moderated Re: Social Norms and Financial Inclusion #ediscussionday1

Audrey Misquith

Hi all! Julia, interesting questions. I'd like to add some comments

1) Is the reason financial inclusion hasn't addressed social norms because we're essentially retrofitting microcredit into the formal banking sector? The banking sector has NEVER had to consider customer needs, let alone low-income women's social restrictions; it's very business model is: you need money? I have money....but you need to jump through these hoops to get it. 

Quite unsurprisingly, I think this is fairly true in some markets particularly in the South Asian markets of India and Nepal. It is true that banks in these countries never considered the needs of low-income customers particularly those of women in a thoughtful and nuanced manner. Even though there was/is an appreciation for a business case in terms of  volume(About 30-40% of India and Nepal's population can be considered low income), there is skepticism associated with the riskiness of low-income borrowers/depositors and their low literacy levels, potentially inhibiting further business expansion. Microcredit, although not a panacea to the ills of financial exclusion of the low-income populace(Read poor economics by Abhijit Banerjee and Esther Duflo) has found workarounds to the above problems through  group lending approaches, communal learning mechanisms and the like. Banks have tried to emulate these approaches piecemeal in some sectors but have not completely adopted the microcredit model. In Nepal for instance, although banks are mandated by the Central bank to direct 5% of their net credit to the deprived sector, banks direct these funds to MFIs that do most of the lending. 

I wouldn't link the above phenomenon to a lack of understanding of social norms, however. Quite the contrary, actually. I think microcredit as a solution has carefully analysed social norms and found ways to make finance work despite these norms. In other words, it has followed a "norms-aware" approach. Banks mimicking this is a good sign as they see value in designing around norms for low-income people. What's missing though(although this is changing)  as some Finequity members have pointed out is a direct response to shift social norms and combat them head-on. I think there is a free rider problem here. Banks do not want to take on the onerous responsibility of transforming how societies ought to be thinking about women's financial inclusion and economic empowerment. Clearly, it is not their core work.  The reliance is on governments, NGOs and other bodies to fill in. That's why in most markets we see banks working with these organizations in collaborative and complementary ways to help shift social norms. For example, in Nepal banks are patterning with SDC to bring digital literacy initiatives at the doorstep of dalit(marginalised) communities in Nepal. The idea there is an immersion-technique where the whole community gets involved to drive meaningful learning and associated capacities for action. 

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