TRADE, FINANCE AND INVESTMENT COMPETITIVENESS FINANCE EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT The Leadership Gender Gap in Banking: Insights from Ethiopia Toni Weis, Marlon Rawlins, Kenno Itana, Rachel Coleman © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Photo credits: iStock Ponomariova_Maria The Leadership Gender Gap in Banking: Insights from Ethiopia Toni Weis, Marlon Rawlins, Kenno Itana, Rachel Coleman Acknowledgements This work has been made possible through the generous collaboration of the Commercial Bank of Ethiopia as well as Dashen Bank and Awash Bank. The authors would like to thank Ketki Sheth, Saba Yifredew, Girum Abebe, Niklas Buehren, Nolawi Tadesse, Anuradha Ray, Katerina Koinis and Mengistu Bessir for their contributions to this work. They are also grateful for feedback provided by Nisha Singh, Sophia Muradyan and Alwaleed Alatabani on earlier versions of this EFI Note. Funding for this work was provided by Global Affairs Canada under the Innovations in Financing Women Entrepreneurs project based at the World Bank’s Africa Gender Innovation Lab. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 3 >>> Contents 1. Introduction 5 2. Measuring the Gender Gap in Ethiopia’s Banking Sector 7 A Look at the International Evidence 7 Ethiopia’s Leadership Gender Gap in Banking 8 3. Exploring the HR Processes Behind the Leadership Gender Gap 11 Recruitment and Choice of Job Function 11 Promotion and Leadership Selection 14 4. Conclusion 16 References 17 1. >>> Introduction The global banking industry has a well-known and well-documented leadership gender gap. The financial sector is a popular career choice for women, yet their representation drops precipitously at the higher rungs of the career ladder. An International Monetary Fund study thus estimates that only 2 percent of banking CEOs globally are female (Sahay et al. 2017). Although this leadership gender gap is itself concerning, studies suggest that the underrepresentation of women in management roles also has negative effects on financial inclusion and financial stability (Brock and De Haas 2019; Montoya et al. 2020; Sahay et al. 2017). However, much of the existing evidence— which is reviewed in section 2—is drawn from countries with highly developed financial industries. Less is known about gender differentials in emerging economies, where the banking sector is often growing rapidly. This EFI Note adds to the literature on gender in the financial sector by providing a first assessment of the gender leadership gap in the Ethiopian banking industry. It is the result of a collaboration between the World Bank’s Africa Gender Innovation Lab; its Finance, Competitiveness and Innovation Global Practice; and key financial sector institutions in Ethiopia, motivated by the government of Ethiopia’s commitment to promoting women’s career advancement in the financial industry. The report shows that women are significantly underrepresented in leadership positions across Ethiopia’s commercial banking sector, and that the percentage of female staff members decreases with each step of seniority. Although it is impossible to infer the causes of this leadership gap from the data available, the report pinpoints possible explanations by outlining the processes Ethiopian banks use to recruit, promote, and train their male and female staff members. The report draws on data collected from a sample of four major financial institutions: a state- owned commercial bank, two of its largest private competitors, and the central bank.1 Together, these four institutions account for 54 percent of employment and 75 percent of assets in the Ethiopian banking industry. The authors conducted structured interviews with senior management in each institution and collected human resources (HR) data to examine the gender composition of the workforce across different functions and levels of seniority, and to understand processes for recruitment, promotion, and leadership appointments. High-level data were also collected 1. The authors would like to thank the participating institutions for their collaboration and their commitment to working toward gender equity in the financial industry. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 5 from publicly available sources on each of the remaining 14 gender gap in financial sector careers globally before offering commercial banks. A second round of data collection in the key statistics from the Ethiopian banking industry. Section 3 then form of a staff survey with experimental elements is currently looks at some of the HR processes behind these outcomes, underway. Among other things, it will allow for a more detailed outlining differences between male and female staff members analysis of “supply-side” factors such as gender differences in both in the early stages of their careers (recruitment and choice attitudes and ambition. of functional area) and at later points (career progression and leadership selection). The remainder of this EFI Note is divided into two parts. Section 2 looks at HR outcomes, summarizing the evidence on the >>> Figure 1: The Leadership Gender Gap in Banking: Insights from Ethiopia Among all Ethiopian banks: Only 1 in 17 institutions has Women hold Women hold achieved gender equity in 11% of senior 