Alexander Hamilton once said, “Banks are the happiest engines that ever were invented for creating economic growth”. Finance shapes the contours of the economic horizon.

Financial inclusion plays an important role in the growth of a nation. Gender is more than the binary of male and female; it is how individuals associate with socially prescribed activities and roles. Women are thwarted by financial exclusion because of not only cultural and social barriers but also other factors that go beyond the scope of these two.

Last year in November, Prime Minister Imran Khan approved a five-year strategy to enhance National Financial Inclusion Strategy (NFIS) as part of the PTI government’s agenda. On March 6, Finance Minister Asad Umar affirmed the government’s commitment to enhancing access to formal financial services by priority groups.

Presiding over the sixth meeting of the NFIS, the minister said the government has prioritised the scheme through digitisation, promotion of SMEs and easy access to formal credit for farmers.

Refining the existing delivery system through technology-based solutions alone will not ensure access to financial products by vulnerable groups

Branchless accounts, a digitised mode of banking as opposed to the brick-and-mortar branch network, are pitched as a cornerstone of financial inclusion. They are mostly used for transactional and social welfare disbursements.

Refining the existing delivery system through technology-based solutions and financial literacy alone will not ensure access to appropriate financial products and services by vulnerable groups. The prime function of financial institutions and financial inclusion is ensuring easy access to credit by such segments of society.

From June 2015 to June 2018, the number of branchless banking accounts increased 262 per cent. But the share of women’s accounts in total branchless banking accounts remained flat over the same period. This was partly due to a low female literacy rate. Pakistan ranks eleventh in the world in terms of female illiteracy while there is a 17pc gap between men and women when it comes to mobile ownership.

The barriers that cast women out of economic life emerge mainly from the practices of the formal financial sector. Account operations of stay-at-home women, who are illiterate in some cases, depend on witnesses.

In order to open a bank account, at least two formal identification documents are required. A huge number of women in rural areas and even in urban centres do not have national identity cards and marriage certificates. It is difficult for them to have these documents due to cumbersome processes, social pressure and a lack of awareness.

Women rarely have access to any form of collateral due to a lack of documentation and many other reasons. Therefore, they have little access to credit. In an attempt to help female entrepreneurs, the State Bank of Pakistan (SBP) offered the Refinance and Credit Guarantee Scheme for Women in 2017 at subsidised rates.

The participating financial institutions are provided with 60pc coverage of the outstanding loan amount (maximum limit Rs1.5 million) by the government. However, lending regulations and participating institution’s credit policies still apply to such loans.

Regulations prohibit banks from discriminatory actions on the basis of gender. But a document by Asian Development Bank said that banks ignore women clients due to preconceived views on their creditworthiness, their ‘dependency’ on men and difficulties in gaining information about the borrower’s reliability.

The gender-wise distribution of the gross loan portfolio of the SBP shows that women took 19pc of microfinance loans while male borrowers consumed 81pc of loans. Contrary to microfinance, only 3pc of SME loans are granted to women while 97pc borrowers are men.

An overwhelming number of women work in agriculture and yet only 4pc of gross agriculture advances are granted to them.

Some progress has been made in recent years. For example, 11pc of women were banked in 2015 compared with just 4pc in 2008. The government and regulators still need to give targets to financial institutions to ensure gender-based lending in order to increase financial inclusion.

Women branches set up by some of the banks are a good initiative. The SBP and other regulators should make this feature a part of their branch licence policy for improved financial inclusion.

Women are often not aware of the available financial services. This is true in not only far-flung rural areas, but also urban centres. The government will have to remove legislative and policy-level hiccups and initiate financial literacy programmes at school level for girls.

The writer is a freelancer.

Published in Dawn, The Business and Finance Weekly, March 18th, 2019