Women are under-represented in the financial industry and improved gender equality would contribute to both greater financial stability and economic growth, suggests a recent report from the International Monetary Fund.
The report, Women in finance: A case for closing gaps, finds that gender gaps are evident throughout the financial system, and women are under-represented as customers, industry executives and regulators.
“Shockingly, women accounted for less than 2% of financial institutions’ chief executive officers and less than 20% of executive board members,” the IMF says in a note summarizing the report.
Women are better represented on bank boards and at the regulators in many low- and middle-income countries, the report finds, than they are in the so-called advanced economies.
The report argues that improved gender equality on the customer side would bolster economic growth, while on the industry side, it would contribute to financial stability.
“While financial inclusion is an important goal in itself, new evidence suggests that greater inclusion of women as users of financial services has generally positive macroeconomic outcomes as well. Greater access to and use of accounts for financial transactions, savings, and insurance can help increase long-term macroeconomic growth,” the report states.
“Econometric analysis suggests that, controlling for relevant bank- and country-specific factors, the presence of women as well as a higher share of women on bank boards appears associated with greater financial resilience. This study also finds that a higher share of women on boards of banking-supervision agencies is associated with greater bank stability,” the report adds.
Specifically, banks that have higher shares of women leaders, “had higher capital buffers, lower nonperforming loans, and higher distance to distress. These results hold even after controlling for factors such as bank size, [gross domestic product] per capita, experience of board members, and other board and country characteristics,” the report states says.
The paper suggests several possible reasons for these findings, including: having more women in top management contributes to a diversity of thought that leads to better decisions; and that discriminatory hiring practices may mean that “the few women who do make it to the executive level are exceptionally well qualified.”
Although more research is needed to determine causal links and better data is needed to help this analysis, “This evidence strengthens the case for closing the gender gaps in leadership positions in finance,” the paper concludes.