Globally, there are roughly 1.7 billion adults without an account either at a financial institution or through a mobile money provider, according to the World Bank. The 2017 Global Findex report highlighted that “[a]ccount ownership is also lower among young adults, the less educated, and those who are out of the labor force.” However, the most astonishing statistic is that women make up 56 percent of the world’s “unbanked” adult population.

While almost as many men are excluded from the global financial system as women, this does not hinder men from achieving financial independence. “The majority of unbanked men—68 percent—are employed or seeking work,” according to the Global Findex database and the Gallup World Poll 2017. “For unbanked women,” the report goes on, “the picture is flipped: 59 percent are out of the labor force altogether.” Women’s labor force participation and financial inclusion rates are also particularly low in the MENA region.

In 2017, the rate of labor force participation for women between the ages of 15 and 64 was only 22 percent in the region, according to the International Labor Organization. Furthermore, only 35 percent of women, compared with 52 percent of men, have a financial account of some sort in the MENA region. According to the World Bank, this is the widest gender disparity in account ownership of any region.

In recent years, the challenges of inclusion, especially gender inclusion, in the financial sector have increasingly attracted the interest of global stakeholders. Many key financial service providers, regulatory bodies, policymakers, and development organizations have started to collaborate to empower women in the MENA region. In order to help more Arab women access finance, it is crucial that these key stakeholders understand the challenges they face.

Lack of Savings and Personal Attitudes about Banking

First, and foremost, it is crucial for global stakeholders to identify the social and cultural attitudes that persuade, or dissuade, potential users, especially women, from using traditional financial services. When the World Bank asked unbanked adults why they did not have an account with a financial institution, respondents offered various answers. The most commonly cited reason was that they had too little money to put in an account. Other respondents cited the prohibitive cost of an account, the distance of banking institutions, and having family members who already had a bank account.

However, the availability of financial services does not always correlate with an increase in the rate of financial inclusion in a community. This is mainly due to the fact that many individuals voluntarily refrain from using financial services for religious or cultural reasons, even though they have access to them and can afford them, according to a World Bank Development Research Group report.

Ultimately, financial inclusion is about more than just statistics or providing unbanked individuals with the appearance of being empowered. It is about giving people access to financial services that will positively impact their lives, businesses, and communities in the long-term.

Gender Disparity in Access to Internet and Technology

In 2017, the internet user gender gap in Arab states was 17.3 percent, down from 19.2 percent just four years earlier, according to data from the International Telecommunication Union. Among the MENA region’s unbanked population, 86 percent of men and 75 percent of women have a mobile phone, according to the World Bank. The international financial institution also estimated that “up to 20 million unbanked adults in the region send or receive domestic remittances using cash or an over-the-counter service, including seven million in the Arab Republic of Egypt.”

Although the narrowing gender gap in internet access could increase women’s financial inclusion and boost the burgeoning financial technology (fintech) ecosystem in the MENA region, fintech cannot be viewed as the sole, or even main, solution to the issues that hinder gender economic equality in the Arab world.

“Although fintech is a valuable tool that can be used to increase financial inclusion among many populations that are traditionally excluded, it is not a panacea. For fintech to be useful in increasing financial inclusion, people must have access to technology, must be comfortable using it, and trust that their money will be safe,” Blake Goud, founder, and CEO of the Responsible Finance and Investment (RFI) Foundation, told Inside Arabia.

“These all require additional inclusion efforts to be effective that focus on narrowing the gap of access to technology. . . . Until the digital gender gap is closed, fintech should be used as a tool alongside non-digital means to increase financial inclusion of women in the MENA region,” Goud added.

Institutional Barriers to Accessing Funding

Although research indicates that women throughout the MENA region generally have the legal right to own property, enter legal contracts, apply for loans, and access credit, they frequently do not do so because laws in other areas perpetuate gender-based discrimination. For example, personal status and labor laws in Arab countries often contain gender-specific provisions that reinforce gender bias by enabling discriminatory interpretations or implementation of business laws.

When members of the MENA Businesswomen’s Network were asked what specific difficulties they faced in seeking finance for their businesses, they ranked their difficulties as follows: 67 percent cited high interest rates as the major hurdle, 36 percent had difficulties due to lack of collateral guarantees, 31 percent found the process too complicated, 17 percent lacked a business track record to secure financing, and finally, 16 percent felt that the bank mistreated them because they were women business owners.

