Ranee Jayamaha: Access to finance and financial inclusion for women
Speech by Dr Ranee Jayamaha, Deputy Governor of the Central Bank of Sri Lanka, at the
Centre for Women's Research (CENWOR), Colombo, 4 April 2008.
* * *
Let me start by giving a general definition for access to finance and financial inclusion before
assessing the status of women in these two areas, and then discuss the areas of focus in
enhancing financial inclusion for women.
What is access to finance? In simple terms, this means to provide an environment in which
people, in general, have accesses to the formal financial system, through the use of different
financial products at affordable prices. The access could be to any formal financial institution,
market, and payment system or to a financial instrument, including savings, loans,
remittances and insurance services.
This means the process of facilitating those sectors and
What is financial inclusion?
segments of the population that are outside, to become a part of the formal financial system
and enrolling individuals or groups into the formal financial sector.
Key entry points for financial inclusion
These could be through:
(a) Direct loans or banking facilities to the targeted vulnerable communities or groups;
(b) Facilitation of economic activity in a particular geographical area of operations or
location;
(c) Development of local or national infrastructure to enable a particular type of
business activity, which could then be practiced or performed by a group or groups
which can include women; and
(d) Providing an enabling environment and/or enhancements for such economic activity
to take place. The enabling environment includes laws, regulations, taxation, skills
development, duty waivers, subsidies, etc. In this context, tax concessions and duty
waivers given to make enterprises be "financially inclusive" are often forgotten. In
fact, due to lack of awareness, enhancement of access to finance or financial
inclusion that has already taken place in various sectors, and the enabling
environment that has been created, are taken for granted with no value attached to
them.
Women's contribution to economic development
Let me now deal with the importance of women's contribution to the economic development
in Sri Lanka and assess whether financial inclusion of, and access to finance by women are
on par with the contribution they make.
Women in Sri Lanka have been engaged in economic activities over centuries of history
primarily through employment. Due to low productivity and inadequate incomes in the
agricultural sector, women in small farm families have moved from unpaid family labour to
other occupations, in particular, to garment factories and employment abroad. According to
employment by economic activity, as at the 3rd quarter of 2007, of the total occupation,
women accounted for 35% and 26%, respectively, in agriculture and manufacturing. During
2003-2007 of the estimated worker contracts abroad, on average, 65% have been females.
Although there has been some impact following the removal of export quotas for garments
under the multi-fiber agreement in 2005, the important point is that, in terms of employment,
the female labour force has not suffered significantly.
Women's contribution to growth has been much more significant in the recent decades, given
their enhanced involvement as garment and apparel factory workers, domestic helpers in the
Middle East and other destinations, and tea plantation workers. In terms of foreign exchange
inflows during 2007, garments and apparel have accounted for USD 3.3mn, worker
remittances for USD 2.5mn and tea exports for USD 1.0mn. Around 80% of exports have
been dependent largely on the fortunes of the garments industry in which over 90 per cent of
employees are women. The 3 export processing zones, i.e. Katunayake, Biyagama and
Koggala, the increasing number of industrial estates located in the different parts of the
country, and around 150 rural garment factories, provide employment opportunities for young
women between 18-30 years. Although precise statistics are not available to indicate the
participation of women or their contribution to enhance foreign exchange inflows,
undoubtedly, women's contribution has been very significant. Unfortunately, not only has the
contribution of women not been highlighted or fully appreciated, but there has also been no
focused attention to enhance access to finance by women or to increase financial inclusion
of women.
Of the approximately 20mn population in Sri Lanka, 50% are females. The same ratio is
found in all provinces according to latest data. For 3 consecutive years, the country has
achieved a growth over 6% and a growth rate of 6.8% has been recorded for 2007. However,
women's contribution in this 6.8% is hidden. As at the end of 2007, we have exceeded a per
capita income of US $ 1,600. The system of National Accounts or other systems that set
standards in the compilation of National Income have recognized the need for separating
women's contribution to GDP but, so far, there is no acceptable formula for achieving this.
Similarly, the gender budgeting that started in Australia and South Africa has not been
followed or continued by many countries. Sri Lanka too recognized that there is a need to
separately account for gender contribution in the budget. In that regard, some of us managed
to include a couple of paragraphs announcing the gender budgeting policy in the 1999
Budget, but there has been no follow up since then.
