CBDC advocates tout 'inclusion,' but women are being left behind

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Nearly all central banks in the world — 94% of them, to be exact — are exploring implementing a central bank digital currency, or CBDC, according to the Bank for International Settlements, and many of their strategies cite financial inclusion as a primary driver. The Bahamian Sand Dollar's stated goal, for example, is to "advance more inclusive access to regulated payments and other financial services for underserviced communities and socioeconomic groups." But are these currencies something that women trust? Not yet, and not likely. More work needs to be done to ensure CBDCs work for women.

To be fair, shifting currency to digital makes absolute sense in our increasingly digital world. Digital currency offers an alternative to cash that, in its best form, is pseudonymous, ubiquitous and secure. A benefit of CBDCs could be that they provide central banks with greater data and insights about flows and, in the case of programmable tokens, could allow a central bank to program certain elements of monetary policy into the digital currency.

The problem is that for a CBDC to reach its financial inclusion potential for women, the right ecosystem needs to be in place, women consumers need to have adequate financial capability, and a critical mass of merchants and consumers must trust the currency to use it in the same way they use cash.

Access to personal technology devices and digital IDs are essential for women to even consider adopting a CBDC in the first place. Women are 15% less likely than men to access a mobile internet, according to an industry trade group. They are also less likely to own a mobile phone and less likely to own a smartphone when they do own a mobile phone.

Women also must have a sufficient level of digital financial capability. We know, however, that women are less confident than men in using financial services. In emerging markets, for example, women are 25% less likely than men to say they could open a bank account without help. Women consistently show lower financial literacy than men as adults, according to the OECD, driven largely by social barriers to financial confidence.

Finally, trust plays a significant role as well. Even when they have high digital financial capability and access to personal technology, women also may not trust CBDCs in the same way they trust cash. Most CBDC models rely on issuing currency to banks (the same way central banks issue cash to banks), but consumer trust in the financial services industry is declining, according to an EY report. If a CBDC relies on the same financial services institutions that consumers do not trust, CBDCs will create the same trust barriers to inclusion.

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Women's World Banking and Ernst & Young LLP are not alone in their concerns about CBDCs as a proven on-ramp to financial inclusion. Most publications on CBDCs put financial inclusion firmly in the language of "might," "could" or "possibly" when discussing benefits of CBDCs. The IMF succinctly says "A CBDC by itself is not a silver bullet to financial inclusion, as it can face barriers common for digital products such as gaps in digital and financial literacy, and access to electricity and digital networks."

There are several examples of CBDCs that have thus far failed to create financial inclusion. The Bahamian Sand Dollar, launched in 2017, was designed to modernize and streamline the country's financial system, reduce service delivery costs, increase transactional efficiency and improve financial inclusion. Seven years post-launch, the Sand Dollar now accounts for less than 0.5% of total currency in circulation. As of July of this year, the government was seeking a change in tactic, enacting regulations that would force commercial banks to distribute it.

Similarly, the Nigerian eNaira, which was launched in 2021, has thus far failed to capture network effects, with less than 1% of the country's bank accounts onboarded and only about 1.5% of wallets active in any given week. The digital currency, set up to better facilitate remittances and extend financial inclusion, has faced strong competition from incumbent mobile money operator networks.

In Ecuador, the Dinero Electronico, or DE, was launched with both financial inclusion and cost-saving objectives in 2014. The DE failed to gain people's trust and was ultimately abolished in 2017.

The Bahamian Sand Dollar, the Nigerian eNaira and the Ecuadoran Dinero Electronico underscore that building a CBDC does not guarantee it will work for women. Gender inequality in the underlying infrastructure, financial capability landscape and trust levels will influence success. Our message to the 94% of central banks working toward functioning CBDCs is that if you design for women, the currency has the potential to create financial inclusion. A women-centered design approach and policy resources offer strong principles to build on.

CBDCs offer new options for women looking for a safe and reliable place to store value and straightforward channel through which to send and receive payments. Their design, however, will determine their effectiveness. Will CBDCs lead to women's financial inclusion? Time will tell, but it will take much more than flashy central bank plans to get there.