Accessing finance is a key hurdle to the growth of many small and medium-sized enterprises (SMEs), regardless of gender. “[A] 2011 study showed that women-owned SMEs grow more slowly than their male-owned counterparts.” One of the key factors associated with slower growth rates was lack of access to finance, which, as noted above, often raises gender-specific challenges such as lack of collateral and control over assets.

The inability to raise capital is problematic:  bank loans are the principal external source of finance for entrepreneurs in the MENA region. Male or female, entrepreneurs’ inability to secure funding through financial institutions means that they frequently have to rely on informal sources of finance to grow their businesses. These informal sources are more commonly known as the three Fs: family, friends, and “fools.”

Restrictive Cultural and Social Expectations

Many of the hurdles that Arab women business owners face are also inherent to the social practices of the MENA region. Even though the law does not necessarily prevent Arab women from pursuing their entrepreneurial dreams, cultural expectations and family restrictions often impede them from accessing the financial and business services they need to help their ventures thrive.

In fact, studies show that the lending practices of banks in many Arab countries frequently incorporate non-legal barriers. For example, some banking institutions require women to include their husbands as cosigners to ensure that women’s business activities are carried out with the consent of their family and spouses, Dr. Aishath Muneeza, an associate professor at the International Centre for Education in Islamic Finance in Malaysia, told Inside Arabia.

Traditionally, men are the breadwinners in the MENA region. Consequently, many societies in the region do not think it is necessary for a woman to work. Because women are often primarily responsible for family matters in Arab societies, they do not always have the time or the ability to engage in economic activity outside of the home. Moreover, in very conservative Arab communities it is considered “commendable” for a woman to stay at home, take care of her family, and serve her community.

However, the social stigma associated with seeking economic empowerment outside of the home is not the only problem that Arab women face. The structural inequalities in many of the MENA region’s educational institutions mean that Arab women do not have access to the same knowledge and tools that their male counterparts do. Therefore, many female entrepreneurs in the region struggle to be successful, as they lack the skills required to create a business plan, accurately assess their financial needs, and develop compelling pitches for potential investors and lenders.

But most importantly, many Arab women entrepreneurs lack the confidence needed to deal with the region’s bureaucracies and financial institutions because of the hostility and criticism they receive from their communities as they strive to achieve economic independence, according to Muneeza.

Future of Women’s Financial Inclusion in the MENA Region

While in light of all these obstacles tackling the issue of women’s financial exclusion in the Arab world may seem like a Herculean task, it is not impossible to achieve. In India, the number of adults with bank accounts has more than doubled since 2011, rising to 80 percent. This increase was largely driven by a policy launched by the government in 2014 to boost account ownership among unbanked adults through biometric identification cards. “Between 2014 and 2017, account ownership in India rose by more than 30 percentage points among women as well as among adults in the poorest 40 percent of households,” according to the World Bank. The effective implementation of government policies can create a swift and long-lasting change.

There is also a growing movement in the MENA region to increase the rates of financial inclusion. This movement is being driven by startups that are striving to empower the Arab world’s financially underserved populations while also strengthening the region’s financial ecosystems and generating a profit. Jordan-based Liwwa and United Arab Emirates-based Now Money are just two examples of fintech startups that are trying to create a more inclusive financial system in the Arab world.

However, many MENA-based fintech startups still face challenges as they seek to scale their operations and encourage their customer base to adopt their platforms. According to Justin Sykes, founder and managing director of Innovest Advisory, some of these challenges include weak regulatory frameworks, a nascent entrepreneurial ecosystem (one in three MENA fintech startups fail), the lack of easily-accessible funding, and difficulty in hiring and retaining talent. Until the key players in the region’s financial ecosystem can come together to remove these obstacles, the MENA fintech startup scene, and the region’s financial inclusion rates will be held back.

In the future, the MENA region’s public, private, and development sectors need to collaborate more effectively to empower Arab women in a multi-faceted way. By introducing social, legal, and educational policies with a gender-focus, not only will these entities empower more Arab women to become economically independent, they will also unleash the full potential of the Arab world for generations to come.