Wharton’s Katherine Klein talks to Mary Ellen Iskenderian, president and CEO of Women’s World Banking, a nonprofit that is expanding financial inclusion for women.

Mary Ellen Iskenderian is the president and CEO of Women’s World Banking, a global nonprofit with a mission to give low-income women in the developing world access to the financial tools and resources they need to achieve security and prosperity. The organization works with 57 institutions in 32 countries to help the estimated 1 billion women worldwide who are left out of formal financial systems. In addition to designing market-driven financial solutions, Women’s World Banking also advocates through gender-lens investing and leadership training to build gender-diverse teams.

Iskenderian, who joined the organization in 2006, previously worked at the International Finance Corporation and Lehman Brothers. She’s a permanent member of the Council on Foreign Relations, the Women’s Forum of New York, and the U.N.’s Business and Sustainable Development Commission. She holds an MBA from the Yale School of Management and has been recognized in the Forbes 50 Over 50 Investment list, which highlights female investors and financial leaders.

Iskenderian spoke about Women’s World Banking to Katherine Klein, vice dean for the Wharton Social Impact Initiativeduring an episode of the Dollars and Change podcast. Listen to the podcast at the top of this page or keep reading for an edited transcript of the conversation. (Find more episodes here.)

Katherine Klein: You joined Women’s World Banking as its president and CEO 15 years ago. Why did you make the move?

Mary Ellen Iskenderian: It was an enormous move, maybe a bigger move than I knew I was going to be making at the time I made it. I had been at the International Finance Corporation, the private-sector arm of the World Bank, for 17 years. And I worked a year before that at the World Bank in the Young Professionals Program. I had a wonderful career there. I got to see some of the most incredible history in the making. I worked in Eastern Europe and the former Soviet Union for several years, rebuilding and reshaping financial systems in many respects.

But to be honest, I felt that the more I progressed in the organization, the more I took on senior roles there, that the name of that game is managing up. I felt like I was spending more and more of my time building out my wingspan to protect the people working under me, so they could get the good stuff done. I was focused more internally on the politics of the World Bank Group. I just felt I had gotten so far away from the people I had taken on a development career to serve.

Most of my time at the IFC had been in the financial sector, and I had acquired some real knowledge about microfinance and had run a fairly large portfolio of those investments in a number of different countries. So, when I had the headhunter call about Women’s World Banking, I knew a little bit about microfinance, but I had such an eye-opener in getting to know that organization.

Perhaps the biggest lesson, to my lasting shame, was that in the whole 18 years I had been at the Bank and the IFC, I had never once asked a bank or an insurance company or an equity fund how many women’s businesses they were funding. How many women depositors did they have? Were their clientele, their investment officers, their loan officers women [or] men? I never asked any of that. I had this huge awakening just during the interview process at Women’s World Banking. I realized there was a whole other element of development that I wanted passionately to learn about. I wanted to make up for some of what I had missed in the time I had been at the World Bank.

Klein: That’s such a fascinating example because it highlights how unconsciously implicit these biases, norms, and expectations are. It’s not what we’re thinking about. We’re not checking. Women who are educated and professionals, and interested in all that, might not ask these questions. I think that’s true of me, as well. So, how hard it is for others to be empowered along this path? You talked about microfinance. Can you tell our listeners what is microfinance?

“Inclusion, at least the way that we practice it at Women’s World Banking, is not just about creating that safety net. It’s also about being able to feel confident enough that you’ve got that safety net in place.”

Iskenderian: Microfinance, as opposed to the broader conversation around financial inclusion, is making fairly small loans. We’re talking in most cases an average of somewhere between a $200 and $500 loan to a very small, often or primarily an informal, unregistered business that would have maybe a sole proprietor, maybe one or two employees. I think the informal nature of both the business and often the finance itself is endemic to microfinance. Over the years, more microfinance institutions have become formal and have become chartered banks, and they’re allowed to take deposits, but the mission of those institutions has been to serve low-income populations that were not served by the mainstream financial system.