15% of board leadership management seats positions 11% 15% Among banks in this study: Women make up 24% of junior but only 8% Women are especially underrepresented in of senior managers core corporate functions 24% 8% EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 6 2. >>> Measuring the Gender Gap in Ethiopia’s Banking Sector Although there are a number of studies on the subject of gender and financial inclusion in Ethiopia, this EFI Note is the first to explore and quantify the leadership gender gap at the higher echelons of Ethiopia’s banking sector. To understand these results in the proper context, however, it is worth starting with a brief overview of the global evidence on gender, career paths, and decision-making in the financial sector. A Look at the International Evidence Substantial evidence from high-income countries (as well as from emerging markets) shows that although women hold a large proportion of entry-level finance jobs, that proportion dwindles as the level of seniority increases. An International Monetary Fund study estimates that, globally, women account for no more than 20 percent of seats on the boards of commercial banks and 17 percent of seats on the boards of supervisory agencies, and that they make up less than 2 percent of bank CEOs (Sahay et al. 2017). Managerial positions, too, are male-dominated: in the United States, just 22 percent of senior managers in the financial service industry are female— despite the fact that women make up more than 50 percent of the workforce in this sector (Deloitte 2019). Similarly, data from the European Banking Authority show that only 8.5 percent of European banks have female CEOs, and that two-thirds of them have all-male executive directors (EBA 2020). The leadership gender gap in banking is particularly problematic because it limits the sector’s ability to adequately serve its customers. Several studies show that an institutional culture that discounts women’s achievements undermines the performance of banks and limits lending to qualified borrowers. Discrimination against female loan applicants has been shown to result EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 7 in higher rejection rates for female borrowers (Montoya et al. Loureiro, and Taboada (2021) caution that gender quotas on 2020), lower amounts of credit granted (Alibhai et al. 2019), bank boards can in fact lead to increased systemic risk if they and higher levels of collateral required (Brock and De Haas result in the appointment of relatively less experienced female 2019). Some authors find that the effect is driven primarily board members. by male employees; however, others find that bias is rooted in institutional norms and is common among both female and Several factors are driving the leadership gap, but gender- male staff members. However, it is worth pointing out that based discrimination seems to play an important role in limiting not all studies find evidence of discrimination against female women’s career advancement in banking. Current explanations borrowers; Galli, Mascia, and Rossi (2019), for example, find draw both on demand-side factors—such as an “ambition that female small-business owners in Europe are less likely to gap” between male and female employees—and supply-side apply for loans but are more unlikely to be rejected. factors, that is, institutional characteristics. A recent McKinsey survey of 14,000 US finance professionals thus shows that Conversely, greater representation of women in managerial women are less likely to aspire to senior leadership roles, and leadership positions appears to boost the performance but are also less likely to have received encouragement from of financial institutions. In a study by Beck, Behr, and Guettler managers and senior leaders (Chin, Krivkovich, and Nadeau (2013), the portfolios of female loan officers consistently 2018). Research also indicates that women are more likely to outperformed those of their male counterparts. Similarly, a World carry responsibility in corporate functions that do not typically Bank study on small and medium enterprise (SME) lending lead to senior appointments, such as HR, marketing, and in the Republic of Türkiye showed that bank branches under compliance (Clempner, Daisley, and Jaekel 2020). However, female management attracted more than twice the number of the line between personal and institutional factors is tenuous, female loan applicants as their male-led counterparts (Alibhai as organizational norms and structures heavily influence the et al. 2019). This finding is consistent with a review of the perceptions and ambitions of banking staff (Deloitte 2019). literature on gender-in-lending decisions by Bellucci, Borisov, and Zazzaro (2011), who see some evidence that lenders Research also indicates that, although most financial institutions prefer applicants of the same gender—a fact that puts female profess a commitment to gender equity, unconscious bias applicants at a disadvantage, given the relatively small share of remains an obstacle for women’s career progression (ILO female decision-makers in commercial banks. 