Financial discrimination is a worldwide problem

Many people around the world have no access to financial services. In many cases, the reasons for this are simply discriminatory: it goes z.B. to gender, skin color or disability. A contribution to Banking on Values Day.

Money means power. And if history teaches us anything, it is the great injustice that a great many people are excluded from both. Money and access to it are extremely unequally distributed. At the same time, money is also the key to a more equitable and inclusive world. To mark Banking on Values Day, we give examples of this.

Women and finances

There are still 70 countries in the world where women cannot independently open a bank account and access credit. You still need your husband's signature to get a line of credit, for example. This discrimination has led to a host of initiatives to create access to financial services for women around the world – such as the nonprofit Women's World Banking Organization, founded by the first UN Conference on Women in 1975.

Members of the Global Alliance for Banking on Values (GABV), such as Banco Mundo Mujer in Colombia or BRAC Bank in Bangladesh, also aim to address this inequality. The GABV is an association of over 60 sustainable banks worldwide and was co-founded by Triodos Bank.

There are still 70 countries in the world where women cannot independently open a bank account.

Despite deep-rooted discrimination in many places, 33% of small businesses worldwide are owned by women. In Latin America, the figure is as high as 51%, according to the study "The Gender Journey of the GABV in Latin America". The study also shows that discrimination against women has serious economic consequences. This is because the loan default rate is lower for companies run by women, and they also handle risks more responsibly and invest more in the education of their employees. Despite this, women continue to find it significantly more difficult than men to obtain credit. In Latin America, the credit gap for women-owned small and medium enterprises is $98 billion. The study concludes that promoting women's initiatives would be an important factor in broader economic development.

Discrimination against women is an inherent problem in the financial industry. While there are great exceptions, women are still severely underrepresented in leadership positions at financial institutions. Globally, women make up only 20% of all financial industry board members. With 50% women on its board, Lead Bank, a GABV member in Kansas, USA, is one such exception. "We recognized long, long ago the need and societal benefits of greater and broader participation of women in financial affairs and decision-making processes", says Joshua C. Rowland, CEO.

The rise of African-American finance

Unfortunately, the color of people's skin is also a factor in (financial) discrimination: according to the Federal Reserve, as many as 45% of African-American loan applicants:in the U.S. were rejected in 2020, compared to 31% of Hispanic applicants:in and 18% of white applicants:in.

To address this type of inequality, City First Bank was established in Washington DC back in the 1990s. The bank has since focused on the financial inclusion of low-income neighborhoods, most of which have high African American populations. In 2021, City First Bank, which is also a GABV member, will merge with Broadway Federal Bank in Los Angeles. The new institution is now the largest black-owned bank in the U.S.

The significance of this merger goes far beyond a traditional merger in the service of efficiency and profits: the structural dynamics of economic discrimination mean that many black-owned banks have relatively low capital bases. As the LA Times reports, a large bank like Wells Fargo had $1.97 trillion in assets in 2020, while Latino-owned banks in the U.S. averaged $109 billion and black-owned banks averaged only $4.85 billion.

Increasing awareness of this is a first step in the right direction and is reflected in civil society – for example, in the #BankBlack initiative. She calls on African Americans:inside to deposit money in black-owned banks to support their communities.

Financial access for all

Financial exclusion also affects many other groups and communities around the world. Sustainability banks show that sound, scalable and effective solutions exist. The handling of money only needs to be questioned structurally. Two other examples:

One in eight people has a disability. Against this backdrop, GABV member Finca DRC in the Democratic Republic of Congo launched a program to combat discrimination against the blind. The bank is helping blind women who beg on the streets of the capital, Kinshasa, to start their own businesses. Many of these women started small retail businesses selling products such as cooking oil or groceries. Over the course of several weeks, Finca staff:ers trained the women in business leadership. They formed a savings group, which led to the majority of women building long-term businesses.

Another of the many groups that need better access to finance is migrants. Despite making up 3% of the world's population, millions continue to suffer financial exclusion years after migrating, as they face barriers to acquiring full citizenship. This has far-reaching implications, including access to long-term housing. In Minnesota, GABV member Sunrise Banks has therefore launched a so-called "bank of the year". Open Door Mortgage introduced. This is a loan aimed at foreign-born residents who cannot provide all the paperwork required for traditional mortgages.

This post is from the Global Alliance for Banking on Values and has been made available to all members.

The Global Alliance for Banking on Values

The Global Alliance for Banking on Values (GABV) is a network of banking leaders from around the world who are committed to positive change in the banking industry.