Women and Barriers to their Financial well being/ Barriers for women in relation to financial security

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2.2 Women and Barriers to their Financial well being/ Barriers for women in relation to financial security There are different circumstances faced by women that may create barriers in becoming financially secured in their lives (Morris, 2007). Formal Financial barriers A key constraint for women is the access to adequate financial resources for the success of their business (Minniti, 2009; Jordi, 2009). Different researchers have made the attempt to see how financial institutions behave towards women while granting funds. Empirical studies have established the influence of financial literacy on financial behavior. People with low financial literacy are more likely to have problems with debts (Lusardi & Tofano, 2009). Apparently, debt financing is a challenge for women entrepreneurs (Buttner and Rosen, 1992) because of unequal treatment by debt providers, lack of experience in dealing with lending institutions and insufficient credit history and rating (Belcourt et al, 1991; Goffee & Scase, 1983; Hisrich & Brush, 1984). As an example, Kenyan women are almost invisible to formal financial institutions they receive less than 10 percent of commercial credits (Mahbubultlag Human Development Center, 2000). According to the UNIDO report (1995), “despite evidence that woman’s loan repayment rates are higher than men’s, women’s still face more difficulties in obtaining credit,” often due to the discriminatory attitudes of banks and informal lending groups. In developing countries, women have limited access to funds as they are located in poor rural communities with fewer opportunities to borrow (Starcher, 2008). These women continue to suffer from poor enforcement of financial rights and the existence of poor access to financial resources long with the rigidity of collateral requirements and heavy paperwork are further impediments to women entrepreneurs (Stevenson and Jarillo, 2003). Not surprisingly, women struggle for financial assistance as well for their own use. In most regions of the world, fewer women held a account at a formal financial institutiton whereas Sub-Saharan Africa, women are more likely to use an informal saving clubs and not a formal financial institution to save as compared to men. Also, financial inclusion is low in Mexico among women whereby only 22% women have bank accounts (Demirguc-kunt and Klapper, 2012). On the whole, proper access to financial services provides opportunity for improving women’s businesses and the economy of the entire communities and countries. Informal barriers Besides, the home environment plays a role in financial literacy. Parents have the primary responsibility to inculcate financial habits and behaviors to children when they are young (Into, 2003). They have the greatest influence on the way children handle money and instill the attitudes their children have towards saving (Eikmeier, 2007). “Children learn financial management behavior through observation and participation and through intentional instruction by socialized agents (family, siblings, spouse, peers, schools, workplace, media and culture)” (Eikmeier, 2007, p.6). Social beliefs “commonly fail to value women’s contribution to relationships and as a result, women may fail to fight for their financial rights as they themselves lack experience of this recognition” (Branigan, 2004, p.16). From a gender outlook, financial attitudes, knowledge and behavior differ for both male and female due to different financial satisfaction during childhood (Lim, Teo and Loo, 2003). In nearly every culture around the world, girls are brought up to be the caretakers while boys are grown up with the expectation to be the breadwinner (Wilhelm, Varcoe & Fridrich, 1993). As a result, differences in gender roles and expectations would provide different strategies to the financial socialization of boys and girls and consequently, the different levels of financial knowledge among them (FAlahati & Pain, 2011). For example, in Nigeria, there is a large power distance and high masculinity and where customs place the obligation on the male child to be the economic provider, emotional protector and leader (Hofstede, 1980) Astonishingly, women may be working and supporting their family financially, still they are not considered as breadwinner (Yodanis, 2007). Women should be less involve in income earning activities but rather should be humble and modest amid the priority given to their roles as wives and mothers (Zakaria, 2001). The interest of the family members is a determinant factor in the realization of women folk business aspirations (Stevenson and Jarillo, 2003). “Having primary responsibilities for children, home and older family members, very few women can devote all their time and energies to their business” (Starcher, 2008) A potential explanation for women’s lower financial literacy may have to do with specialization of tasks within the household. The idea that men acquire greater financial knowledge and skills than women because they specialize in financial decision-making within the household is consistent with the fact that men tend to display higher financial knowledge than women across a wide range of countries. Hsu (2011) finds that