Klein: When I think of Women’s World Banking, I think of a mission to increase women’s financial inclusion, women’s empowerment, and economic stability and prosperity around the world. I’m hoping you could talk about the notion of financial inclusion. As I was reading up on Women’s World Banking getting ready for our talk, it struck me it was really worth unpacking this term. What is financial inclusion? What is the absence of financial inclusion that many women experience, and why is that important?

Iskenderian: I love the way you phrased the question then referred to the absence, because I think it is one of those concepts that’s very often defined more by what it isn’t than what it is. It’s very notably not one of the U.N. Sustainable Development Goals, for example. However, there are numerous metrics underlying the goals. I think there are seven of the 17 goals that explicitly refer to increasing access to finance to low-income people as being essential to accomplishing water and sanitation goals, health and nutrition goals, gender equality. So, the idea that not being the end but being the means is really central to an understanding of what financial inclusion is.

Another way of defining it as what it isn’t: Microfinance is very much predicated on the extension of a loan, and savings has tended to be sort of secondary. Whereas with financial inclusion, we’re thinking more about all of the financial products and services that a person needs to transact in daily life, whether they are an entrepreneur or not. We need to be able to make timely and convenient payments and not pay a fortune to do so. We need bank accounts to save money in. We need insurance to protect us from risks and mitigate those risks. We need to have long-term retirement savings or pensions, and yes, we do need credit, whether it’s for business credit or to smooth consumption, or to make large purchases.

Inclusion, at least the way that we practice it at Women’s World Banking, is not just about creating that safety net. It’s also about being able to feel confident enough that you’ve got that safety net in place, that you can take risks and really bring about prosperity. It’s a much broader set of ways of engaging with the world, engaging with the formal economy than simply getting a loan.

Klein: What is the gender gap in the U.S. and around the world, and the extent to which women have bank accounts versus men? Do women have access to credit or credit cards versus men? Do they have insurance, or can they get a loan?

Iskenderian: The most well-known database is called the Global Findex, which is funded by the Gates Foundation, done at the World Bank in conjunction with the Gallup Poll organization. Every three years, they poll thousands of people around the world on their use of financial products and services. Unfortunately, the last three-year survey that was supposed to be last year was postponed until next year, so we’re very hopeful that we’ll see some good data. But the last set of data showed us that 1.7 billion people in the world did not have access to either a bank account or even a mobile money account. That ability to store value on your phone now has been recognized as making you financially included. Of that 1.7 billion, very close to 1 billion of those people are women, so much more disproportionately, the onus is falling hard on women.

Because so much of the world is acquiring financial services through digital means, through that smartphone, that gap is the one that we’re really focused on today. We’ve got 15% fewer cell phones in the hands of women than men, so that’s a fairly significant gap. And maybe even more importantly, even when women have the phone, their understanding of how to use it, their ability to be confident in using that phone is much less than men’s. The nature of the gap starts to get slightly more nuanced than just counting how many people do or don’t have a bank account. Those issues of access to the technology, and the confidence and the ability to use it, is very central to the way that we’re working.

“There is some fascinating data on women voting more often or even standing for election more often once they have become financially included.”

Klein: Can you talk about the consequences of women being underbanked, not having access to a bank account or an app on a smartphone where they can store their own money? If I played the devil’s advocate, I’d say, “Hey, what’s the matter? They have a father, they have a brother, they have a husband.” Why is this important?

Iskenderian: It’s such a wonderful question, and that is right at the heart of the mission of Women’s World Banking. There are many organizations that we partner with all the time that are working to close that gap, to make sure that 9% around-the-world gap between women and men owning a bank account gets closed. But the “so what” question is really where I think Women’s World Banking differentiates itself.

We use a framework that Martha Chen from Harvard University developed more specifically for micro-entrepreneurs, and she worked with us to broaden the lens. She talked about four changes that women could potentially go through in their lives as they interacted with financial services. The first and easiest to measure was material change. Was there more money coming in? Did the family have more assets under their control? Second, was there cognitive change? Getting back to that idea of financial capability, did she learn anything as she acquired this new product, this new service, this new access?

