Long queues. Days off work. Loss of assets. Not the effects of an economic crash, but rather what has happened in recent weeks after India’s prime minister, Narendra Modi, announced a policy of “demonetisation”, which banned with immediate effect the two notes most widely used throughout the Indian economy.



Modi said demonetisation was necessary for several reasons, among them: combating corruption and terrorism financing; promoting formal savings; and ensuring transactions could be properly taxed. To comply with this policy, Indians must wait in long queues at banks with strict deposit limits to swap their old notes for new ones. This policy has had a profound effect, as estimates indicate as many as 98% of all transactions throughout the country are handled in cash.

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The result has been chaos. Some men and women must now take their life savings in cash and convert them into new notes, the supply of which is insufficient, requiring them to queue at banks for days, if not weeks. Further, there have been stories of people needing urgent medical care being denied transport to clinics because they didn’t have the new currency notes. These anecdotes are shocking and illustrate the stark reality of the immediate effects of this policy, but they are only the tip of the iceberg, as those who are already vulnerable and disadvantaged will continue to suffer disproportionately.

While policies like Modi’s are enacted in the name of security, they are frequently implemented without any understanding of those they affect the most: people who are poor, rural and female, and are far less likely to have bank accounts and more likely to operate in a cash economy.

In India, as in many lower- and middle-income economies, it is less usual for women to have bank accounts or access to financial services and they will often save cash in their own homes. Women are less likely to use banks because they often lack the identity documents required to open accounts, and are rarely financially literate. Additionally, women may distrust formal financial services, have lower earnings, be seen as less-valuable clients by financial institutions and face more mobility restrictions in travelling to banks and ATMs. They are also far less likely to have access to formal credit. This means more difficulty in using financial services, such as insurance, and more limited opportunities to invest in and grow their businesses.

For many women, most of whom are not working or are in the informal sector, keeping cash squirrelled away at home provides a cushion for their future, and their financial and physical wellbeing. Women are much more likely than men to hold small amounts of cash so that they can meet expenditures for health, their children’s education and even weddings and dowries.

Facebook Twitter Pinterest Demonstrators in Bangalore protest against the demonetisation policy introduced by prime minister Narendra Modi’s Bharatiya Janata party. Photograph: Jagadeesh Nv/EPA

With this new policy, women are likely to be disproportionately affected, particularly if they do not have bank accounts. Relying on male family members to act as financial intermediaries can mean reduced autonomy over financial and household decision-making and the inability to save individually. This dependence may also leave women’s savings exposed to a greater risk of being used by others in the family. In the event that the male family member dies or the woman is divorced, this could leave her without life savings and assets.

El Salvador provides another example of how changes in monetary policy can affect women and the poor disproportionately. In 2001, the country adopted the US dollar in an effort to stabilise currency and reduce inflation. When prices went up as a result of this “dollarisation” and wages did not, the poor, and those who disproportionately used cash, many of whom were women, were unable to purchase necessary goods and services.

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These types of measures, when implemented swiftly, overnight and without warning – as was the case in India – and which require people to deposit cash in existing bank accounts or open new ones, will continue to have an outsized, negative effect on women.

Before implementing policies like these, governments must undertake far greater efforts to ensure women have bank accounts, which should include determining that they have the necessary legal documents (such as identification) needed to open them, investing in financial literacy, and expanding access to digital payments and mobile banking. Governments must also focus on women’s financial inclusion more generally using social benefits, cash transfers and pensions systems or mandate that banks open accounts with no transaction costs for clients with small amounts of cash and savings.

Including financial literacy in the national school curriculum is another way to effectively reduce barriers to accessing financial services. Offering postal services has also proved particularly effective in giving hard-to-reach populations banking access.

Getting more women and poorer people to use banks is not rocket science, it just requires a concerted effort on the part of governments and financial institutions to make sure that the services provided meet the needs of the populations they are trying to reach. By leaving out the gendered dimensions of banking, policies like those in India and El Salvador will do little more than further widen the gap between women’s and men’s economic empowerment, and will hinder efforts to truly tackle poverty.