ADFI PERSPECTIVE: Overcoming barriers to African women’s access to and use of digital financial solutions

Recent data shows the significant improvement in financial inclusion across the world, with an increase in global account ownership at 76% . However, Africa is lagging behind with an increase from 41% to just 51% from 2017 to 2021[1]. Data also shows that globally, 78% of men and 74% of women hold an account, a gender gap of 4 percentage points.

In Africa, the gender gap in account ownership remains high, estimated at 12%, twice as much as the developing economies’ average and three times higher than the global average of 4%. 2021 Global Findex

In the case of Africa, notwithstanding the improvement in financial inclusion driven by the proliferation of digital financial solutions, evidence shows that little progress has been made in bridging the gender gap in account ownership.

Analysis of the data from the recent Global Findex shows that women are often excluded from formal banking services because they lack access to identification documentation, are less likely to own a mobile phone and have lower financial capacity. In addition, evidence abounds that barriers rooted in social norms and legal constraints, together with the cost of accessing financial services, also contribute to the gender gap in financial inclusion in Africa.[2]

While the gender gap in account ownership improved in 66% of African countries, the gap widened in 61% of African countries for mobile money accounts and 52% for digital payments.  2021 Global Findex

Launch of Africa Digital Financial Inclusion Facility (ADFI) to catalyse inclusive digital financial solutions across Africa

In 2019, in recognition of the crucial role that digital financial solutions play in building resilience and economic growth, the African Development Bank (AfDB) launched the Africa Digital Financial Inclusion Facility (ADFI) together with the Bill and Melinda Gates Foundation (BMGF), the Ministry of Finance, Luxembourg and Agence Française de Développement,. Joined by the Ministry of Finance and Economy, France and the Women Entrepreneurs Finance Initiative (We-Fi) in 2020 and 2022 respectively, ADFI is a key advocate for digital financial inclusion on the continent to empower all Africans, especially women.

ADFI is a blended finance vehicle composed of a multi-donor trust fund with an initial target envelope of USD 100 million and debt-funding of up to USD 300 million from the African Development Bank (AfDB). The facility has a 10 year tenor running to 2029, and engages with actors in both the public and private sector.

Working under three core pillars, ADFI seeks to meet the goal to increase access to and use of quality digital financial services across Africa, mainstreaming gender across all operations. ADFI’s goal is to achieve gender intentional or transformative impacts in all its projects, with 60% of its investment committed to gender intentional initiatives and 15% to gender transformational activity:

• Gender intentional approach: ADFI’s investments aim to contribute to reducing gender gaps in access to digital financial solutions and resources. ADFI will prioritise initiatives that describe differences in how a problem impacts people due to gender and how the proposed innovations will address the disparities, risks, and gender gap reduction.
• Gender transformative approach: ADFI’S investments aim to contribute to transforming gender power relations and/or reducing gender gaps. ADFI will primarily support initiatives that actively examine, question, and change the rigid gender norms and power imbalances.

ADFI’s gender sensitive digital financial services policies and regulations align not only with the African Development Bank’s High 5s but also the Gender Strategy (2021-2025) to enable women through access to finance and markets, accelerating employability and job creation for women through skills enhancement and increasing women’s access to social services through infrastructure. ADFI works closely with the gender team at the African Development Bank in project design, co-task management of gender transformative projects and as members of the technical review committee.

Towards bridging the gender gap in digital financial inclusion across Africa

With growing recognition of the devastating impact of persistent and new issues such as economic shocks, gender inequality, social exclusion and climatic change on financial inclusion, the need for digital technology to bridge exclusion gaps has never been more apparent and critical, as evidenced at the height of the Covid pandemic and underscored by the current data findings for Africa.

Digital financial solutions provide the tools to mitigate risk, maximise economic potential and improve livelihoods. This can help stimulate economic and social opportunity by building resilience among excluded and underserved individuals and strengthening women-led SMEs, increasing their business viability and job creation.

ADFI recognises that when women access digital financial solutions, they can thrive in formal economies as they are better positioned to start businesses, invest in their future, provide for their families and contribute to the wider economy[3][4]. Women are the backbone of the African economy, with the highest percentage of women entrepreneurs by continent in the world.[5] Furthermore, women typically reinvest up to 90% of their income in the education, health and nutrition of their family and community – compared to up to 40% for men.[6] To realise their ambitions for their businesses and families, many women make payments, save and borrow through informal financial services[7][8], resulting in higher costs and less favourable terms, as well as limiting their ability to build their creditworthiness.