Drawbacks in financial inclusion and uneven ground situation
The banking and financial sector in the country must be strong for financial inclusion to take
place. Our banking sector has been showing advancement and growth. The financial system
is stable and resilient. The financial institutions are committed to engage in social
responsibility related work as well, or to reach out to vulnerable and disadvantaged groups,
of which women occupy an important place. Despite the advancement of the financial sector
and the resilience of the system as a whole, we are still unable to appreciate or criticize its
commitment towards financial inclusion of and access to finance by women, due to lack of
disaggregated data from banks and financial institutions. This, I believe, is the biggest
drawback in initiating policy responses to remedy the deficiencies in financial inclusion of
women.
The absence of balanced regional or provincial growth is another important drawback in
enhancing financial inclusion of women. GDP growth has been uneven throughout the post
independent period. Growth in the Western Province has been around 50%, while all other
provinces accounted for the balance. This uneven growth has resulted in a skewed income
distribution, varying degree of poverty, marginalization and unemployment issues, as well as
financial exclusion in the other regions of the country. However, the significant growth in the
Western Province has resulted in notable enhancement in access to finance and financial
inclusion.
Table 1
Banking Density as at 31.12.2007
(Provisional)
No. of
Banking
Banking Banking Population
District Outlets Population Population per Province
Density Density per Branch
(All ('00,000) Branch
Banks) *
1 Colombo 415 24.56 16.90 5,918.07
2 Gampaha 174 21.40 8.13 12,298.85 Western 11.88 8,417.40
3 Kalutara 89 11.11 8.01 12,483.15
4 Matale 38 4.77 7.97 12,552.63
5 Kandy 96 13.80 6.96 14,375.00 Central 6.93 14,438.89
6 Nuwara Eliya 46 7.42 6.20 16,130.43
7 Galle 78 10.52 7.41 13,487.18
8 Matara 70 8.13 8.61 11,614.29 Southern 8.19 12,207.07
9 Hambantota 50 5.52 9.06 11,040.00
10 Jaffna 40 5.99 6.68 14,975.00
11 Killinochchi 4 1.46 2.74 36,500.00
Northern 5.26 19,000.00
12 Mullativu 4 1.47 2.72 36,750.00
13 Mannar 5 1.01 4.95 20,200.00
14 Vavuniya 8 1.66 4.82 20,750.00
15 Ampara 42 6.15 6.83 14,642.86
Eastern 5.36 18,662.50
16 Batticaloa 20 5.23 3.82 26,150.00
17 Trincomalee 18 3.55 5.07 19,722.22
18 Kurunegala 101 15.24 6.63 15,089.11
North Western 6.77 14,779.22
19 Puttalam 53 7.52 7.05 14,188.68
20 Anuradhapura 66 8.01 8.24 12,136.36
North Central 8.36 11,960.00
21 Polonnaruwa 34 3.95 8.61 11,617.65
22 Badulla 71 8.50 8.35 11,971.83
Uva 8.31 12,028.30
23 Monaragala 35 4.25 8.24 12,142.86
24 Kegalle 68 8.02 8.48 11,794.12
Sabaragamuw
7.42 13,485.71
a
25 Ratnapura 72 10.86 6.63 15,083.33
Total 1,697 200.10 8.48 11,791.40 8.48 11,791.40
* Branches only Source: Central Bank of Sri Lanka
Table I shows that as at the end of 2007, there were 678 banking outlets in the Western
Province out of a total branch network of 1,697 in the whole country. Accordingly, 8,417
persons have been served by a bank branch in the Western Province, while the banking
density in the Western Province has been 11.89. 50% of people are within one mile from a
bank and with ATM facilities within a radius of 2-3 miles. In contrast, according to latest
available data, the Northern and Eastern provinces accounted for a share of 2.9% and 4.7%
of the GDP during 2006. These two provinces had 61 and 80 branches, respectively, serving
19,000 and 18,662 persons per branch. The banking density in the two districts was at a low
level of 5.26 and 5.36, respectively. Given the conflict in these two areas, the limited branch
network, outreach and lower banking density are understandable. It is now time to enhance
financial inclusion in the recently liberated Eastern Province. What action is needed and how
quickly it can be implemented are challenging tasks, but financial inclusion, in general, and
for women, in particular, is an area that should be given priority.