2017). Much of this gender bias is top-down; however, it can also express itself in the form of “discrimination from below”: recent A more recent set of studies has also argued that the gender experimental evidence from Ethiopia found that subordinates composition of a country’s financial elite affects the relative rank (fictitious) male managers more highly than their otherwise stability of the institutions they lead. Sahay et al. (2017) thus identical female counterparts (Ayalew, Manian, and Sheth find that banks with a higher share of women on the board 2021). Lastly, research from higher education suggests that of directors were associated with higher capital buffers and committees whose members do not believe in gender bias lower nonperforming loan ratios, and that they displayed lower are less likely to promote women, underlining the importance levels of insolvency risk during the 2008 financial crisis. They of acknowledging the potential of gender bias in the first place cite a range of possible explanations, including (a) higher risk (Régner et al. 2019). aversion in female financial executives, (b) discriminatory selection practices that mean women who get selected for board positions are relatively more qualified, and (c) greater Ethiopia’s Leadership Gender Gap diversity of thought on mixed-gender boards (Sahay et al. 2017). Andries, Mehdian, and Stoica (2020) similarly find that Eastern in Banking European banks with a greater number of women in leadership positions have lower levels of credit losses, whereas Ofori-Sasu Compared with the global financial industry on which much et al. (2022) argue that African banks with more female leaders of the preceding literature is based, Ethiopia’s banking sector are more prudent about information disclosure. However, Liao, remains in its infancy. The sector is closed to foreign investment EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 8 and its integration into global financial markets remains limited; of 18 commercial banks on which information was available, as a result, both regulators and bank management are largely 10 offered savings accounts for female customers with educated, recruited, and socialized domestically (Weis 2020). preferential interest rates and other benefits to attract female In 2021, Ethiopia was home to 19 commercial banks, with the business owners and individuals. One private commercial state-owned commercial bank accounting for well over half of bank was founded with a mission to increase women’s access all banking assets in the country. However, the pace of change to financial services and offers credit products tailored to the has accelerated markedly in recent years. Private banks have needs of female borrowers. The main public commercial bank expanded significantly and now account for 73 percent of the has opened two bank branches that are staffed exclusively national branch network (NBE 2021). The banking sector is by female employees. Central bank management interviewed also beginning to diversify: two Islamic finance institutions and by the authors have also emphasized their institution’s a mortgage lender obtained banking licenses in 2021, and commitment to promoting women’s financial empowerment. several of the country’s largest microfinance institutions have begun the process of transforming into banks. In 2022, the Despite the new emphasis on inclusivity, however, the upper government approved a policy to open the sector to foreign echelons of the Ethiopian banking sector remain heavily investment, a step that will further transform the sector. male-dominated. Of the 17 commercial banks included in the analysis, only 2 are led by a female CEO, and women A similar dynamic is at play with regard to women’s financial account for 11 percent of C-suite management positions more inclusion. According to data from the Global Findex database, broadly (see figure 2.1). The picture is similar for governing Ethiopian women are underbanked: the overall level of account boards: two commercial banks have female board presidents, ownership in Ethiopia is below the continental average (35 and women account for 15 percent of board seats. Two banks percent vs. 43 percent), and women are significantly less have no women on either their executive team or their board of likely to own a bank account than men (29 percent versus directors. The sole commercial bank that has achieved gender 41 percent). Data from the World Bank’s 2015 Enterprise parity among their senior leadership—with 55 percent of board Survey also suggest a strong gender differential in access to seats and 47 percent of executive management positions held credit, with female business owners citing access to finance by women—is an institution that was specifically founded to as a critical constraint at a much higher level than their male serve female customers. The central bank is at the other end counterparts (49 percent versus 19 percent). However, of the spectrum, whose governor is male and with no women Ethiopian banks are making efforts to reduce this gap. Out among its vice governors or board members. >>> Figure 2.1: Female Staff as % of Senior Leadership Bank 17 Bank 16 Bank 15 Bank 14 Bank 13 Bank 12 Bank 11 Bank 10 Bank 9 Bank 8 Bank 7 Bank 6 Bank 5 Bank 4 Bank 3 Bank 2 Bank 1 0% 10% 20% 30% 40% 50% 60% Board of directors Executive management Source: Authors’ Data EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 9 Management data