Small businesses and AI: Accelerating innovation and inclusion

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<h3>Key Takeaways:</h3><ul><li>Financial inclusion is increasing globally, but the gender gap remains.</li><li>Contributing forces include supply and demand factors, regulatory issues and the labor force gender gap.</li><li>Reducing the unevenness in labor force participation&nbsp;could influence the financial inclusion gap and set off mutually reinforcing cycles.</li></ul><h3>The gender gap in financial inclusion</h3>Over the past few&nbsp;<a href="https://www.mastercard.us/en-us/about-mastercard/corp-responsibility/social-sustainability/the-mastercard-labs-for-financial-inclusion.html" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">years</a>, the public and private sectors have successfully worked together to increase financial inclusion. Globally, the number of people with access to financial assets such as bank accounts and credit has meaningfully increased; however, the gap between the number of men and women who have access to these formal financial tools persists.The&nbsp;<a href="https://globalfindex.worldbank.org/" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Global Findex</a>, a database of financial indicators developed by the World Bank, now contains three rounds of data, from 2011, 2014 and 2017. The good news is that the number of women in the world with access to a bank account is increasing – from 47% of women globally in 2011 to 65% in 2017. The bad news is that this rate of increase is not keeping pace with the number of men gaining accounts.The gender gap in financial inclusion seems to be holding steady. The number of percentage points between men and women who have accounts hasn’t shifted globally since 2011, blocking a meaningful realization of financial inclusion for everyone. However, this broad topline analysis hides the fact that some countries have seen meaningful improvements in gender equity while others are experiencing mounting financial inequality.

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Countries such as Saudi Arabia and Turkey saw a large improvement in the gender gap from 2011 to 2014, but then backtracked from 2014 to 2017. Other countries, such as Costa Rica, Bangladesh and the United States have seen a subtler version of this trend, as their gender gap decreased slightly in 2014 then increased by 2017.All of this points to the challenge of reducing the gender gap in financial inclusion while sustaining lower margins. Albania, Bahrain, Brazil, Columbia, Guatemala, Indonesia, Italy and Malta have shown the greatest success in sustaining growth and equality in regards to financial inclusion. What are these countries doing differently to reduce the gender equity gap in their economies?<h3>The gender gap in labor force participation</h3>In most countries, men participate in labor markets more frequently than women. Globally, labor force participation among working-aged women increased substantially in the last century; however, in some parts of the world, the increase has slowed down or even regressed slightly in recent years.One&nbsp;key to shrinking the financial inclusion gender gap is to increase labor force participation among women. Research shows men and women often cite a lack of earned income as the reason for not having financial accounts. Increasing and maintaining a woman’s involvement in the job market can directly help her sustain income and improve her chances of accessing financial tools. Even better, as labor force participation among women improves, so will financial inclusion.We’re able to see this correlation in the World Bank’s analysis. Many countries that saw improvement in the financial inclusion gender gap had reductions in the labor force gender gap. Albania, for example, saw its labor force gap drop from 21 percentage points to 18 percentage points. Bahrain went from 43 to 39 percentage points, Brazil from 25 to 19 percentage points and Malta went from 32 to 26 percentage points. The World Bank’s analysis indicates that a reduction of 10 percentage points in the labor force participation gap can improve financial inclusion equity by as much as 6 percentage points.<h3>Mutually reinforcing cycles</h3>Recent&nbsp;<a href="http://scholar.harvard.edu/files/rpande/files/on_her_account.can_strengthening_womens_financial_control_boost_female_labor_supply.pdf" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">research</a>&nbsp;has shown that financial inclusion and labor force participation are mutually reinforcing. By sustaining both, they act symbiotically, improving equity in both financial inclusion and labor force participation.The economic empowerment of women also has a direct impact on global, inclusive growth. Achieving gender equality in financial inclusion and labor force participation by 2030 could raise global GDP by 3.6 percent and reduce the share of the global population living in extreme poverty by 0.5 percentage points.

<h3>Gaining momentum</h3>There is tremendous social and economic potential in women who don’t currently have formal financial accounts or formal work. Our analysis illuminates a few simple changes to systems, policies and practices could release the untapped potential in the labor force and expedite the closing of the gender gap around financial inclusion.One step is for employers and governments to make all employee payments and transfers directly into digital financial accounts. This change increases the likelihood of women gaining control of their economic assets and strengthens their chances of getting and staying involved in the labor force. Digitizing payroll also enhances economic empowerment, which improves a woman’s position in the labor force chain. This cycle can be harnessed and scaled for continuing, inclusive growth.Another positive step would be to improve and implement new work culture policies. Despite reporting high levels of career interest and ambition, similar to men, women in parts of the developing world&nbsp;<a href="https://www.catalyst.org/knowledge/expanding-work-life-perspectives-talent-management-asia" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">report</a>significantly more challenges in managing their work and personal life. This suggests companies might reconsider how current work cultures become barriers to labor force participation. In order to attract women into the labor force and prevent backsliding, the public and private sector should make a concerted effort to adopt innovative policies for women’s integration and retention.&nbsp;<a href="https://www.oecd.org/g20/topics/employment-and-social-policy/Monitoring-progress-in-reducing-the-gender-gap-in-labour-force-participation.pdf" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Research</a>&nbsp;shows these policies need to address financial arrangements to pay for the care of dependents, provisions around working hours and&nbsp;<a href="http://reports.weforum.org/global-gender-gap-report-2016/gender-parity-and-human-capital/" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">social norms</a>&nbsp;around gender.Finally, banks and other lending organizations should look for ways to address the challenges women entrepreneurs face when trying to access credit. Despite their potential, too many female entrepreneurs&nbsp;<a href="https://www.newyorkfed.org/medialibrary/media/smallbusiness/2016/SBCS-Report-WomenOwnedFirms-2016.pdf" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">struggle</a>&nbsp;to access the capital and resources they need. For example, of all of the venture capital deployed in the U.S., only 8 percent goes to women.&nbsp;<a href="https://mastercardcenter.org/insights/start-small-stay-small-dilemma-nonprofitprivate-partnerships-can-boost-women-owned-businesses/" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">Solutions</a>&nbsp;aimed at making it easier for women to access microloans would enable them to grow their businesses, to the benefit of not only the business owners, but their families and communities as well. Additionally,&nbsp;<a href="https://mastercardcenter.org/insights/technology-allowing-grameen-america-scale/" rel="noopener noreferrer" target="_blank" style="font-size: 16px;">leveraging technology</a>&nbsp;to digitize the disbursement of loans would bring more women into the formal economy and help them transition to digital banking.Private-private and public-private partnerships can be instrumental in executing these solutions. By combining expertise, know-how and ingenuity, these partnerships can help close the gender gaps in both labor force participation and financial inclusion, which in turn, drives&nbsp;inclusive growth.Author bio:&nbsp;Heather Krause, PStat, is a data scientist specializing in analyses for the social sector. She uses modern tools and technology to find data stories that move people. Her work has been part of FiveThirtyEight, the Bill and Melinda Gates Foundation, Orb Media, The Guardian, the BBC, and many other global social sector organizations.

Including more women in the labor force could help reduce the financial inclusion gender gap.

Reducing the gender gap in financial inclusion