The main credit needs among people in low growth areas and with low incomes, in particular,
women are:
•
access to small, unsecured, fixed term loans in cash;
•
quick access to credit without lengthy or intrusive application procedures;
•
affordable weekly payments with no hidden or extra charges;
•
automatic repayment arrangements, such as deduction from benefit or home visits
by a collector; and
•
opportunities for making late payments or rescheduling loans without incurring
charges when temporary financial problems occur.
If anyone of these or a combination of these factors tend to deny access to financial
institutions or to products, that is known as financial exclusion, which is often reflected as a
symptom of poverty as well as a cause. As much as we are interested in financial inclusion, it
is also necessary to reduce financial exclusion to a minimum, which is also a policy
challenge. These are two sides of the same coin.
Table II
Access to Finance - 2006
Indicator
Sri
India Nepal
Bangladesh Lanka Benchmark
Pakistan
Access to Finance
Demographic branch
penetration (branches per 4.73 6.37 1.73 4.96 7.69 9-28
100,000 people)
Demographic ATM
penetration (ATMs per 0.29 1.93 0.28 1.25 5.67 39-167
100,000 people)
Deposit accounts per
255.23 442.87 110.40 171.14 1117.82 976-2418
1,000 people
Loan accounts per 1,000
61.11 78.00 10.83 31.78 364.22 248-776
people
Geographic branch
penetration (branches per 44.53 23.46 2.97 9.67 15.81 1-57
1000 sq. km.)
Geographic ATM
penetration (ATMs per 2.71 7.11 0.48 2.44 11.65 3-252
1000 sq. km.)
Source: Getting Finance in South Asia Phase IV - 2008 World Bank
Visible areas of financial exclusion
Financial exclusion and denial of access to credit exists in two clear areas, in particular, in
formal credit markets and the payment system. According to available data, in Sri Lanka, at
least 40 per cent of the farm households do not have access to formal sources of credit or
bank accounts. The reliability of this number depends on the type of survey done and the
source of information. Nevertheless, it is a significant number to work with. Comparatively,
however, we are ahead in the region as 51 per cent of about 89 million farm households in
India have no access to formal or informal sources of credit while 73 per cent have no
access to formal sources of credit. Although both in India and Sri Lanka, the shares of
noninstitutional sources of credit have decreased compared to the 1970's and 1980's, there still
remains a significant gap in accessing the formal financial sector by men and women in rural
areas and the unemployed in the urban areas. Among many reasons for financial exclusion
of women from the formal system, however, literacy barriers and language barriers are
becoming less important factors. It is primarily the approach of banks and financial
institutions and the strenuous processes and procedures adopted by them, which matters
more in financial exclusion.
The second important area of financial exclusion is the denial of access to efficient and safe
payment systems. This area of activity is unknown to many and it has been taken for
granted. Among the main payment instruments, cash is straightforward. However, the other
payment instruments, such as cheques, bank drafts, electronic payments, card payments
etc., can have delays in both clearing and settlement, which can cause problems to those
who receive money through these payment modes. This is common to both men and
women. Following the efforts made by the Central Bank of Sri Lanka, cheques/bank drafts
are now being cleared on t+1 or t+2 in most parts of the country, and that has clearly
enhanced access to finance through retail transactions. The receipt of remittances through
non-bank sources or various money transfer systems has also been enhanced following
countrywide IT and payment system advancements. In more recent years, therefore,
financial exclusion in Sri Lanka has been greatly reduced.
Initiatives for financial inclusion of women
There are some initiatives taken, not only by Sri Lanka, but also in the South Asian region
towards financial inclusion. By 2005, micro finance institutions covered at least 35mn of
some 270mn people in the South Asian region and met around 15% of the overall credit
requirements of low-income families. In Sri Lanka, the coverage is particularly high at 60%.
The high outreach in Sri Lanka is based on an extensive network of community-based
organizations that receive considerable government subsidies.
