Women’s empowerment through financial inclusion becomes a cross-cutting issue of discussion among the international development organizations, policymakers and researchers as studies found the persistent presence of gender gap in financial inclusion. Representing “gender equality and empower all females” in 2030 SDG agenda makes this topic more significant. In developing nations, gender inequality in access to banking services is still high. More than half of the unbanked populations in the world are women. 67% of men have a formal account with the banks and financial institutions whereas 59% of the female have access to an account. Since 2011, this gap almost remains constant which is consistently more than 8% (Demirgüç-Kunt et al. 2018). Moreover, girls and females are still facing various economic, social and political limitations and obstacles. They have lower labor force participation rate, lower access to financial services, lower enrollment and compilation rate of education, and lesser rate of political participation. Women spend a larger proportion of their time in the household works and child care than men. In some societies, females are the targets of many violent activities. Employed women are also facing persistent gender-based inequity at their workplace including a greater gender wage gap. These types of inequalities have both social and economic costs including losses of working productivity, higher health care, and legal expenses. Minimizing gender disparities and improving women’s welfare is extremely crucial not only for social and moral aspects but also from an economic development standpoint. Full access to financial products and services is a policy tool for women’s full participation in the economy and more inclusion of females in the economy would lead to benefits in the growth of GDP (IFC, 2016). Enhanced and easier access to financial credit facilities help women entrepreneurs to increase the productivity of the enterprise, managerial capacity, and more profits. Women’s additional income allows them to save, further productive investment and more consumption (World Bank/OECD, 2013) which facilitates efficient allocation of resources within households that leads to an increase in family expenditure to health care, child nutrition and education (Castilla and Walker, 2013).
Financial inclusion refers to a circumstance in which individuals and businesses, including those currently excluded from the formal banking system, have access to effective financial products and services that meet their needs such as access to credits, daily transactions, savings, and deposit transactions and insurance (AFI, 2016). This is one of the important and proven regulatory instruments to increase macroeconomic welfare, enhance stability, and reduce poverty and inequality (Beck et al. 2007; Cull et al. 2012; Kim 2016). Participation on financial services, particularly access to accounts, helps individual to start a new business and expand an existing one, encourages more investment in schooling and health, and increases savings and consumption which have a greater impact on reducing income inequality, rapid economic growth and women empowerment (Isaac 2014)
Thus, this study investigates the main research question-does financial inclusion (FI) empowers women? Besides, this study also analyzes- what is the major contribution of different indicators of FI, such as access to banks, access to ATMs and access to credit facilities, on enhancing women empowerment and how these indicators could help to achieve SDG 5? This study uses the gender inequality index (GII) as the outcome variable because it measures three major dimensions at the same time such as political engagement, participation rate to the labor force and mortality rate. Lower the value of GII implies lower the gap between males and female which in turn means high women empowerment. Covering panel data of 50 developing countries from 2005–2017, this study finds that more access to banks, ATMs and credit facilities are negatively associated with gender inequality. The results are highly statistically significant and robust to both fixed effects and generalized method of moment estimation technique. This study also considers the gender development index (GDI) and women’s political empowerment as the dependent variable instead of GII. Employing fixed effects estimation confirms that FI helps to improve GDI and also increases the opportunity of the political empowerment of females.
This study contributes to the literature in the following three ways. First, the study uses three important proxy indicators of financial inclusion, such as access to banks, access to ATMs and access to banks services and analyzes their impact mainly on reducing gender disparities. This would be the pioneering study to investigate such results in the developing economy perspective. Second, most of the existing papers related to financial inclusion and women's development are based on theoretical perspective and case study. Numerous numbers of literatures are related to financial inclusion and economic growth. An empirical study on women empowerment through financial inclusion is still untouched and has a potential scope of the profound investigation. Third, the study considers three dependent variables that represent women empowerment in a single econometric specification using the latest available annual panel data till 2017, applies both static and dynamic panel data estimation techniques and controls country-specific heterogeneity, endogeneity, and autocorrelation. These techniques provide more robust findings and offer a strong basis for evidence-based policymaking on financial inclusion which helps to promote women empowerment in developing countries.
The remaining part of the study is arranged as follows. Section 2 analyzes existing literature on financial inclusion and women empowerment. Section 3 methodology and data. Section 4 discusses the sources of data and several stylized facts related to our study. Section 5 and 6 present the results and discussion and robustness tests, respectively, while 7 concludes the paper with some policy implications.