Consumer goods companies rely on massive supply chains with millions of workers in developing countries. Many of these workers are women, and many are still paid in cash – and herein lies an opportunity for change. Development organizations such as the United Nations, Gates Foundation and the World Bank are now recognizing the opportunities of partnering with these consumer goods companies to increase access to digital financial services through payroll.
According to recently released World Bank Findex 2014 data, increasing access to digital payments can significantly increase financial inclusion. Yet only 41 percent of wage earners in developing countries receive their wages directly into bank accounts (including roughly 45 percent in East Asia and less than 25 percent in Southeast Asia) and the likelihood of receiving wages into an account goes down as income drops.
So why does this matter for consumer goods companies? Global brands have long since monitored how much workers in their supply chain are paid, but few have ever thought to ask how these workers are paid. In fact, most don’t know – and until now, they haven’t had much reason to care whether these workers were getting paid electronically or in cash. But that is now changing. As data increasingly reveals the link between electronic wage payments, financial inclusion and women’s economic empowerment, a valuable opportunity is emerging for both brands and the workers they depend on.
Researchers at the World Bank have observed that electronic wage payments (i.e.: payroll) can be an on-ramp to financial inclusion by bringing people into the formal banking system. This can lead to higher savings rates and greater access to other financial services, such as insurance and credit, that can help poor people manage risk, weather economic shocks and smooth consumption. Women in particular stand to benefit, because having an account into which they are paid electronically gives them greater control, confidentiality and convenience with regards to their finances. It shifts household decision-making toward women and increases their economic empowerment.