Almost all rural financial institutions in Sri Lanka have provided easy access to women,
particularly in the villages, estates and among fishing communities. Financial institutions that
are directly involved in this area, are the licensed commercial banks, licensed specialized
banks, micro finance institutions, cooperative rural banks, the SANASA Thrift and Credit
Cooperative Movement, SEEDS and other non-governmental organizations.
Let us examine the extent to which financial inclusion for women has taken place through the
existing institutional network and assess the deficiencies and gaps, although we may not be
able to do a comprehensive analysis. The participation of women in credit programs as at
end December 2007 is given in the following table:
Table III
Women's participation in the Credit Programmes as at December 2007
No. of Loans Value % Received
by Women
Institution Male Female Total Rs. mn
1. Regional Development Banks 50,804 43,277 94,081 1,614 46.00
(RDBs)
2. Licensed Commercial Banks (LCBs) N.A.* N.A.* N.A.* N.A.*
3. Sanasa Development Bank 321,687 246,896 568,583 13,000 43.42
Thrift & Credit Societies 36,726 85,696 122,422 2,816 70.00
4. Cooperative Rural Banks (CRBs) 316,142 135,490 451,632 8,999.0 30.00
5. Poverty Alleviation Microfinance 12,604 39,388 51,992 1,058.4 75.76
Project (PAMP)
6. Small Farmers & Landless Credit 669 8,681 9,350 244.5 92.84
Project (SFLCP)
7. MFIs - SEEDS (SKS) 11,540 23,081 34,621 1,986 66.67
NA - refers to the non-availability of disaggregated data
Source: Regional Development Dept., Central Bank of Sri Lanka
As shown in the table, the Small Farmers and Landless Credit Project (SFLCP), Poverty
Alleviation Micro Finance Project (PAMP) and SANASA Thrift and Credit Societies have
been successful in providing loan facilities at 93%, 76% and 70%, respectively, for women.
Approximately 8,681 women have obtained financial and credit facilities under the SFLCP
revolving funds loan scheme, while 39,388 women have benefited under PAMP as at the end
of 2007. Again, due to lack of statistics and information, it is difficult to assess the ratio of
loans granted exclusively for women by commercial banks. Among others, the Sarvodaya
(SEEDS) has been in the forefront, reporting a total loan value of Rs 1.9 billion at the end of
2007, of which 67% has been for women borrowers.
As shown in Table IV, exclusivity conditions are not necessarily applicable to Sri Lanka given
the large-scale membership of women in the widespread banking arm of the Cooperative
Societies, i.e. about 1,500 cooperative rural banks and 7,400 Sanasa Societies, both
providing banking and financial services. In effect, in the micro finance delivery chain, Sri
Lanka's Cooperative Societies and Sanasa Societies appear to be very significant.
Table IV
Extent of microfinance outreach in South Asia
Country Population Poverty Poor MF MF MF Borrowing
Ratio Families Clients Poverty Coverage Clients, %
Outreach of Poor of
Families population
%
%
% (millions) (millions)
(millions)
Afghanistan 22 55 2 0.12 50 3 -
Bangladesh 143 50 13 16 50 62 13.1
India 1100 30 60 15 35 9 1.1
Nepal 26 35 1.6 0.5 45 14 1.5
Pakistan 155 33 8.5 0.58 35 2 -
Sri Lanka 20 25 1 2.5 25 63 4.3
Source: Getting Finance in South Asia Phase IV - 2008 World Bank Publication
Women still feature significantly in the vulnerable groups and it is imperative to include them
in the facilities offered by the formal financial sector. However, in terms of micro finance
coverage of poor families, Sri Lanka covers 63 families, which is the highest in South Asia.
Similarly, women account for 4.3% of the borrowing clients. Sri Lanka at 4.3% is below
Bangladesh, which is at 13%, but way above others. We, in Sri Lanka, had high hopes of
enhancing financial inclusion of women through the Millennium Development Goals, which
would have provided a smooth path for financial inclusion for women. However, even after
several rounds of discussions, the program has not got off the ground as yet.