collected from the sample of four major positions. This “funnel” appears to be even more pronounced financial institutions show that this leadership gender gap in private commercial banks: in both cases, the share of is the result of a gradual decline in women’s representation women drops from close to 30 percent in junior management along the professional hierarchy (see figure 2.2). At the central roles to below 10 percent at the senior level. Across the bank as well as at the public commercial bank, women make sample, women make up 26 percent of total staff members, up a large majority of employees in clerical roles but account but only 19 percent of employees in decision-making roles for fewer than 20 percent of staff members in managerial (junior management and up). >>> Figure 2.2. Female Staff as % of Overall Staff % female staff, % female staff, staff, central a. Femalecentral bank bank b. Female public staff, public commercial bankbank commercial 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% staff a staff le clerical Junior management Middle management Senior management Top management Board of directors n staff staff of clerical Junior management Middle management Senior management Top management Board of directors ff M r M nal f f ag nt t ge t M gem t dl nag t aff Se e M gem ff re t re t s s ica cal J u of e ical al ar nag en en a en ag nt M gem t n n ta or or ta ta en r ric Bo an m e of me e e m i of em lS o s io S ct ct M M a al S an S C c ler Se M em C c le ni Clerical Other professional e e Clerical Other professional Di Di a a on on o Pr ler Pr Non ni an ni an T o an T o an si Non Bo a N N J u es s M M d d ar e p p or or r dl o ni id id er er th th O O % female staff, % female staff, private c. Female staff, bank private #1 bank no. 1 private staff, bank d. Female private#2 bank no. 2 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% io staff dl nag staff ricclerical Junior imanagement Middle management Senior management Top management Board of directors staff a staff le clerical Junior management Middle management Senior management Top management Board of directors a ff t M gem t ff Se e M gem ff re t ag nt t s J u of e ical al ff ire t s al ar nag en a en M gem t n en or nag nt n ta or ta ta en or ta r ric le eric e e of me e of em m or s ion S ct J u f es al S an l S ct M M a al S M gem Se M em C c le oClerical Other professional e e ni Clerical Other professional cl Di n a D on a on oNon ni an Bo an T o an T o an Pr Non Bo a a s N N s C M M M d d ar p e p or r dl Pr ni n id id er er th th O O Source: Authors’ Data EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 10 3. >>> Exploring the HR Processes Behind the Leadership Gender Gap What are the reasons behind the low percentage of women in leadership roles, and for the gradual decrease in women’s representation across the organizational hierarchy? Identifying the correct causes among a long list of possible drivers is essential for addressing the issue moving forward: a mentoring program or leadership training for female staff members will have a limited impact if the limiting factor is inadequate childcare or implicit bias. The second half of this EFI Note therefore takes a look at the HR processes that guide the recruitment and promotion of staff members at Ethiopian banks and highlights several factors that warrant closer attention. As mentioned earlier, the analysis provided here does not claim to show causality; a more detailed staff survey and analysis of HR data are currently underway to this end. Recruitment and Choice of Job Function All commercial banks in the sample largely restrict external hiring to entry-level positions and fill more senior roles via promotions, internal recruitments, or appointments.2 Entry-level recruitment is typically processed in batches, with the number of open positions ranging from several dozen to several thousand. Although the details of the process vary across institutions, they usually include a review of eligibility criteria (such as a bachelor’s degree in relevant academic fields, a grade point average of 2.5 or higher, and fluency in English) followed by a written exam and several rounds of interviews. Recruitment campaigns are advertised at partnering universities, as well as on job portals and in newspapers; increasingly, applications are received and processed via a dedicated website. The application process for entry-level positions at the central bank is slightly different, with positions advertised individually and applicants submitting materials in hard copy. The selection process then typically includes a written exam and at least one interview. 2. The project team is accompanying the public commercial bank’s 2022 national recruitment campaign to understand the main bottlenecks for female candidates (e.g. wording of job announcements, outreach strategy, skills requirements, selection process) and propose adjustments. