An Economic No-Brainer: Empower Women, Empower Economies
A special conversation with Christine Lagarde, Managing Director of the International Monetary Fund (IMF)
Evidence shows that girls and women play a significant role in boosting economic growth, reducing inequality, and strengthening financial resilience for families and their communities. For example, when companies have a higher percent of women on their boards, it results in greater financial stability for their business. Research further reveals that when women have access to financial services, economic growth booms – creating a ripple effect benefitting entire families, communities, and countries, across generations.
Evidence like this forms the basis for the International Monetary Fund’s (IMF) commitment to identify the case for investing in programs and policies that prioritize girls and women. Now, the IMF is releasing several new reports to further demonstrate, and call for, strengthening women’s economic participation and leadership within sectors. It isn’t just the right thing to do, it’s the smart thing to do with significant social and economic returns on investment.
In this conversation with Katja Iversen, President/CEO of Women Deliver, Christine Lagarde, Managing Director of the IMF, sheds light on the importance and urgency of investments that advance gender equality and equity for girls and women around the world. As the first woman to lead the IMF, and a leader in advocating for increased investment and action toward gender equality, there is no one more qualified to help Deliver for Good explore the steps needed to build sustainable financing for girls and women.
Katja Iversen: As part of its core mandate, the International Monetary Fund (IMF) works to help countries build and maintain strong economies. How do girls and women factor into this mission, and how does the IMF put this into action?
Christine Lagarde: Empowering girls and women can be critical to economic development in countries.
The IMF has found that the positive economic effects of greater gender equity cover several crucial dimensions of an economy’s performance. It can boost growth, reduce income inequality, help economies diversify their exports, and partly mitigate the economic effects of demographic change. Therefore, even besides the obvious moral and social dimensions, empowering women is an economic “no-brainer.”
An economy should work for women—helping, not hindering.
As well as conducting research in these areas, the IMF has increasingly taken gender considerations into account in our policy advice, programs, and capacity development. For example, since 2015 we have actively incorporated gender analysis and advice in 39 of our annual economic health-checks with member countries, known as Article IV consultations. We are now moving to incorporate gender analysis and advice into broader country work.
IMF-supported programs have contained measures to help empower women economically. With the Jordanian authorities, for instance, we have discussed reforms to help women including more flexible working hours, greater access to childcare, and more efficient and affordable public transport. Under its IMF-supported program, the Egyptian government has increased funding for public nurseries and other facilities to help women seeking work.
Our capacity development work has included training courses, technical advice, and peer-learning workshops with country authorities. These have covered areas such as gender budgeting, which seeks to understand the impact of fiscal policies on gender equity goals.
Katja Iversen: Research shows when women have the opportunity to participate in the formal labor force and have an income, it increases their influence and decision-making power within their families and communities. It also shows that women to a larger extent reinvest their earnings in their children’s health and education, creating a ripple effect that benefits future generations. Beyond the social benefits, can you also expand on the economic benefits of empowering girls and women?
Christine Lagarde: Empowering women can transform lives and society. Women’s empowerment can strengthen an economy in several ways—greater gender equity can support growth, social inclusion, and economic resilience.
A recent study by IMF found that the macroeconomic benefits of greater gender inclusion are actually even greater than previously estimated.
It looked at the economic consequences that men and women bringing different skills and ideas to the workplace can have. Because of these differences, men and women actually complement each other, creating more value than if workplaces were less gender diverse. As a result of such complementarities, raising women’s participation in the labor force – including in leadership - can bring greater gains than raising male participation.
It is estimated that if a country with a 30 percent gap between women’s and men’s labor force participation could close that gap, then GDP would increase by 25 percent. Between 3 and 7 percentage points of that rise in GDP would be from productivity gains caused by greater gender diversity.
It is important to note as well that men would stand to win—because higher productivity would help to increase men’s wages.
This kind of research provides the IMF - and decision makers at large - with a robust analytical foundation on which to make the case with our member country authorities that empowering women truly matters not only from a moral perspective but from an economic one too.
