From gig work to financial empowerment: Embedded finance for women in the platform economy

• by Putu Monica Christy and Nadia Fairuza Azzahra
• Oct 23, 2024
• 5 min

This blog explores the role of embedded finance in enhancing financial inclusion for women informal workers in Indonesia. It highlights how digital platforms like Gojek and Grab help boost digital financial services (DFS) adoption and offers recommendations to design gender-sensitive embedded finance solutions for greater impact.

Sari, a 32-year-old woman and a mother of two children in Jakarta, starts her day early. She handles household chores and prepares her children for school. By mid-morning, she logs into her ride-hailing platform, ready to start another work day. Like many women in Indonesia, Sari depends on the flexibility of gig work to support her family. Whether she picks up passengers or makes deliveries, her earnings are vital for the household.

Sari is one of many individuals who rely on platforms for their income. In 2022, digital platforms onboarded around 20 million MSMEs, feeding into Indonesia’s MSME Go Digital vision. Gojek and Grab, the two leading ride-hailing platforms, each supported around 2 million drivers. In Indonesia, when women make up 66% of the country’s 84 million informal workers, they play a vital role in driving small-scale enterprises and supporting their families through casual labor and self-employment.

A recent study by MSC, in collaboration with the Ministry of Women Empowerment and Child Protection (MoWECP), highlights that despite existing challenges, the platform economy has improved women’s access to digital financial services (DFS). The study reveals that around 52% of female informal workers started to use m-banking or digital payments specifically for work requirements. This is significantly higher than the national average of 15%. It highlights digital platforms’ potential to improve financial inclusion among women in the informal sector.

This blog looks into the suitability of embedded finance as an approach to improve women’s financial inclusion and recommends ways for stakeholders to design embedded finance for female informal workers.

The promising opportunities of embedded finance

Embedded finance can boost DFS adoption among female informal workers. It integrates financial services directly into the platforms these workers already use. It can provide productive financial products and generate leads for previously unbankable communities that lacked financial data footprints.

Embedded finance offers convenience as it does not require informal workers to access separate or new applications. Moreover, since the financial services and products are integrated into the platforms they access daily, these workers also have a sense of trust and familiarity that may increase their likelihood of adoption.

For example, Grab and Gojek offer various embedded finance products for their partners. Grab’s GrabModal Mantul provides eligible food and beverage MSME merchants in its ecosystem with loans specifically designed for their businesses. It offers loans up to IDR 30 million (USD 1,946) with lower interest rates and a quick disbursement process of one to two days.

Similarly, alternative financial services and products help address the gaps in the informal economy through tailored solutions that meet the unique needs and work nature of those who operate within this sector. For instance, Grab offers a driver financing product in collaboration with JULO, a FinTech lending company. This product provides online drivers with working capital to cover emergency expenses, such as vehicle breakdowns, wheel repairs, and other unexpected costs.

While some leading digital platforms offer embedded finance and continue to innovate to meet the unique needs of informal workers, many platforms have yet to offer it. As a result, the adoption of embedded finance remains limited, especially in terms of access to credit.

Our study shows that while banks remain the preferred source of formal credit (63%), friends and family (50%) and savings groups, such as credit unions and cooperatives, are popular choices among female informal workers who seek informal credit (41%).

Designing embedded finance for female informal workers

A gender-intentional approach can increase the adoption of DFS among female informal workers through embedded finance. Women face unique challenges, such as sociocultural norms and institutional barriers. Therefore, the design of “platform-enabled financial services” must prioritize gender-specific outcomes.

Our previous experience and research indicate that women’s agency, control, and privacy are fundamental aspects of gendered financial behavior. The design of gender-sensitive financial services must consider these elements as these highlight the distinct behavioral differences between women and men.

Let us take Sari’s case. She has been an app-based driver for four years and is familiar with the ride-hailing platform’s many embedded payment options, such as digital wallets and bank transfers. After years of working in the sector, she wishes to upgrade her vehicle but needs credit. For the platform to onboard Sari to other products beyond payment, such as loans, it should offer a unique way to increase access and usage of the embedded credit products.

The following is a list of recommendations that use MSC’s Financial Services Space Framework to provide ways to develop trigger points for Sari to improve her financial behavior and acceptance of platform-enabled financial services. Platforms and policymakers can use these recommendations to design gender-intentional and targeted financial services and solutions.

Volume and frequency: Sari should have a more regular and larger cash flow after she is integrated into the platform. These enhanced inflows are likely to encourage her to use various financial services and products regularly. As Sari becomes fluent in the use of payment products, she has a regular financial data footprint that can be used to build her credit score. This score provides data-driven information for a platform to determine her eligibility for loans and other financial products.

Convenience: Despite her familiarity with the platform, Sari must experience “felt convenience” when she uses the new product. These can include clear and transparent information on loan options, interest rates, payback schedules, and procedures to make her feel safe and comfortable with onboarding. A seamless product design and interface can also help her use the application without confusion or misunderstanding. Our research also captures the fact that the ease of use and accessibility of financial products are vital. Female platform workers frequently struggle to use various features and buttons in the apps due to continuous upgrades and development.

Influence and motivation: Social factors play a significant role in influencing Sari’s choice to explore DFS on the platform. When more coworkers in the Women Drivers Association use the loan product, Sari gets motivated and influenced to try the new loan product on the platform. Furthermore, support from her husband also encourages her to make more independent financial decisions. Social influence and encouragement can drive adoption and confidence in financial decision-making.

Building inclusivity in embedded finance

Sari’s story shows that embedded finance platforms present an opportunity to enhance women’s digital financial inclusion. However, much work and intentionality are required to make this opportunity truly inclusive.

For instance, algorithmic bias in digital financial services can significantly affect women in several ways, particularly in credit scoring and lending decisions. The requirement of asset ownership to access credit can disadvantage women as cultural and legal barriers make it less likely for women to own assets. Therefore, financial products should be “inclusive by design,” specifically for women, considering their unique needs.

Financial platforms must create inclusive access using gender-sensitive credit metrics, such as alternative income data and more flexible collateral requirements. Additionally, digital platforms can provide targeted financial literacy programs in accessible language to help women navigate these financial systems.

Finally, partnerships with women-centric organizations can bridge the gap between financial service providers and women. Community leaders and influencers can advocate for the use of products, which can help shift social norms and increase the acceptance of digital financial services within the community.

Ultimately, women’s empowerment through embedded finance goes beyond women’s digital financial inclusion. It also drives broader social and economic transformation across Indonesia’s informal sector.