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 11 Recruitment for entry-level positions at all four institutions is gender composition of its staff. (One private bank indicated that highly competitive. At the public commercial bank, a recent it seeks to create a “gender-balanced” workforce but did not campaign to hire 3,000 junior professionals drew more than back up this objective further.) However, the public commercial 112,000 applicants, of whom 51,000 passed the initial screening. bank and the central bank both apply a small bonus to female Similarly, one of the private banks received more than 13,000 candidates by giving them an additional 3 points (out of 100) on applicants and went through 11 rounds of selection to hire 53 their assessment score. entry-level customer service officers. These numbers reflect a generally challenging labor market in Ethiopia’s major cities, Three factors warrant further investigation. First, the share of where a growing pool of young university graduates compete female applicants for entry-level positions is well below the for a limited number of formal employment opportunities. percentage of female students in relevant academic disciplines. However, banks often need to relax their criteria in Ethiopia’s Data from recent recruitment campaigns at the commercial emerging regions, where the number of university graduates is banks show 20 percent of female applicants for a management smaller, and where English is less widely spoken. trainee program, 21 percent for an information technology (IT) management trainee program, and 35 percent for a customer All institutions adhere to what they describe as an “objective” service recruitment. In comparison, women account for 37 process in which applicants are selected on the basis of percent of all undergraduate students at Ethiopian universities, their technical capability and personal fit for the position, and their share of students in the field of economics and business regardless of gender. The institutions cite the use of clearly studies is above that average (see figure 3.1). However, it specified eligibility criteria—such as fluency in English and an is worth pointing out that the share of female graduates has undergraduate degree with a sufficient grade point average— increased rapidly in recent years—from 21 percent in 2014 as well as the importance of the written exam as signs of an to 39 percent five years later (MoSHE 2019). Staff members unbiased recruitment process. There are no gender quotas for who work in mid- to senior-level management roles today likely entry-level recruitment campaigns or other targets guiding the joined at a time when female graduates were significantly rarer. >>> Figure 3.1. Undergraduate Enrollment in Ethiopia by Gender, June 2019 Total Social Science and Humanities Business and Economics Agriculture and Life Sciences Me dicine and Health Sciences Natural and Computational Sciences Engineering and Technology 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Ma le Female Source: MoSHE 2019. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 12 Second, in the recruitment campaigns for which data were to senior management positions. This factor mirrors findings available, the percentage of women selected to proceed to the from other studies that show that female banking employees next round decreased with each step. The hiring of customer self-select into career paths that are (perceived as) less service staff mentioned earlier is a particularly striking example: taxing and more compatible with household and family whereas women accounted for 35 percent of applicants, their responsibilities (e.g., Chin, Krivkovich, and Nadeau 2018). number shrank to 22 percent at the exam stage, 6 percent at As figure 3.2 shows, more women work in administrative the initial interview stage, and 4 percent in the final selection. and operational support functions, as well as HR and legal Similarly, in the recruitment of IT management trainees at the affairs, whereas core business functions and technology- public commercial bank, only 10 percent of the candidates intensive roles are dominated by men. This imbalance is even selected were female, down from 20 percent at the initial stronger when looking at managerial roles specifically: men application stage. This factor suggests that women are less account for well over 80 percent of managers at the branch likely than men to pass the hiring selection process—raising level, as well as in treasury and IT or electronic banking questions about their preparedness for the selection process, roles. Although specialization in more peripheral corporate but also about the criteria applied and the potential for bias. functions does not preclude women’s career advancement per se, it is unlikely to increase their chances for appointment Third, Ethiopian women who embark on a career in banking tend to senior management or board roles. to gravitate toward functional areas that are less likely to lead >>> Figure 3.2: All Staff and Managerial Staff by Gender and Function a. All staff by gender and function, three Ethiopian commercial banks Total Facilities management, procurement IT, digital banking Wh olesale and retail banking - branch level Legal affairs, risk management, compliance Tre asury, investment Operational support, customer care Accounting, marketing, HR Foreign banking, international trade 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % male staff % female staff b. Managerial staff by gender and function, three Ethiopian commercial banks Total Tre asury, investment Wh olesale and retail banking - branch level IT, digital banking