do due to identity documents. Identity document gender gaps appear in South America, Africa as well as in Middle Eastern and South Asian countries.

Countries like India and Nigeria have introduced innovative large-scale national identity programmes. These programmes are important, but national identification systems do not necessarily ensure equal coverage for women. In Pakistan, for example, women are significantly less likely (79%) to have a national identity card than men (90%).

Without the required documents, women cannot open a bank account. There is, however, no clear reason why these identification barriers should be set so high for women.

The real risk

National AML/CTF regulations heavily determine banks' customer identification practices. These in turn reflect international standards set by the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision.

AML/CTF laws require banks to apply robust customer identification and verification measures to prevent anonymous accounts and identity fraud. Where clients pose a higher crime risk, banks must enhance their due diligence measures, require more information and apply more stringent verification.

New, proportional, risk-based standards adopted by the FATF in 2012 enable countries to allow banks to simplify identification measures where crime risks are lower. For such lower risk clients, banks may dispense with verification of residential addresses where that is a standard requirement. They may also accept a letter from a community leader verifying a person’s particulars, rather than insisting on viewing a state-issued document.

Could women classify as a group of customers that pose a lower crime risk? Compelling statistics suggest so.

Criminality: the gender gap

Criminal justice statistics reflect a distinct criminality gender gap. The International Centre for Prison Studies collects statistics on women in prison. They report that women comprise only 1.5% of prisoners in Pakistan, 2% in Nigeria, 5.1% in Indonesia and 5.3% in Kenya. In fact, the percentage of women in prison is in single digits in nearly 95% of countries globally. Arrest and prosecution rates of women are also significantly lower. Women feature more prominently in only a few types of offences - prostitution, shoplifting, embezzlement and welfare and credit card fraud.

Criminologists are very aware of this gap. A significant body of research focuses on possible explanations for the gap (for example that bias in the criminal justice system may explain a part of the gap), whether or not the gap is narrowing and the few types of offences where the gender gap is small, absent or where women may be in the majority. While the academic analysis and debate continue, the available statistics support the contention that women pose a lesser crime risk than men do and that this risk is often significantly lower.

Why do bank practices not reflect this fact? Probably because AML/CTF risk assessments, both at a country and a financial institution level, are on average still relatively crude and because banks may be concerned that a gendered view of clients may be discriminatory.

Improving the system

AML/CTF assessments are generally quite basic. A simplistic understanding of money laundering and terrorist financing risk often informs them, reflecting mainly anecdotal evidence blended with a measure of common sense. Granular criminal justice statistics, where available, appear at a national level but banks do not often consider them in their risk assessments. Banks often lump clients together to avoid accusations of unfair discrimination.

Clients generally cluster in broad groups such as nationals and foreigners or individuals and corporates, and risk assessments focus mainly on risks arising from the types of products and services such groups may use.

Non-discrimination, however, not only requires the like treatment of those who are alike but also the unlike treatment of those who differ. While gender will generally be an irrelevant consideration for banks, client risk assessments require a consideration of similarities and differences among clients.

Crime patterns differ from country to country and region to region. In some cases, women may pose the same or even a higher money laundering or terrorist financing risk to banks. What is required is a reasonable and honest assessment of the available facts and statistics. There is, however, little evidence that regulators and banks are considering gender-related crime statistics. Ignoring such statistics may unfairly undermine women’s financial inclusion.

With increased anti-money laundering measures, banks are shutting out women is republished with permission from The Conversation

The Conversation

See also: How to Serve Millions of Potential Banking Customers in Asia