Katja Iversen: Despite the fact that we know women’s participation in the economy drives both social and economic benefits, women continue to face a range of barriers – legal, social, and cultural. For example laws that prevent women from opening bank accounts or social norms that place women primarily in the informal, unpaid care sector. What solutions/recommendations can the IMF and financial institutions provide to tackle these barriers?
Christine Lagarde: IMF research shows that when legal barriers are removed, women’s participation in the workforce increases. In half of the countries studied, when gender equity was reflected in the law, women’s participation in the labor force increased by at least 5 percentage points in the following five years. The IMF highlights these legal barriers and their economic costs in our discussions with member country governments.
Aside from removing legal obstacles, the IMF regularly offers recommendations on other ways to help women participate in the economy.
In many advanced economies, our advice to governments tends to focus on how women can juggle work and family life—including ensuring parental leave provisions, affordable and high-quality childcare, and tax policies that do not penalize secondary earners (who are usually women).
In many emerging and developing economies we emphasize education. Gender gaps in education can be reduced through higher public spending on education, better sanitation facilities, reduced teenage pregnancy rates, and delaying the age of marriage.
It is evident that women are making economic contributions that often are not reflected in the official statistics. For example, women carry out the majority of care work—work that they are often not compensated for financially and for which they may not receive necessary support. The IMF is working on a paper on the value of unpaid care work too help inform this debate.
Lastly, we emphasize the need for greater financial inclusion of women because improving access to finance, including by women, has major macroeconomic benefits. This year, for the first time, we released gender-disaggregated supply-side data on financial inclusion though the IMF’s Financial Access Survey (FAS) which highlighted factors that help to close the gender gap in financial access, such as simplified deposit accounts regulations. The FAS has also identified lack of gender-disaggregated data in many countries. We will continue to work with country authorities to improve the availability and comparability of financial access data.
Katja Iversen: From borrowers to regulators, there are relatively few female leaders in the financial sector. We have heard you champion the importance of gender balance and diversity on boards of financial institutions by explaining that it “will perhaps lead to better decision making and fewer unnecessary risks.” You are the first woman to serve as Managing Director of the IMF. Why does this matter and what are some key actions that can be taken to move toward gender parity at all levels in the financial sector?
Christine Lagarde: Globally, women hold less than 20 percent of board seats in banks and bank supervision agencies and account for less than 2 percent of bank CEOs. Interestingly, many developing economies have higher shares of women on bank boards and banking supervision boards compared to advanced economies.
Research reveals that greater shares of women on bank boards and banking supervision boards are associated with greater bank stability. Banks with higher shares of women leaders have higher capital buffers and lower non-performing loans ratios. Banking systems with more women on supervisory boards are less likely to get in distress.
What can we do to help more women succeed in finance? It is important to repeatedly emphasize to young women that banking isn’t solely a “man’s job.” Strong female mentors are valuable, as are further efforts to make work environments more women-friendly, including through flexible working practices. As an industry, the financial sector is lagging behind on that front.
More broadly, not just in finance, I used to think that there should not be quotas, but I have changed my mind on that. To work, quotas should be distributed along the hierarchy of a company, and there needs to be a pipeline from which women are selected.
Katja Iversen: How did you become a passionate advocate for gender equity?
Christine Lagarde: Gender equity is a personal and professional passion of mine. As a child, my parents were loving and supportive, which gave me confidence. I also took some risks. When I was 16, my father had just passed away, and I took an American Field Service scholarship to study in the U.S. I was away from my family when we were grieving. I stayed with a host family, and I am grateful to my mother for having encouraged me to take this risk. It is at times like these when you absorb, digest, and enrich yourself. So, you could say that I grew up as an independent young woman.
Despite this, I was aware of the glass ceiling, particularly when I began my legal career. At one of my first job interviews with a major law firm, I was told that, as a woman, I would never make partner. I left the interview and looked elsewhere, but the experience was a stark reminder of discrimination, and there would be other episodes throughout my career.
When I became Managing Director of the IMF in 2011, I began to see gender equity through an additional prism, which is that it also carries large, and potentially transformative, value in economic terms. During my visits to IMF member countries, I have met many inspirational women from all walks of life, and they have really helped to sustain my passion for gender equity, offering a constant reminder that behind all the analysis and advice there are people whose lives can be transformed.