financial literacy of older married women in the US increases as they approach widowhood, thus supporting the idea of household division of labor. Women are more likely to have a budget and to keep track of their finances which are a crucial aspect of financially savvy behavior that has to do with short-term money management. Keeping a close watch on every-day financial expenses is a first step in building long-term financial security and avoiding unsustainable levels of debt. In many countries, women have an important role in household money management in large share of couples. As stated by Chen (2002), women have been traditionally responsible for childcare and daily maintenance of activities like household budgets and bill payments. As a result, they are less likely to save for their retirement and more likely to spend their money on children and families. The results were in line with the OECD INFE surveys and other national studies showing that women appear to be better than men at short-term money management behavior. For instance, women in Australia are much more likely than men to regularly keep a budget for their day-to-day finances and more likely to think about ways to reduce their spending (Australian Government and Financial Literacy Foundation, 2008). Results from both the 2006 and 2009 Financial knowledge survey in New Zealand suggest women have used written/electronic records to be in more control of their expenses. Others authors have also argued that women have marginally outperformed men on keeping track of their financial affairs (McKay, 2011; Atkinson et al, 2006). However, Evidence from the OECD INFE survey shows that both partners are jointly responsible for day-to-day money management in a majority of households across several countries, weakening the idea of specialization to financial decision-making. Equally, Fonseca et al (2010) and Bucher-koenen et al (2012), studying the US and Dutch population respectively do not find support for the specialization hypothesis. Another challenge for women is that most of them do not receive any education in finance until they are divorced or widowed (Bach, 2002). Studies have shown that women show limited interest in money matters because they feel they have too little knowledge to engage in these issues. It is reasonable to assume that lower access to education can affect opportunities to improve financial literacy. Lusardi (2007) noted that many households are unfamiliar with even the most basic economic concepts needed to make saving and investment decisions. Researchers (Beal, Delpachtra, 2003) assert that financially educated people would know how to manage their money, understand how financial institutions work, and possess a range of analytical skills. Besides, they would know how they should handle their financial affairs and how to be responsible financially. Eikmeier (2007) pointed out that financial education can lead to financial knowledge and positive changes in attitudes, motivation and planned behavior. Women generally have less knowledge about personal finance topics whereby education and experience can impact the financial literacy of women/For women and men, education will improve their financial education /financial literacy can change with education (Chen, 2002). Having a University degree relates to how a woman manages money with a spouse and they are more likely to be involved in the decision making process with their spouse (Yodanis, 2007). Kitching and Woldie (2004) note that women entrepreneurs in Nigeria are often inhibited by their relatively low level of education and skills and this generally limits their access to various support services. Goldsmith and Goldsmith (1997) suggest that women score worse than men because in general they are less interested in the topics of investment and personal finance and consequently use financial services more seldom. The term financial literacy is in itself a barrier because it implies that a person may be financially illiterate. Lusardi (2000) defined financial illiteracy as having little knowledge while Bennleim (1994) referred it as a lacking experience in daily financial matters. In a large number of countries, women have lower financial knowledge than men. This is a robust piece of evidence as it holds across developed and developing countries in all regions of the worlds and using different survey instruments, only in very small number of cases gender differences are not significant and in a no country women were found to be more knowledgeable than men. Financial illiteracy is widespread and severe among certain groups including women and older Americans (Census, 2000). Empirical research have been carried out to measure the degree and spread of financial literacy among women. Lusardi and Micthell (2007a) argued that less educated people comprising of females, African-American and Hispanics display low financial knowledge which impacted their decisions financially. Since these people were illiterate in basic financial knowledge concepts, they were unsuccessful in planning their retirement period, had low stock market participation and had fewer borrowings. Similarly, an unequal proportion number of women was categorised as being financially illiterate by Hogarth and Hilgerth (2002). Also, female respondents had been known to score lower marks