Photo: BSR HERfinance

Increasing Financial Inclusion in the Garment Industry

A Conversation with Lynn Eisenhart of the Bill & Melinda Gates Foundation

Increasing Financial Inclusion in the Garment Industry

Today, BSR and theBill & Melinda Gates Foundationare announcing a new strategic partnership to increase financial inclusion for low-income women and men working in the garment industry in Bangladesh, India, and Pakistan. Through this partnership, BSR will help garment factories in these countries transition from cash-based payroll or traditional direct deposit to mobile wallet accounts, while providing workers withHERfinance

training to ensure a smooth transition to digital wages.

We sat down with the Gates Foundation’s Lynn Eisenhart—a senior program officer on theFinancial Services for the Poorteam—to understand why mobile money is critical to achieving financial inclusion at scale, and why the foundation is partnering with BSR’s HERfinance to further its objective of bringing the world’s poorest into the formal financial system.

Chhavi Ghuliani: Tell us about the Bill & Melinda Gates Foundation’s mission and the strategic priorities of the Financial Services for the Poor team.

Lynn Eisenhart: Our mission is primarily driven by the passions of our co-chairs, Bill and Melinda Gates, to lift people out of poverty by focusing on areas of need in both the United States and developing countries. The Financial Services for the Poor team focuses on increasing access to formal financial services, primarily through digital means, or mobile money. We believe that digital financial services have the potential to help poor households transact and store funds efficiently and securely, enabling them to weather financial shocks and to take advantage of opportunities to move out of poverty.

Ghuliani: Why is access to financial services critical to enabling people to move out of poverty?

Eisenhart: All of the work we do to address the needs of the world’s poor—whether it’s in HIV or polio, or helping smallholder farmers improve their yields, it ultimately has some tie to a financial payment or financial services. Money is a critical part of everybody’s life. We all need it, we all use it, and we all have to manage it. When you’re living on less than US$2 a day, you have to manage it even more efficiently. Unfortunately, however, the world’s poorest are the most underserved by formal financial institutions.

Ghuliani: The 2015 Annual Letter from Bill and Melinda Gates was titled “Our Big Bet for the Future.” In it, they wrote that mobile phones will give the poor more control over their assets and help them transform their lives. Why is the Gates Foundation making such a big bet on mobile money?

Eisenhart: We are really starting to see the rapid diffusion of mobile handsets—on both basic-feature phones and smartphones—increase, even among the poorest people in many countries. In fact, 90 percent of the world’s poor are now covered by a mobile signal—far greater than the number of people who have access to traditional banking services.

When people have increased access to mobile phones, not only does communication improve, but an infrastructure also develops that allows people to transact digitally with anyone in the country—whether it’s the transfer of information, knowledge, or money. This type of digital infrastructure can dramatically decrease the cost of conducting financial transactions compared to traditional means. Specifically, digital payment technologies have the potential to strip out more than 90 percent of the cost of transactions. These ultra-low transaction costs help make banking viable for the world’s poor, and they open up a massive new market for financial services providers. Given the rate at which people are acquiring mobile phones, it’s the perfect time to start building out digital financial services that can ride on top of that infrastructure.

Ghuliani: The Gates Foundation is partnering with BSR to help us integrate wage digitization into our HERfinance programs in South Asia. Why are you making this significant investment in HERfinance, and how will it support your strategic objectives?

Eisenhart: The garment and textiles industries in South Asia employ significant numbers—in the millions—of formal, low-income wage earners. We wanted to target bulk payments through wages as a way to bring large numbers of unbanked people into the formal financial system.

We are excited to be working with BSR because you have a great program that is already established and works in exactly the types of garment factories that we would want to work with, and works with global buyers who care about the welfare of workers in their supply chains.

HERfinance is a a proven and effective programthat advances financial education, particularly for low-income and unbanked women. With this partnership, we can add a component to HERfinance that will drive the digitization of workers’ wages and train those workers on how to effectively use these services to transact and save moving forward.

I’m excited to see how the program develops and how many people we can begin to bring into a formal financial system through this partnership.

Ghuliani: Is there a business case for employers to switch to digital payroll?