Legal affairs, risk management, compliance Facilities management, procurement Operational support, customer care Accounting, marketing, HR Foreign banking, international trade 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % male managers % female managers Source: Authors’ data EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 13 It is worth noting that the management data reviewed for this will typically include business-level indicators—such as the value study do not allow us to draw conclusions regarding the role of deposits generated or the performance of a loan portfolio— of “supply-side” factors in career choice and progression. with behavioral ones. At all banks, individual performance scores Ethiopian labor statistics show that the overall division of work are taken into account when determining salary increases, bonus remains heavily influenced by gender norms: men are more payments, and future career opportunities. likely than women to engage in salaried work (63 percent versus 37 percent) and tend to spend more time on the job; conversely, All banks use competitive processes to promote employees. women carry a disproportionate share of the household and Management determines staffing targets for different units childcare burden (World Bank 2019a). A previous study by annually, and open positions are advertised internally so current the World Bank’s Africa Gender Innovation Lab also shows staff members can apply. Promotion committees are then created that women who cross over into more profitable, male- to evaluate candidates, with criteria that depend on the type dominated sectors often do so with the support of husbands and seniority of the position; for promotions to junior and mid- or male partners and role models (World Bank 2019b). The level management positions, this procedure may also include question of the extent to which personal constraints limit a written exam. Senior management positions are usually filled women’s professional availability and ambition—and whether by appointment rather than competitive promotion; in this case, such constraints are explicitly or implicitly assumed by their the CEO (or the central bank governor) nominates a suitable institutions—is an important one and will be further explored in candidate who is then confirmed by the board of directors. the second round of research. The leadership gender gap described is also evident in the banks’ promotion activity. As figure 3.3 illustrates, the Promotion and Leadership Selection percentage of women who were promoted to managerial positions is significantly lower than the number of women hired or promoted to other professional positions. Across the Recruitment processes and the applicant pool determine the four institutions, no women were promoted or appointed to gender composition of the entry-level workforce. Because top management positions during the 2020/21 fiscal year; for Ethiopian banks, like their counterparts elsewhere, prefer to fill other managerial rungs, the rate of women promoted ranges higher-level positions with internal candidates, HR practices between 7 percent and 19 percent. This result is despite the around performance management and promotion have a direct banks’ professed commitment to supporting women in their impact on the share of female staff members at higher rungs career progression: although none of the banks has a quota of the corporate ladder. All four institutions in the sample have for promoting women, the two public institutions provide a formal performance management systems in which individual 3 percent bonus to female candidates (similar to the hiring performance targets are derived from the strategic objectives process), whereas the two public institutions say they prefer set by senior management each year. The key performance female candidates in case of a tie. indicators for staff members depend on their role and function but >>> Figure 3.3: Promotions, Appointments, and External Hires by Gender, 2020/21 Fiscal Year (All Banks) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Top management (n=8) Senior management (n=78) Middle management n=(974) Junior management (n=1449) Other professional st aff (n=6034) Ma le Female Source: Authors’ data EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 14 The gender gap in career advancement suggests that the working hours or home-based work. Ethiopian labor law also underrepresentation of women in leadership positions is ascribes only a limited role to male care providers: employers unlikely to disappear on its own. Thus, it is all the more are required to offer 120 days of fully paid leave to birth mothers important to understand the factors that result in women’s (30 days predelivery and 90 days postdelivery), but only 3 days careers progressing more slowly than those of their male of paid paternity leave.3 coworkers. An obvious starting point is the potential for gender bias in the bank’s processes for workforce planning Lastly, it is worth paying attention to the banks’ efforts to identify and promotion. This includes the possibility of discrimination and support the growth of staff members with leadership against female candidates applying for promotion (especially potential. All four institutions invest in the professional