in financial literacy tests (Chen & Volpe, 1998; Murphy, 2005; Volpe, Chen & Pavlicko, 1996). In the same way, women have obtained less correct answers on six numeracy and financial knowledge questions (Alpha Research, 2010; Azerbaijan Micro-Finance Association, 2009). Based on short tests of financial knowledge, in general, all studies portrayed that women have lower levels of financial knowledge in most countries. Consequently, both men and women were found to have low financial knowledge in Russia and East Germany (Bucher-Koenen and Lusardi, 2011; Klapper and Panos, 2011). Limited access to education not only reduce women’s financial well-being per se, but also limit the extent to which women can improve their knowledge, confidence and skills about economic and financial issues. Money as power/Income Next, making financial choices and discussions concerning money and financial issues can be an emotional area for women. “Money, which may consider a ‘measure of success’, is often a taboo topic” (Into, 2003, P.826). Women tend to attach sentiment to money. Since they were raised as being caregivers and not breadwinners, women are seen to be more uncomfortable talking about money and tend to focus on doing well as opposed to getting rich. As an example, there are different emotions and that often are attached to the issues of saving and investing like the need to save for the family or providing their children with things they need or want. Furthermore, emotions that are attached to money often determine if they will live their lives in comfort or poverty (Bach, 2002; Frankel, 2008). There are also many excuses they use to become less involved in their financial well-being. Some of them include: “someone else will do it, I am not interested in money matters, I do not have enough, I do not have enough time and I just do not want to think about it” (Frankel, 2008). Generally, women tend to undervalue their abilities and talents, have less enthusiasm for, lower confidence in and less willingness to learn about personal finance topics (Chen, 2002, p.289). Meeting the family needs is often the contributing factor to the delay in addressing their financial situation. The confidence level of a woman in her ability to make decisions is the difference between knowing something and doing something about it (Foundation, 1998). Results from several sources suggest that women are less confident than men about their financial knowledge. This evidence is largely based on the fact that they are more likely than men to answer “do not know” to financial knowledge questions rather than attempt to answer it (OECD INFE Survey, 2013). In addition, women tend to have lower confidence than men also in their ability with financial issues. The “Women Understanding Money” study highlighted that women are not very willing to learn more about everyday money management issues like budgeting, saving, dealing with credit and managing debt where they felt more confident. However the study found that women thought it was important to learn more complex money management issues such as planning for the financial future, understanding rights and responsibilities/understanding financial language and ensuring enough money for retirement. Despite acknowledging the importance to learn, significant number of Australian women held attitudes and beliefs that could limit improvements in money management knowledge and skills. Women were more likely than men to find money stressful, uncomfortable or boring and less likely to feel in control of their financial situation (Australian Government and Financial Literacy Foundation, 2008). Lastly, the concept of risk aversion is an area of concern which relate them to financial decision making. Though there has been some progress in women’s financial knowledge and confidence in the last 8 years, women still worry about their financial future and are not sure what they need to do (Prudential, 2008). Croson, Gneezy (2004) show that there is a significant difference in risk-taking between men and women. Women are more risk-averse than men and this low-risk tolerance attitude prevent them from accumulating adequate retirement funds and reaching their long term financial goals (Loibl, 2007). Women’s financial literacy would be enhanced by women becoming more risk tolerant and gaining confidence in their math ability and financial decisions (Glass, 1998). “Women want less worry, less aggressive investing, more security and predictability, more simplicity and easier access to understandable financial information (Eikmeier, 2007, p.6). Women exhibit relatively more risk aversion in financial decision-making than men. Charness and Gneezy (2011) conducted a meta-analysis of nine different studies on risk-taking in investment. They find a very consistent result that women invest less and thus appear to be more financially risk averse than men. Similarly, other researchers reported that women are more risk averse to investment than men (Chen & Volpe, Bajtesmit & Bernasek,1996, Powell and Ansic, 1997; Agnew et al, 2007). Women’s financial risk aversion and low confidence about their financial skills may reduce their propensity to profit from opportunities in the financial marketplace by limiting their willingness to take financial risks
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