Eisenhart: There is a long-term business case, but it is going to take some dedicated capital to reach that point of discovery. It won’t be obvious in a short pilot, mostly because a lot of top-tier factories have already optimized their cash payroll processes and may need to incur some small initial costs related to implementing a digital payroll system. However, over time, factories that pay digitally may see overall cost savings and increased operational efficiencies, as well as intangible benefits to their workers that result in more satisfied employees that turnover less frequently. For these reasons, the Gates Foundation continues to remain involved until we reach that long-term goal.

Ghuliani: What about the business or social case for workers?

Eisenhart: Not all workers will be immediately ready to jump on board with mobile payments. And I don’t blame them. If my employer told me they were going to change the way they currently pay me, and it could potentially cost me money or change my pattern of what I need to do on payday, I might be a little intimidated.

What we’re starting to see among workers that have joined our pilots in the past, however, is that once they’ve gone through a few payday cycles, they start to retain more money in their digital accounts, indicating a level of comfort with the new system.

When they see that it’s a safe place to keep their money, and that they can transact digitally to pay their household bills or send money to family remotely, they do not revert immediately back to cash when they receive their paycheck. I think that’s a really positive sign.

Ghuliani: The majority of the employees in the garment sector globally, and in light manufacturing overall, are women. Even if they earn the same wages, women tend to have less access to information and services than men do. Does mobile money offer any particular benefits or challenges for women in overcoming gender-specific barriers to access?

Eisenhart: The Gates Foundation, as a whole, has really made a deliberate decision recently to focus on women and girls in several of our program areas. We know that when women are empowered in their households to manage finances, they make better decisions about allocation of funds that help entire families thrive.

We’ve chosen to focus on garment workers in South Asian countries specifically because such a large proportion of them are female.

It’s difficult to say whether or not mobile money benefits women more than men. I think we need to see higher rates of access to mobile phones among women to ensure they can readily benefit from digital financial services. We also need to see more female mobile money agents, so that women who have these accounts feel comfortable going to another woman if they need that help with transactions.

If we can put together the right infrastructure and the right access to these services to reduce the digital gap between men and women, then I would say absolutely. This is the type of service that’s really going to benefit women and their families more than what they currently have available to them in terms of financial services options.

Overall, studies have shown that mobile money benefits all low-income wage earners more than any other type of financial service that’s been available before, which is why we’re advocating for its adoption on a global scale.

Ghuliani: What message do you want to send to apparel companies, technology companies, or retailers that are sourcing from South Asia or Southeast Asia? What is their role in helping our organizations achieve our vision and support financial inclusion for workers?

Eisenhart: Incidents in the past few years—including the tragedy at Rana Plaza—have driven more brands to focus on the welfare of workers in the garment factories they source from.

While physical worker safety is table stakes for factories that want to show they have employees’ best interests in mind, there are so many other things, including health and financial services, that play a critical role in the overall well-being of garment workers worldwide.

I would encourage these companies to think about these critical services beyond basic worker safety and how they can be implemented properly based on the lifestyles of the workers. For example, it’s one thing to make sure your workers are being paid electronically into a bank account for transparency reasons, but it’s another thing to make sure that a worker can actually access that account easily and frequently. A traditional bank account actually may disadvantage some of these workers because it might take them a day or two to access a formal bank branch, which may mean missing time at work or added burden for childcare. Paying them through mobile money, on the other hand, likely gives them easier access to a distribution network of agents nearby, which will help encourage more frequent and meaningful transactions—and could result in increased uptake of additional formal financial services.

Ghuliani: Any final thoughts you want to share?

Eisenhart: I want to thank BSR and all of the brands that are already eager to participate in HERfinance, because you will be the trailblazers that show other great brands, factories, and mobile money providers just how important this work is. Access to formal financial services really can improve the lives of workers if done the right way. It’s become apparent to us just how impactful the HERfinance program has been, and we’re really excited to be partnering with BSR to make a difference in the lives of all the workers that your program touches.

For more information, read our newHERfinance case study.

Editor’s Note:

This article first appeared on and is reproduced with permission.

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