Recent initiatives taken by the Central Bank and the banking and financial sector
As in India, banks and financial institutions in Sri Lanka, at the grass root levels, have been
advised to engage in basic banking with "no frills", or to entertain minimum balances and
reduce charges where possible to enhance access to finance and financial inclusion. The
recent efforts taken by the Central Bank of Sri Lanka as well as some banking institutions
have enhanced access to finance and financial inclusion. They are:
•
10% mandatory credit to agriculture by banking sector;
•
Agency banking through mobile phones: Permission has been granted to
commercial banks to provide facilities using telecommunication services to appoint a
number of agents to enable on the spot banking facilities such as depositing and
withdrawing money and receiving remittances abroad through these agents located
throughout the country;
• The HSBC
Upgrading of post offices to provide banking and financial services:
Bank has established links with post offices which are considered to be grass root
financial institutions and providing access to finance in terms of drawing their
pensions, monthly allowances and, where possible, remittances from abroad. This
initiative has helped to enhance financial inclusion as post offices are patronized by
women as well;
•
Setting up of a credit and debt management council by the Central Bank: to
provide advice to individuals and companies on their credit problems and denial of
access to finance, the Central Bank of Sri Lanka has initiated this process; and
•
Preparation of a Micro Finance Regulatory Act by the Central Bank of Sri
One of the impediments in Sri Lanka is that the system does not enable an
Lanka:
effective monitoring system through a regulatory framework, which monitors
progress of women accessing credit and their financial inclusion. To remedy the
problem, the Central Bank is now working on a Micro Finance Act, through which
micro finance institutions will be brought under a prudential regulatory framework.
Need for a comprehensive program to increase financial inclusion of women
It is important to note that initiatives cannot be taken and implemented by the Government
alone. Government could perhaps be the main motivator and driver. The promotion of
women entrepreneurial activities and financial inclusion has to be elevated to a policy
debate. There should be a serious commitment by banks and financial institutions, and their
business development sections should be proactive and ensure that credit delivery to women
engaged in relevant sectors is given priority.
In addition to the major infrastructure development projects, many village level enterprises
and projects are coming up within a short period of time. For example, the newly liberated
Eastern Province has potential for new opportunities for growth. Crop agriculture, the dairy
industry, fishing industry and livestock are three key areas, which can make a significant
contribution to growth. Women's participation in each of these activities is estimated to be
high and there are clear opportunities for women, seeking banking and financial services.
It is time to prepare a comprehensive plan and that should have new entry points to
accommodate women's financial requirements. Some of the new entry points include the
following:
•
Information technology application and usage: The phenomenal growth in the
telecommunication industry, particularly in the mobile telephone sector, could serve
as the main platform to enhance the delivery of credit to women and girls. Sri Lanka
is fast moving towards a technology savvy population. However, many women and
girls still do not use computers and newer payment modes available through mobile
phones and cards. In India and Bangladesh, many disadvantaged and vulnerable
groups, women and children in particular, have benefited immensely from
information technology, which has enabled such groups to have better
understanding of prices in the market and business processes. The Government's
Information, Communication and Technology (ICT) Program should ensure that
more and more women are included so that women can use the ICT entry point to
enhance financial inclusion.
• Introduce products/supply chain focused credit facilities and payment
instruments: Introduction of appropriate credit facilities as well as payment systems
and instruments in commodity markets and production chains/supply chains seems
to be new entry points to improve access to finance and financial inclusion. Women
in agriculture can be driven towards a debt trap when prices collapse at the time of
harvesting. Although it is common to both men and women in agriculture, losing
regular incomes would be a bigger blow to women than men. There can be inland
bills, goods receipt vouchers and other instruments that are discountable during
such periods. This is a responsibility for banks and financial institutions.
Let me sum up the substance in a few sentences. More than anything, there is an urgency
on the part of CENWOR or Marga or any other institution to conduct research, surveys and
statistical analyses to assess the status of enhancement of access to credit and financial
inclusion among women in Sri Lanka. It is hard to come to conclusions without adequate and
reliable statistics or even to initiate policy action to fill in gaps that exist in this area. It is
equally important for the relevant Ministry or Ministries and other public and private
organizations to coordinate and prepare a strategic plan to spearhead the campaign of
financial inclusion for women and suggest policy and operational measures as they deem fit.
This initiative too should be supported by well-recognized research institutions like
CENWOR. I hope the deliberations during the next few days would lead the way to prepare
an action plan or road map to take forward the financial inclusion for women initiative.
Thank you.