The last two changes are the really fascinating ones. The next one is relational change. Did that woman’s bargaining power in her household change by the fact that she had a savings account in her own name? Or the fact that if there was a government COVID relief payment, it came directly to her account and not to her husband’s?

There is some fascinating data on women voting more often or even standing for election more often once they have become financially included, and they’re confident in that role. It’s still more equivocal than we’d like it to be, but there is some fascinating research even on intimate partner violence and whether being financially included, having control over financial resources, makes a woman more or less vulnerable to both physical and emotional abuse.

The final set of changes is really about the woman herself. Does she have more self-esteem? Is she planning for the future or still living day-to-day? Does she see herself as independent of that husband, that father, and does the control over those resources give her other choices in her life? We have a very complex framework for measuring those kinds of changes. It is the major foundational monitoring and evaluation tool that we use on our project work now. I think it says so much about the role of money and the control of money in a woman’s life.

Klein: Can you give us an overview of the main ways in which Women’s World Banking is working to drive change and where?

Iskenderian: The thing we’re probably best known for is our advisory role. We’ll go into a financial service provider and design from scratch a product to reach a particular segment of women, or we’re taking a product that they already have and either adapting the marketing of it or making sure that the documentation for it or the loan processing or the credit analysis process is more suited to women. It’s taking something they’re already doing and shaping it so that it meets women’s needs.

One of my favorite stories is a project we did in Pakistan with one of the largest mobile companies there. They had created a wallet, and they had very explicitly said they wanted this to have a financial inclusion role. Pakistan has a very serious financial exclusion problem. But the company brought us in after they’d launched the product and had found that only 12% of the clients of this wallet were women. They wanted us to come in and design a woman’s product.

“It’s such an exciting time out there to be an investor with this lens, with this agenda of increasing both the access to finance for women, but also doing it with more women in the leadership and management of the companies.”

But when we looked at the data, we found that those 12% women customers were using the product exactly the way the men were, at the same volumes, generating the same level of profitability. They didn’t really need another product, but the real problem was the way they were onboarding clients. They had mobile network agents that were small shop owners, 97% of whom were men. You were asking a Pakistani woman to go into a shop alone, run by a man, and then if she had made it that far and gone into the shop, she had to give him her cellphone number in order to open an account. In that cultural environment, that just wasn’t going to happen.

We worked with them on building a network of female agents by also partnering with Unilever. We took the Unilever shopkeepers, a network of women shopkeepers that they’d established all over the country, and taught them how to be mobile money agents. Overnight, we quadrupled the number of women agents, and that was a much, much friendlier mechanism to onboard new female clients. We changed a lot of the language of our marketing.

The second tool is an increasing amount of policy advocacy, where we’re working directly with regulators. In fact, we’ve got a leadership and diversity training program for regulators that has really opened the eyes of both senior regulators in central banks and insurance commissions and pension regulators, as well as more junior, high-potential women who are making a career in regulation, on not only the need for diversity, but also the gender implications in policy that they need to start thinking about.

The third area that I’m very excited about — and what I missed most when I left the IFC and came to Women’s World Banking — is that we launched our first impact investment fund in 2012. We are now in exit mode on that first fund. We’re harvesting our investments and have had a $75 million first close on a second fund that we will have the final closing at the beginning of next year. It has been fascinating seeing how the investment sector has changed, in that the first fund we invested primarily in traditional microfinance institutions. But in the second fund, we’ve got fintechs, we’ve got an affordable housing finance company in India that insists that women’s names be on the title to the property. It’s such an exciting time out there to be an investor with this lens, with this agenda of increasing both the access to finance for women, but also doing it with more women in the leadership and management of the companies.

Klein: Why was this an important element to add to your fund?

Iskenderian: It was driven by two very distinct things. One is we were a very demand-driven fund at the time. We had microfinance institutions around the world that were making that decision. “OK, we’re going to move from being an NGO to a registered bank, a commercial bank that’s fully regulated. And Women’s World Banking, we want you as a shareholder.” We didn’t have any means with which to do that, so there was a real demand for us to start playing that role of investor.