ADFI’s aims to catalyse solutions that can help bridge the financial inclusion gap through investment in scalable initiatives. Highlights of the current portfolio show the breadth of sustainable and responsive gender transformative solutions:

1. Enabling infrastructure for DFS that targets underserved and excluded groups, particularly women
   • Inclusive digital payment systems: ADFI is supporting EthSwitch Share Company, an initiative led by the National Bank of Ethiopia, in an initiative to modernise the payments infrastructure in Ethiopia. This will facilitate various digital financial services programmes, ranging from the digital distribution of government payments to the creation of services for e-commerce, transport systems, and utility bills. Use cases will include excluded women to drive a gender agenda and gender disaggregated data.
2. Gender responsive policy and regulatory environment that supports digital financial solutions to overcome barriers women face in accessing and using digital financial services
   • Regional policy harmonisation: ADFI’s current portfolio includes work with the West Africa Monetary Agency (WAMA), which directly promote gender-sensitive digital financial services policies and regulations across the Economic Community of West African States (ECOWAS). More specifically, from a policy perspective, this initiative seeks to develop a harmonised gender-centric digital financial inclusion framework for use by the digital financial inclusion (DFI) ecosystem stakeholders.
3. Relevant and affordable products and innovation that meet the needs of women

ADFI also invest in initiatives with high potential of deepening women’s financial inclusion through innovative product and service solutions.

• Using human-centered design research for responsive digital microinsurance and micro credit: An example is the work with Pula Advisors, which empowers smallholder women farmers in Kenya, Nigeria and Zambia through digital micro-insurance by modifying the customer journey for women, and addressing socio-cultural barriers that hinder access to insurance. In addition, the Facility is also working with M-KOPA to conduct human-centred design (HCD) research into smartphone-enabled digital solutions for women traders in Kenya.
• Overcoming social and cultural barriers through women agent networks: In Nigeria, ADFI is working with Y’ello Digital Financial Services (YDFS) to enhance women’s access to digital financial services through women agents. Using human-centered design research and prototyping, this project addresses the security issues and cultural norms that disproportionately exclude women from accessing finance by determining the feasibility of deploying women agents to facilitate access to foster women’s financial inclusion.
• Innovative microfinance and capacity building for women and youth: ADFI is supporting an initiative in Chad to provide support to the government’s microfinance development programme to target increased financial access to women and youth entrepreneurs through design and roll out of innovative and safe financial and non-financial services, including digital services.
• In addition, complementing the work of the African Development Bank’s Affirmative Finance Action for Women in Africa Initiative (AFAWA), ADFI is co-financing an initiative with the Women Entrepreneur Finance Initiative (We-Fi) to develop and extend digital financial solutions to women-owned small and medium businesses in Cameroon, Egypt, Kenya, Mozambique and Nigeria.

Over recent years, the rapid rise in the adoption of digital financial services in Africa has resulted in over 600 million registered mobile money accounts, one of the highest penetration rates in the world[9]. Evidence of new technology that can respond to changing needs demonstrates how digital financial solutions have become some of the most powerful tools in Africa to address the impact of economic, social, health and environmental risks and a gateway to increased economic empowerment and growth.

However, this evidence also highlights the persistent gender gap in financial inclusion, where millions of women in Africa remain excluded from the opportunity to use digital financial tools to build resilience, protect their families and businesses and contribute to the wider economy. The need to address this gender gap in access to valuable, appropriate and affordable finance has never been greater due to its significant impact on the continent’s social and economic progress. ADFI is working to meet this growing challenge, catalysing solutions that can bridge financial inclusion gender gaps, enable women to realise their economic potential and make a contribution to greater economic growth in Africa.

[1] 2017 and 2021 Global Findex reports

[2] GRID Impact and Strategic Impact Advisors (2022). Barriers, Opportunities, and Exemplars: Women’s Economic Empowerment and Financial Inclusion, USA.

[3] Bill and Melinda Gates Foundation. July 2019. Women’s Digital Financial Inclusion in Africa.

[4] Pursuing Women’s Economic Empowerment (imf.org)

[5] GEM Global Entrepreneurship Monitor (gemconsortium.org)

[6] Why AFAWA? | African Development Bank – Building today, a better Africa tomorrow (afdb.org)

[7] Access to Finance: Why Aren’t Women Leaning In? | African Development Bank – Building today, a better Africa tomorrow (afdb.org)

[8] Working Paper 317 – Women Self-Selection out of the Credit Market in Africa | African Development Bank – Building today, a better Africa tomorrow (afdb.org)

[9] GSMA | State of the Industry Report – Mobile for Development