Making finance work for women

Just as it is not an inherent feature of the financial system to work against society, it need not be the case that it discriminates against women. A flourishing group of financial cooperatives and mission driven banks are leading the way in showing how

Women holds up a credit card and scissors, surrounded by campaigners Move your money campaigners in London

The impact of the financial crisis and the financial system more broadly are disproportionately discriminating against women on multiple levels - as employees, consumers and citizens. 

The pay gap between male and female employees in the financial sector in the UK is 55%, which is much higher than the average 15% pay gap for the broader economy. Women are under represented in finance, and concentrated in secretarial and administrative roles. Globally, women are more likely to be denied access to loans and mis-sold products.  

As citizens, women are suffering too. The UK government’s austerity measures hit women harder because they are most dependent on the benefits that are being cut, such as housing support, and they tend to hold the part time jobs that are first to be dropped in a recession. In particular, single mothers are becoming poorer, and some women in the UK now miss meals in order to feed their children. The global financial crisis has been described as “feminised” by some. 

The financial crisis has of course hit men too, and understandably the public interest in banking and finance has heightened since the financial crisis of 2008. People are more questioning of what banks are doing with their money and less trusting, especially in light of the ensuing mis-selling and LIBOR rigging scandals.

The public reaction has expressed itself in a number of ways, including outrage at remuneration and bonuses in finance and the Occupy movement. A practical action people are turning to is to move their money to alternative financial institutions that they trust, whose business practices match their values, and provide the services they need.

In the US there have been a number of campaigns - Move Your Money, Move Our Money  and Bank Transfer Day . This grassroots movement has since spread globally, and last year I co-founded the campaign Move Your Money UK, which is the British manifestation of the movement.

Man holds up two halves of a destroyed credit card, surrounded by campaigners Move your money campaigners in London

Though most people in the UK currently bank with the “Big 4” - Barclays, HSBC, Lloyds TSB, RBS (and their subsidiaries), we aren’t reliant on them. There is a flourishing group of financial providers that offer a safe and credible alternative. They have ownership structures and business strategies that are more geared towards benefiting people, communities and the environment, and these include credit unions, building societies, banks with strong ethical commitments and community development finance institutions.

Whilst the public have lost trust and are looking to alternatives, the governments in countries with the most significant financial sectors - the US, the UK and Europe - have so far supported the status quo, and rely on it in their plans to recover economic growth in the wake of the crisis. They have bailed out the banks with unimaginable amounts of taxpayer money and they are using various forms of quantitative easing in the hope that banks will lend out the newly created money out to the private sector who they believe will kick start the economy.

In this vein, the UK Coalition government is using a mix of government spending cuts and quantitative easing to address the growing public debt since the financial crisis. This set of policies is familiar to the Conservative Party who used it in 1975, 1980 and 1993, but this time round it doesn’t seem to be working and so the economic crisis persists. Growth is still below 1%,  4 years after the crisis and the situation for British people, but especially women, is worsening.

The key reason the economy continues to falter is that the banks are not playing out their part in the government's plans. They are using the money created through quantitative easing as a capital buffer, or allocating it to more safer or more profitable assets than loans to small businesses and individuals. The breakdown of this transmission mechanism - from banks to the real economy - is apparent from the minimal impact the staggering and unprecedented £375 billion quantitative easing programme that the Bank of England carried out had on the UK economy. 

The biggest banks, which are hugely significant in the economy and are now a tax payer liability, need to be made functional and socially useful, but efforts to implement regulatory and structural change in the financial system, such as the Independent Commission on Banking (ICB) and the Banking Standards Commission in the UK, and Dodd Frank in the US, have so far had little tangible impact.

Through the Move Your Money movement people and businesses are sidestepping top down reform. Instead of waiting for legislation that may not come into effect for many years and is likely to be watered down over time, they are helping the types of banks that they would like to see shape our economy grow.

As well as encouraging a resilient financial system that isn’t susceptible to catastrophic crises, these financial institutions are driven by the interests of customers and society and so they are better at providing services for both their male and female customers alike, according to their needs.

Credit unions, which are non-profit financial cooperatives, are one of the types of financial institutions that the Move Your Money movement advocates. Being cooperatives, credit unions are owned and run by their members - who are the customers. Credit unions have a strong regional identity and tend to be closely involved with their local communities because membership is traditionally determined by a common bond. The result is that by joining a credit union, you are putting your money towards investing in the needs of a community.

Local roots and a volunteer base of staff give credit unions a more personal approach than the big banks that enables them to recognise and serve their customer’s needs. In most credit unions at least half of the members are women, and many are located in, or run outreach programs in places accessible to women, such as Sure Start centres, schools and council estates, which are also where the most vulnerable women being hit by the crisis can be reached.

Credit unions play a highly valuable role in helping people who are excluded from mainstream finance because they make lending assessments based on a holistic interview rather than a computer check. Many people who would have been forced to turn to loan sharks and high cost lenders have been helped by credit unions . The financial products they offer tend to be more basic but that helps customers to understand what they’re buying and stops mis-selling. 

Credit unions are successful at empowering women over their finances as customers, but they are less good at employing women, especially at board level. This reflects the gender bias in finance more generally. Ethical banks, who have clear intentions to promote diversity among their work force, have a similar problem. I think that it can be explained by tight recruitment regulation, which restricts the pool of potential board members to come from mainstream finance, where we know there is a strong gender bias.

Radical action will be required to address gender inequality among the work force in finance. Standard working hours in this sector are longer and unpaid overtime (when the vital deal is often ‘closed’) is often expected, which is difficult to reconcile with looking after children. Measures that could make a difference, such as quotas  and mandatory wage transparency, are not supported by the UK government. In this context, the “Think, Act Report”  initiative from the UK Government Equalities Office seems insignificant, irrelevant and weak. The “flexible” initiative offers companies the opportunity to volunteer certain measures of their performance on gender issues on a public platform and to receive support to improve.

As well as working to raise awareness of the broad range of ethical, cooperative and mutual financial institutions available and supporting people in moving their money, Move Your Money UK aims to strengthen this “alternative” financial sector and broaden and enhance debate around financial reform. It would be negligible to ignore gender equality as part of this latter aim and we will challenge and work with the alternative sector as it grows.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

About the author

Marloes Nicholls is a postgraduate economist and campaigner for social justice. Having recently finished the M.Phil. in Economics at Nuffield College, University of Oxford, she then went on to co-found the campaign Move Your Money UK and she currently works for Oxfam, on global campaigns.