Financial Inclusion and Welfare in South Africa: Is there a Gender Gap?

Arguments on whether there is a gender gap in access to finance remain inconclusive. The welfare benefits of access to finance have also not been confirmed. This paper investigates whether there is a statistically significant difference between the welfare of financially included men and women, and of financially included women and their excluded counterparts. Using a pooled dataset on financial access in South Africa, we find that women mainly use formal transactional products and informal financial mechanisms, while men mainly use formal credit, insurance, and savings products. Despite this pattern in the use of financial products, a quantile regression analysis shows that there is no statistically significant difference between the welfare of financially included men and women. There is a significant difference, however, between the welfare of financially included women and their excluded female counterparts. Women using non-formal credit and insurance products exhibit higher welfare in the lower end of the welfare distribution. An Oaxaca-Blinder type decomposition shows that welfare differences are mainly accounted for by race, education, income, and, marginally, marital status. Estimates of the average treatment effect suggest a causal relationship between financial inclusion and higher welfare. The mechanism is through the accumulation of durable items following use of formal financial services.