The second thing, and I think the thing that really convinced our board that not only was there demand, but it really was consistent with our advocacy role, is we did research that looked at what happened to those microfinance institutions when they made that shift. We looked at 39 microfinance institutions that had moved from an NGO structure to become regulated financial institutions. We found that within the first four years of having taken outside capital from external shareholders, the average percentage of women clients went from 86% to 59%. And women in the staff and leadership and board of the institutions — it was a bloodbath. It was almost as if, as soon as you become a bank, you have to kick out the woman who has successfully led this really profitable NGO and replace her with a man. And then the board chair has to be a man, too. There was such a direct research impetus for us to be an investor that lived out that investment thesis.

Klein: There’s so much to talk about, but I want to make sure that we touched on the COVID-19 pandemic. Tell us how this has affected the women and your work. I know you’ve also seen some silver linings that you weren’t sure would ever appear.

Iskenderian: I’m always reluctant to talk too ebulliently about the effects of COVID because there’s no question that women in all parts of the world have seen the unpaid care work, the unpaid portion of their day extending well beyond where it was pre-COVID. You’ve seen a much more disproportionate impact of that work falling on the shoulders of women. You’ve also seen an epidemic of gender-based violence everywhere in the world, particularly during those lockdown situations. You’ve seen spikes in teen pregnancy and child marriage in some countries that had started to reverse those trends before the pandemic. But during lockdown, a lot of really terrible tendencies seemed to rear their heads again.

“Things that we’ve talked about for a long time as facilitators of financial inclusion, during COVID really now have become drivers of inclusion.”

Undeniably, women were on the frontlines as first responders, both in health and other professions. I don’t in any way mean to diminish how hard the impact has been on women. That said, the digitization of finance helped narrow the financial inclusion gender gap. There were a number of COVID relief programs where perhaps governments had taken a successful conditional cash transfer program that was already targeting women and modified that for COVID relief purposes. You had a lot of payments going directly to women, often digitally. Those digital payments led to an increase in cellphones, so that we’ve seen the technology gap narrow substantially in the COVID period.

You had some countries like India that made their COVID relief payment only payable to women, so within something like a little over two weeks, you had 25 million bank accounts opened primarily by women in order to facilitate that payment. You’ve seen things that we’ve been talking about for many years, such as using government payments as an on-ramp. You’ve seen employers much more significantly adopt digital wage payments. Again, things that we’ve talked about for a long time as facilitators of financial inclusion, during COVID really now have become drivers of inclusion.

I think the exciting piece is that now that they’re in, now that we have these women in the system, how do we keep them there, and how do we continue to make financial services relevant to these people that we’ve brought into the sector?

Klein: You’ve been at Women’s World Banking for 15 years. This is an organization that is 42 years old. When I look back 15 years, when I look back 40 years, part of me thinks, “Wow, we’ve come a really long way.” And the other part of me is thinking, “Goodness, we have a long way to go.” What do you think we need to have in place to really increase women’s financial inclusion and empowerment in the U.S. and around the world? If you could wave your magic policy world-changing wand, what are the kinds of things that would be happening in the next 10 years to make a significant difference in women’s agency?

Iskenderian: I think a very big piece of it brings us back to the earlier part of our conversation, where I was recounting never having asked a banker how many women-owned businesses he was funding, for example. It’s that idea that we need to stop thinking of serving women, whether they be low-income women or high-net-worth women, as a “nice to do” or a follow-on or something that’s segmented off into a separate group that nobody sees as a career builder inside of a financial service provider, but where it’s recognized as an enormously untapped market.

You only need to spend a little time with insurance providers to get them talking about how the population that’s actually going to buy insurance today is saturated. And if there’s going to continue to be growth, it’s going to have to be in new markets. The far-sighted ones see women-owned businesses, professional women, educated women as that next frontier. It certainly may not be the full waving of the wand, but I think recognizing this as a commercial imperative and as a market to be served allows us to accomplish a lot of the development objectives that are achievable through financial inclusion.