Diversity is key for policy-making and institutional culture

Anita Bezhoska, governor of the National Bank of the Republic of North Macedonia, talks about the benefits of diversity for central bank policy-making, and why more needs to be done to improve the number of women within the financial sector as a whole
Anita Bezhoska
Anita Bezhoska: "Diversity matters for the functioning of any board or team"
National Bank of the Republic of Macedonia

Central banks influence the economy on many different levels and through a variety of different channels: financial, economic and via expectations. In performing their tasks, central bankers have control over how they achieve their goals, by setting interest rates, deploying unconventional instruments, influencing exchange rates and preventing banks from taking excessive risks. This tends to be done free of political interference.

The justification for allowing central bankers to use their monetary-policy instruments independently is accentuated even more in times of crisis. During these periods of stress, when conventional paradigms change, central banks are urged to innovate. Difficult times sometimes call for tough decisions to preserve overall macro-financial stability. These new circumstances make central banks more exposed to public scrutiny, propelling them to further strengthen policy-making, by looking at the challenges from different perspectives in order to find the most balanced remedy measures. This is where the issue of diversity is important. A growing body of evidence suggests diversity, both inherent – race and gender, for example – and acquired, such as experience and cultural background, is associated with business success, as it brings a heterogeneity of values, beliefs and attitudes.

One important aspect of diversity is gender diversity.

Female representation is important because diversity matters for the functioning of any board or team. With regards to the primary objective of any central bank, empirical findings indicate that a higher participation of women on monetary policy committees is associated with better performance in terms of inflation. This suggests equal gender representation can be a signal of prudence in implementing monetary policy actions.1 Furthermore, panel data analysis conducted on eight countries whose monetary policy is consistent with inflation targeting, shows female central bank governors place more emphasis on stabilising inflation compared with their male counterparts. This points to a higher degree of ‘hawkishness’ from female policy-makers, which may be explained by the fact they believe they need to be more conservative to acquire or reinforce their reputation.2

Other studies suggest a greater number of women in senior management could help to foster stronger leadership behaviour across organisations.3 Having more women in senior management roles can lead not only to higher levels of productivity, but also provide role models for junior staff. It has also been shown to encourage participation in decision making from all levels of staff. More broadly, research from the International Monetary Fund has shown a positive correlation between corporate return on assets and the share of women in senior positions. Diverse teams are also better able to adapt to changes and are more resilient; this is particularly important in a rapidly changing world, with enormous amounts of information and constant uncertainty.

I did have to make many personal sacrifices but gained experience working professionally. I had the opportunity to work within different institutions where there were no barriers in terms of career advancement
Anita Bezhoska

Last but not least, diverse teams can lead to better institutional culture, which will help central banks effectively respond to changing environments. Culture drives the values and beliefs that govern how individuals treat others, perform tasks, take decisions, assess risk and do the right thing to ensure they operate in a safe and sound manner. Creating a culture in which diverse points of view and a wide range of skills are valued is essential – not just to redress the persistent gender imbalance, but also to safeguard the quality of the monetary policy decisions.

In the case of central banking in North Macedonia, we have always had a culture based on professionalism, skills and dedication to work performance. Those who have invested in their education, and continue to upgrade their knowledge and competencies, while showing virtues in making a creative, assertive and productive working environment, bring value to our central bank. However, it took us some time to achieve a more balanced gender workplace.

When we look retrospectively, women have always been represented at the executive management level. Even 20 years ago, we had a woman in the position of vice-governor. However, at that time, the highest decision-making body (the Council) consisted of nine members, none of whom were women. Over time, we have gradually improved the number of women in senior positions, and in 2018, I was appointed as the first female governor of the central bank. With this appointment, the proportion of women on the Council increased to 30%.4

Looking from a personal perspective, becoming a central bank governor was a journey that was made possible because I invested in my education and was devoted to my career. I did have to make many personal sacrifices, but gained experience working professionally. I had the opportunity to work within different institutions where there were no barriers in terms of career advancement.

As governor, I have been given the opportunity to promote equal career development for staff at the central bank. Our institution currently has a workforce structure consisting of 57.7% women. In terms of senior management, 67.7% of all department managers are women. The National Bank of the Republic of North Macadeonia – from a gender perspective – is a strong institution. But more can be done to further improve our institutional culture; we are currently reviewing and improving our Code of Ethics as part of this effort. We also want to incentivise all staff to respect diversity in all forms. This includes: gender, ethnicity, different personalities, educational backgrounds and diversity of thought. The central bank’s management believes that by improving the ethical behaviour of staff, it will enhance culture more broadly and improve decision making.

Diversity is also important for the economy more broadly. Central banks must ensure they engage with all stakeholders – internally and externally – to ensure members of the public understand how they are served by the central bank and how actions taken by policy-makers impact the economy. We are currently looking to improve our communication to ensure it is more inclusive and tailored to specific audiences. This also means making our communication more permeable so data and information we obtain can be better understood by others.

The broader banking sector

The participation of women in executive positions within the Macedonian banking sector is not satisfactory. Only a third of oversight board positions and those on executive teams are filled by women. On average, women make up 28.6% and 28.2%, respectively, of banks’ executive and oversight boards. It is striking that at six banks, there are still no women at all at the executive-board level. There is ample room for improvement.

More broadly, the level of financial inclusion of women in Macedonia is also lower. Data on household loans in 2019 show only 37% of total loans were held by women; in 2008, this figure was 35.7%. The numbers improve slightly for women with loan accounts – 44.1% – but both data sets highlight women perhaps do not have the same level of access to certain financial products. If women had access to these products, and were given the opportunity to reach their full potential, economic productivity is likely to increase.

Helping women to fully participate in the economy not only promotes growth, but also helps to diversify the economy, reduces income inequality, mitigates demographic shifts and contributes to financial sector stability. As Maurice Obstfeld noted: “Gender equality is more than a moral issue; it is a vital economic issue. For the global economy to reach its potential, we need to create conditions in which all women can reach their potential.”

This article forms part of Central Banking’s new Equality, Diversity and Inclusion series

The series will bring together content from central bank policy-makers and their commercial partners through interviews and opinion pieces on why EDI is important for the global central banking community. 

1 SUERF policy note, Issue No.4, Gender diversity and Monetary Policy, February 2016

2 Gender and central bankingwww.researchgate.net

3 Women leaders, a competitive edge in and after the crisishttps://mck.co/3tWudlD

4 Currently, as the appointment of three Council members is pending, the Council have 6 members, of which 3 are women.

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