- Gap has set a goal for all of its tier 1 suppliers to pay garment workers digitally by 2020, the company said in a press release, impacting more than 1 million workers at 800 factories in 30 countries.
- By receiving electronic payments, workers will be better able to enter the formal financial system, providing greater control over their finances, and allowing more transparency and improved opportunities to invest and save.
- Gap has joined the U.N.-based Better Than Cash Alliance consisting of governments, companies and organizations to accelerate transition from cash to digital payments to reduce poverty and drive growth.
It’s a digital world, but not for everyone.
According to the U.N.’s Better Than Cash Alliance, more than 2 billion people — a majority being women — are unable to participate in the formal financial system. Nowhere is this more prevalent than in the garment industry, where women make up about 80% of the workforce but live in a cash-only environment.
Gap’s action will expand upon the 60% of its supplier factories that already provide digital payments. The goal is to scale that process across its entire global supply chain.
In its announcement, Gap said electronic wage payment can draw “previously unbanked workers into the formal financial system, allowing women greater control over their finances and a safer way to save, send money and invest.”
There already is ample proof electronic wages make a difference, according to the Better Than Cash Alliance — cost savings, transparency and security, financial inclusion, women’s economic empowerment and inclusive growth.
A Moody’s study reported that between 2008 and 2012, increased use of digital payments added $983 billion in global economic growth. The World Bank says financial inclusion is critical in reducing poverty and achieving inclusive economic growth.
Bangladesh, for one example, could benefit greatly from digital banking. Payments made to and by businesses constitute 83% of the total payments in the country, but only 6% of those payments, whether made or received, are transferred digitally. Breaking it down further, garment workers constitute 45% of the industrial workforce and 80% of those — 4.4 million workers —are women. 90% of those salaries are paid in cash, says the alliance.
However, one must wonder how digital payments can be implemented in a country where garment workers make $37 per month, often in dangerous conditions (400 workers have died in 50 major fires since 1990). Many work 14-16 hours per day in hazardous, dilapidated buildings. Why? To survive.
Gap's plan has good intentions, but how much can possibly be adopted in less than two years? The retailer will have to make a concerted effort to work with its tier 1 suppliers if it wants to meet this ambitious goal in a short time frame.