nuevas TRENZAS informs
june 2013 N° 11
Financial Inclusion of Young Rural Women. A Balance of Public Policies and Development Programs Mariana Paredes Marulanda Consultores Nuevas Trenzas is a regional program that focuses in generating new knowledge about young rural women for designing efficient public policies and development programs. Generating and disseminating specialized knowledge about Latin American young rural women as a collective, their characteristics and expectations, as well as about public policies and development programs that focus on them are among the program’s objectives. In that sense, this study looks to put forward a general outlook of development programs and public policies aiming at promoting and enhancing financial inclusion of young rural women in Latin American, highlighting the importance of financial inclusion as a tool for promoting strategies for reducing poverty and vulnerability. Financial inclusion implies achieving the access and use of a wide range of integral financial services (savings, credit, insurance, payments, transfers) including developingabilities aiming at promoting the correct use of financial services and informed decision making regarding this topic. Achieving greater financial inclusion is anincreasing concern for countries throughout due to its effect over poverty eradication strategies. Main trends in the identified policies and programs For carrying out a critical revision of public policies and development programs focusing in enhancing young rural women’s financial inclusion, even whendoing so only partly or indirectly, available information about financial inclusion programs and public policies related to this collective in Latin America and the Caribbean (LAC) was reviewed. The identified programs all have in common their focus on supporting poor and low income families from rural and urban areas. While many programs have a nationwide scope, in many countries poverty is often more severe in the rural areas furthest away from urban centers, which explains why many programs end up focusing in rural areas. On the other hand, Conditional Cash Transfer Programs (CCT programs) direct their interventions towards poor families, particularly the mother, which makes these programs also pertinent for analyzing financial inclusion and rural women programs. Generally, for focalization purposes, most programs aiming at the reduction of poverty use Conditional Cash Transfers (CCTs) as instruments. In these cases, even if the program’s objective is not financial inclusion per se, they do impact financial inclusion given their mechanisms for paying the CCTs use the financial system. On the other hand, a range of programs has been identified whose main objectives are promoting savings, credit or micro-insurance, always emphasizing the importance of these tools for contributing to reduce poverty and vulnerability. Taking into account the identified objectives, the programs may be classified in:
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• Conditional Cash Transfers Programs (CCTs), whose objective is reducing poverty and vulnerability. • Programs whose objective is granting access to one or several financial products. • Programs whose objective is generating financial and economic abilities. On the other side, it is acknowledged that financial services seek to promote the identified programs themselves, as well as the payment channels used for the incentives or CCTs, depending on the program’s approach. For paying the cash transfers, most CCT programs deposit the money in a savings account, which has no doubt brought families closer to the financial system, specially the mothers as they are the recipients of the family transfers. CCT programs focus generally in complementing poor the income of poor household in order to prevent them from falling into deeper levels of poverty. In this sense, many programs encourage the spending of the resources the families receive, which at first glance it is perceived as contradicting the promotion of savings. In many cases, it has been found that financial inclusion of young rural women is not part of the identified programs’ specific objectives. This has caused a waste of efficacy of the strategies fostered for promoting this collective’s financial inclusion, as well as poverty reduction. However, linking CCT programs to financial inclusion initiatives has had an important effect in bringing motherscloser to the financial sector, which is in itself a noteworthy result, specially from NuevasTrenzas’ perspective. Also, the characteristics of poverty in the region’s countries, which is more severe in rural areas, and the participation of young mothers in receiving CCTs motivate us to believe that it is precisely these programs that may entail better results regarding this collective’s financial inclusion. CLOSING CONSIDERATIONS From the collective of young rural women The importance of financial inclusion in national strategies for struggling against poverty is, no doubt,a compensatory tool for buffering adverse shocks. Recent progress in financial inclusion processescall for the improvement of the financial system’s capillarity for penetrating in rural areas and areas far from urban centers by means of very light channels such as cell phones. Concerns arising in relation to the arrival of these systems to rural areas regard the ability of the population for using these technologies. Nevertheless, it is necessary to have more information for determining the effect of financial inclusion processes among the collective of young rural women caused by programs such as the ones described in this document. Given that those programs have do not aim solely at this group and their results are not disaggregated, it is important to look deeper into the potential impact on the poor rural population benefiting from the access and use of the financial system promotion programs channeled through young women. On the other hand, until now, the results of somefinancial inclusion programs may be seen in the improvement of beneficiaries’ self-esteem and empowerment, indicating that financial inclusion can be a powerful tool for contributing (along with other instruments) to thwart gender gaps and traps that young rural women face. In particular, the access and use of financial services by this collective could counterbalance the disadvantage in the access to productive assets, given that they would have their own assets, allowingthe reduction of dependency and the increase of their importance in the process of decision making in the family, especially regarding those related to investment, expenses and consumption.
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From the national level In most of the region’s countries, the challenges for financial inclusion arise from the characteristics of the excluded population that presents, in general, the lowest income and resides in the most remote areas or inperi-urban areas. One of the basic requirements for financial inclusion is the implementation of specific norms of supervision that seek to protect the financial consumer and regulate the operations of financial products aimed at the low income population. Another limitation that must betackled is the financial system’s lack of appropriatecoverage that ends up restraining the scope of financial inclusion programs directedat the low income population, even more so for the case of rural populations. In effect, the natural development of financial systems has led them to concentrate their distribution channels in the most populated areas in the measure that most of the financial activity is centralized there. This has resulted in a lack of attention towards the most remote areas that, from the point of view of social policy and economic development, end up having no access to the right tools for managing their lives and businesses. Given the absence of public policies aiming at dealing withthe financial system’s lack of coverage in terms of infrastructure, social and CCT programs face the challenge of channeling payments at the lowest possible cost. The analyzed CCT programs illustrate the difficulties for making payments due to the lack of distribution channels, which ends up limiting the effects of the financial inclusion expected to achieve through this medium. Another aspect to take into account is the type of distribution channels, of financial services, that is really sustainable in very remote areas with low population density. When considering this issue, electronic channels emerge as the most suitable solution in the measure that they allow reaching the most remote areas. However, in every case, it is required in every case to take on significant public policy issues such as communications infrastructure and models of mobile banking in which mobile telephony providers and financial services providers are both able to participate. Finally, the need for re-thinking the strategies for preparing the demand based on financial inclusion has been pointed out. Many countries and programs have already made significant efforts for developing financial education programs but there are still many challenges to overcome. One of them concerns the suitability of dissemination channels for making the efforts more sustainable and thus reaching more low income population.
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To access the full Spanish version of this document go to Nuevas Trenza’s website.
www.nuevastrenzas.org Nuevas Trenzas is possible thanks to the financial support of:
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