WHY WE NEED GENDER-RESPONSIVE CENTRAL BANKING / PROJECT SYNDICATE

Why We Need Gender-Responsive Central Banking

Now that the pandemic has deepened a wide range of gender disparities and imposed a disproportionately large toll on women, central banks must recognize that they have a role to play in reversing these trends. Better economic conditions for women will mean a stronger recovery for all.

Anita Bhatia

NEW YORK – The coronavirus pandemic has hit women especially hard, particularly where they are most vulnerable: their incomes, health, and safety. 

Women make up the majority of workers in many of the sectors of our economies that came to a standstill last year. 

Making matters worse for women, health systems have cut or delayed sexual and reproductive health services to streamline treatment for COVID-19. 

And lockdowns and curfews have coincided with a spike in domestic violence.

These problems foretell a protracted reduction in women’s capacity to join the labor force, repay loans, post collateral, or start businesses. 

Worse, these threats to national economies could become permanent, unless policymakers act swiftly. 

That includes central banks, which have a number of tools for combating the pandemic’s worst effects on women.

The problem, of course, is that central banks are notoriously male-dominated institutions. 

Historically, they have never made gender a priority in the design and execution of policies affecting monetary positions, bank regulation, deposit insurance, or bond issuance. 

Changing this pattern will require four shifts in the policymaking process.

First, we need gender-responsive stimulus packages. Governments responded to the crisis with fiscal and monetary packages meant to stabilize aggregate demand. 

These included tax cuts, loan guarantees, wage protections, discounted utility bills, suspension of social security contributions, and direct cash transfers. 

Central banks, for their part, expanded their balance sheets to unprecedented levels and at staggering speed, printing money to buy not just government bonds but also corporate financial assets. 

In many countries, particularly advanced economies, the overall response was massive, because it had to be.

But data gathered through UN Women’s COVID-19 Global Gender Response Tracker show that only a handful of countries tailored their policies to account for women’s specific needs. 

The result has been a slower recovery for everyone. 

As the world prepares for another wave of stimulus spending and investment in reconstruction, it is crucial that these interventions be designed not just with women in mind, but with women in the room.

Second, women need loans, and central banks have an important role to play in how credit is directed to specific sectors. 

Accordingly, it is important to ensure that financing makes it to sectors where the majority of women work. 

As more women lose or are displaced from jobs – even in the informal economy – banks will have to reassess and possibly reclassify the segments of their loan portfolios that cater to female borrowers.

These segments – spanning hospitality, food, retail, tourism, domestic services, garment, and other industries where women form a majority of the labor force – are generally conceived to be “lighter on collateral.” 

But before the pandemic, they had been growing fast in emerging and developing economies, especially among local banks. 

That growth was driven as much by a commitment to equality as by the commercial potential of a previously ignored client cohort. 

If the recovery fails women, banks’ profitability will suffer.

Third, governments need new sources of finance, because fiscal balances were decimated by the pandemic. 

Public debts have grown exponentially and will need to be rolled over in the next few years, with sovereigns competing for funding in international bond markets. 

Looking for an edge in that competition, many will resort to thematic bonds earmarked to address environmental and social development issues.

The demand for such securities is large and growing, now that more than 3,000 investment houses (with a combined $100 trillion under management) have signed on to the UN-sponsored Principles of Responsible Investment. 

But while many private corporations and state-owned enterprises have issued “gender bonds,” no sovereign has yet done so. 

That must change, and when it does, central banks should be a part of the process.

Anita Bhatia, Deputy Executive Director of UN Women, is Assistant-Secretary-General for Resource Management, UN System Coordination, Sustainability, and Partnerships.