those working in more peripheral corporate functions), but development of their workforce, using both internal training also the perpetuation of norms that ascribe different career centers and external training providers. They also offer preferences—rapid advancement versus greater stability, for executive coaching to their senior management staff. For example—along gender lines. Unfortunately, these questions professional development activities during the 2020/21 fiscal cannot be adequately answered with the kinds of management year on which data were available, women’s participation data collected so far and will instead form the focus of the varied widely across programs, from 16 percent to 90 percent. second phase of research. The two private banks also offered female staff access to dedicated women’s leadership training programs offered by the However, information collected from the sample of banks Addis Ababa Chamber of Commerce and the African Women in suggests several other factors also warrant further investigation. Business Initiative. However, all institutions indicated that their One is the average staff member tenure at institutions and its internal leadership development programs do not specifically impact on career progression. Data from the four banks show target female staff members. that female professional staff members have spent an average of 6.8 years at their current institution, compared with an average of 5.8 years for their male colleagues. This finding raises the question of whether mobility across institutions is becoming more important as a vector for career progression, and how the apparent “loyalty” of female staff members influences their prospects for professional growth. Although participating banks indicate that internal promotions remain the primary conduit for advancement, they seem increasingly open to external hiring for managerial positions. This fact is particularly apparent in the case of the public commercial bank, which has been losing managerial staff members to private competitors that offer better pay. A second factor worth considering is the ability to achieve work– life balance. Previous World Bank research in Ethiopia has shown that women in the workforce—whether salaried or self- employed—shoulder a disproportionate share of household and childcare responsibilities at home (World Bank 2019a). Employer-sponsored childcare could ease this burden but is not currently offered by Ethiopian banks: none of the four institutions provide childcare facilities or subsidies for their staff. Similarly, none of the institutions offer options for flexible 3. See revised labor proclamation, Proclamation 1156/2019. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 15 4. >>> Conclusion A growing body of evidence from the banking industry indicates that greater representation of women in leadership positions has positive impacts on both the inclusivity and stability of the financial sector. In light of this literature, the substantial gender gap in the higher echelons of Ethiopian financial institutions is concerning: a review of the leadership teams of 17 Ethiopian banks indicates that women make up just 11 percent of C-suite management and 15 percent of board members in the industry. Additional management data obtained from three of the largest financial institutions, as well as the central bank, show that this leadership gap is not just a reflection of women’s general underrepresentation in the sector. Rather, the percentage of women drops gradually across the institutional hierarchy, with women either staying in their positions longer than male coworkers or leaving the industry altogether. The data also point to possible explanations: promotion processes that may favor male candidates, different careers paths, and durations of “tenure” within the organization, but also a lack of childcare support or flexible working arrangements. Ethiopia’s industry leaders are starting to show an interest in the underrepresentation of women and how it affects the financial sector’s mandate to serve a diverse customer base. They have also taken the first steps to address the problem—with all-female branch offices, bonus scores for female applicants, and dedicated leadership training. However, a strategic approach to building a more inclusive banking sector will rely on a thorough analysis of when and why women fall behind in their careers: an explanation pointing to widespread bias against women in leadership positions will require a different approach from a situation in which women refrain from pursuing professional ambitions because of competing claims on their time from childcare or household chores. Additional data collection during the second half of 2022—including a staff survey featuring an experiment on implicit gender bias—will add to the initial insights offered here and will inform the design of solutions. EQUITABLE GROWTH, FINANCE & INSTITUTIONS INSIGHT <<< 16 >>> References Alibhai, Salman, Aletheia Donald, Markus Goldstein, Alper Ahmet Oguz, Alexander Pankov, and Francesco Strobbe. 2019. Gender Bias in SME Lending: Experimental Evidence from Turkey. Washington, DC: World Bank. https://openknowledge. worldbank.org/handle/10986/33120. 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