RBI Innovation Hub Removing Gender Barriers in Financial Inclusion

Gender barriers affect how women, who form half or a statistical majority of India's population, access, use, and benefit from financial services. Women's experiences in the household, community, and workplace are different from that of men's, as determined by unfavorable gender roles. This has implications on the fundamental aspects of women's lives, including mobility, intra-household decision-making, access to resources and assets, which in turn affect their ability to use and benefit from formal financial services. Digital financial solutions can bridge the gender gap significantly by increasing women's financial independence and improving their economic participation by providing them with effective and affordable financial tools to save and borrow money, make and receive payments, manage risk, and plan for their old age and retirement. However, the current landscape of women's access and use of these tools shows a wide gender gap.

Here is where the Reserve Bank Innovation Hub (RBIH) comes into play. Inaugurated on March 24, 2022, the Reserve Bank Innovation Hub is a whollyowned subsidiary of the Reserve Bank of India (RBI) set up to promote and facilitate an environment that accelerates innovation across the financial sector. RBIH intends to foster and evangelize innovation across the financial sector to enable a billion Indians access to suitable, sustainable financial products in a secure and frictionless manner. In addition, the Hub aims to create internal capabilities through applied research and expertise in the latest technology. The goal is to collaborate with financial sector institutions, policy bodies, the technology industry, and academic institutions and coordinate efforts to exchange ideas and develop prototypes related to financial innovations.

RBIH aims to serve as a focal point to position India as a global innovation hub for a network of financial services providers, FinTech innovation hubs, policymakers, technologists, academia, and the investor community. The network will ideate, incubate new capabilities, and create innovative and viable financial products and services for 1.3 billion Indians to help shape the future of the Indian financial sector. RBIH will identify challenges in the Indian financial system through applied research and extensive stakeholder consultation. Furthermore, it intends to address these challenges by ideating and piloting collaborative solutions that use the power of technology.

Women's Share in the Financial Sector

Gender equality and women's empowerment are now recognized as integral parts of sustainable growth and poverty reduction strategies. We cannot undermine gender issues in financial inclusion. Women form a disproportionately large share of the world's unbanked and underserved population. The RBI's annual Financial Inclusion Index (FIIndex) improved by 10.5 points from 2017 to 2021, indicating deepening financial inclusion in India. However, this improvement may not have translated into equal financial inclusion among women and men in India. Women lag behind men in several socio-economic indicators which affect their active usage of financial products and services building the gender gap. According to the World Economic Forum's Global Gender Gap Report 2021, India slipped 28 places to rank 140th in 2021. The gender gap widened from 66.8% in 2020 to 62.5% in 2021. In the context of women's economic participation, India's gender gap worsened by 3% in 2021.

The reasons behind exclusion are complex and often interwoven with vulnerabilities faced by women and underpinned by social norms. Government schemes have successfully brought a vast majority of women under the umbrella of formal financial services for the very first time, but regular uptake of these services by women still remains a challenge. Digital modes of enhancing financial inclusion for women by targeting self-help groups (SHGs) are still a work in progress.

RBIH Swa-Nari Program

The RBI Innovation Hub's Swa-Nari ('Swanirbhar Nari' meaning 'Self-Reliant Woman) program intends to encourage partners in the financial services ecosystem to create and produce smart, creative, and sustainable solutions for the underserved, low-and middle-income (LMI) women and women-owned enterprises in India. Based on the philosophy of "India for India" and encouraging more women-led FinTechs the program has two key objectives: - (i) Pivot the financial ecosystem to design affordable, sustainable, and suitable financial services and products for women. (ii) Enable and encourage more women-led FinTechs to create impact at scale through innovative, technology-led financial services for women users.

Changing how the market perceives women

The intersection of technology, financial services, and gender can catalyze change in how the market sees and serves women as end-users and contributes to economic growth. The rise of FinTech in India offers a promising opportunity for greater financial inclusion of women.

Encouraging solutions for women by women

The program intends to use this opportunity to encourage more women in technology fields to create solutions tailored to the needs of women users. This may prove to be a win-win situation to increase women users' uptake of financial products and services designed for their needs. Further, the program will increase the number of women on the supply side in FinTech creating these solutions.

Providing security net/pension plans

Most women in India, especially lowincome women, tend to operate in the informal sector and thus generally lack a security net or retirement and pension plans. Women have longer life spans and usually outlive their spouses, thus, compounding their risk and aggravating the gender protection gap. Women frequently set aside small sums of money but often lack the means to convert their savings into sufficiently large funds sufficient to support them in old age. Women undertake most unpaid work, including elderly care and childcare, not reflected in any pension scheme.

Encouraging service providers to devise support mechanism for women

With the right mix of support from the RBI and public or private sector service providers, the program has the potential to impact the lives of more than 331 million adult women, including 13 million womenled enterprises and 7.45 million SHGs across the following thematic areas: 

·         Improve access, adoption, and usage of digital financial services among LMI women; 

·         Improve the readiness of service providers to offer relevant financial products; 

·         Enhance entrepreneurship and better support mechanisms for women enterprises. Facilitating digital history for easy access to credit Female entrepreneurs can build a digital history by conducting digital transactions, such as utility and rent payments, as part of their business activities. These transactions also become an increasingly important source of information for credit decisions in the absence of credit history. Providers can use alternate algorithms to underwrite credit based on digital transactions for women entrepreneurs who want to raise capital from the formal financial market. Digitization can also pave the way for alternative collateral methods for women-led businesses.

Encouraging innovation

The Swa-Nari program intends to encourage innovation in the startup sector to design and roll out solutions to the above problems using the philosophy 'India for India' and encouraging more women-led FinTechs.

Swanari TechSprint

RBIH is hosting a virtual TechSprint from April 18 to 22, 2022 - aimed at advancing digital financial inclusion for women in India. The inaugural Swanari TechSprint in India will connect FinTechs, financial service providers, innovators and subject matter experts to collaborate, ideate and solve specific problems and code prototype solutions in real time. RBIH has committed to take this program forward post the TechSprint and develop Swanari as RBIH's diversity and inclusion platform. The five-day TechSprint is being held in collaboration with RBIH's core partners AIR - the Alliance for Innovative Regulation, CIIE.CO-a startup incubator established by IIM Ahmedabad , and MSC (Micro Save Consulting) . TechSprints are intense problem-solving sessions designed to facilitate innovation and promote collaboration between regulators and technologists to create digital solutions to difficult problems.

Compiled by: Annesha Banerjee & Anuja Bhardwajan