Opinion

Will inclusive financing mechanisms promote more women-led agribusinesses?

Chikumbutso Mtemwa

Financially empowered women benefit the whole community

In many countries, especially in sub-Saharan Africa (SSA), women have less access to financial services compared to their male counterparts. There are a variety of factors that limit women’s access to finance, which include women’s lack of ownership over assets that financial institutions require as collateral for loan application processes. Secondly, most banks in SSA are confined to towns and cities, which reduces their accessibility for the rural population. Rural women often have limited ability to travel to the nearest town or city due to their household responsibilities, which means they have to leave their husbands to handle finances with the bank. Thirdly, cultural values tend to place men as the controllers of household financial issues, which further hinders women from accessing their own financial services. All three factors impede economic growth because, without access to finance, women cannot invest in their livelihood activities to improve their productivity and incomes. This gender inequality gap prevents the economic growth of households, communities and countries as a whole.

One of the indicators of women’s empowerment is their ability to access and control finances. When women have access to financial services it not only benefits their households, but the community as a whole. A financially empowered woman helps to break the belief that a man and a man alone is the voice that counts in the household. A financially empowered woman will help the community understand that a woman also has a role to play in development.

The majority of women in SSA are involved in agricultural production, where they usually fail to graduate to higher levels of the value chain, such as processing, because they lack the financing which these stages of the value chain require. This speaks to why women-led agribusinesses are fewer compared to those run by men. Some argue that women are risk averse, which might be a contributing factor to the lower number of women-led businesses, but to a larger extent it is the environment that has not been conducive enough for women to access financing and establish their own businesses.

The mushrooming of village savings and loans associations (VSLAs), which are mainly dominated by women, is a clear manifestation that women have the appetite for inclusive financing mechanisms. Women in the Kasekese farmer’s cooperative in Mchinji district, Malawi, have used the profits generated from VSLAs to begin value addition activities, including processing peanut butter and soya milk. This is a clear testimony that with greater access to finance, more women-led agribusinesses will emerge. The use of movable property for lending is another inclusive finance initiative, which addresses the issue that most women do not have ownership over fixed assets. However, this initiative does not yet seem to be yielding much because most financial institutions are still not comfortable accepting movable property, such as furniture, as collateral.

Women who have access to formal financial services and are able to save in their bank account, stand a better chance of being connected to other opportunities, such as high-value markets for their products. Some banks, including multinationals like the pan-African ECO Bank, can advise their clients about the availability of commodity market opportunities in other countries where their sister banks are operating. Such market information can also promote the growth of women-led agribusinesses.

The examples I have given above prove that inclusive finance mechanisms, whether from a lending perspective or from a savings angle, have positive effects on the growth of women-led agribusinesses. It is therefore important for financial institutions to tailor their products to address the mobility and collateral issues that exclude women from access to finance. Recognising movable property as collateral for loans and digital finance is one solution.

The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.