Improving rural women’s access to finance represents an untapped business opportunity for financial service providers prepared to tailor products to meet their needs and to find innovative ways to overcome social and logistical hurdles.
In many ACP countries, barriers to formal finance prevent women from growing their businesses and investing in their community’s future. Only 50% of women in the developing world own a bank account, according to the World Bank’s Global Findex database. For agriculture, the challenges are more complex. For example, women clients represented just 28% of Opportunity International’s agri-finance portfolio a year ago, compared with 85% for its total lending book, notes Timothy Strong, Opportunity’s director of operations for agri-finance.
Improving women’s access to agri-finance requires a holistic approach and a need to embed gender awareness, argues Strong. A recent change in its gender strategy saw Opportunity hire consultants to assess attitudes throughout its workforce and provide gender training. A vetting tool was also developed that measures whether partners’ gender values align with its own. As a result, in part at least, Opportunity has increased women’s representation in its African agriculture finance portfolio to 49%, against an initial target of 40%; while, in Mozambique, women’s representation has almost doubled to 30% from 18%.
Sharing the risk
Despite numerous studies showing women to be an excellent credit risk – with equal or better microfinance loan repayment rates than men – few lenders get to experience this without some initial risk-sharing support. “It’s very hard to convince financial institutions to invest in a new client category unless there is some kind of mechanism behind it, like a credit guarantee scheme or subsidisation to encourage them to approach the client segment and see for themselves the profitability,” says Niclas Benni, FAO rural finance and investment specialist. To boost women’s financial inclusion, CUMO – Malawi’s biggest rural microfinance provider – received initial funding from the UK’s Department for International Development (DFID) in the early 2000s. As of June 2018, it boasted a repayment rate of 99% from a lending portfolio that comprises 83% women.
However, lack of collateral, such as titles to land or property, is a common barrier for smallholders seeking credit, but an even bigger one for women with most property held by men. One solution is to accept group collateral, including savings. With CUMO, for example, groups of 10 to 25 women save into a joint deposit account; when they have savings equal to 5% of the required loan, CUMO retains the money as collateral.
Regulatory change is also encouraging lenders in some countries to explore accepting movable property such as furniture as collateral. A World Bank-supported online public database that allows business owners to use moveable assets to secure loans was launched in Malawi in February 2016. Mozambique’s central bank is supporting a similar initiative.
Bridging the gap
Rural smallholders’ physical distance from urban bank branches also presents a challenge. Most women have less access to transport than men and they may face safety threats travelling alone, notes Maxi Ussar, director of JustImpact Consulting based in Malawi. In some cultures, women are expected to remain at home and may require permission to travel. Others see handling money as a man’s job or lack the confidence to enter a bank. For many rural women, the dual responsibilities of farming and childcare also leave them with less time to travel.
CUMO’s lending model requires that each group of borrowers opens a bank account at a nearby branch but, although some travelling is required, only one person has to make the journey. Reducing the need to travel to banks could be overcome by mobile technology. However, with mobile ownership rates lower among women globally, this will take time, emphasises Benni, particularly as over 1.7 billion women in low and middle income countries do not own mobile phones.
Financial inclusion interventions are not gender-neutral and uptake gaps would be reduced if products and services suited women’s needs and priorities, Jemimah Njuki, senior program officer at Canada’s International Development Research Centre, wrote recently in Business Daily Africa.
After a DFID-funded gender study showed women prefer to engage with female loan officers, Opportunity is exploring ways to hire more female staff, who live in the communities, says senior programme manager Lydia Baffour Awuah. In addition, in many communities, it is men who control assets, resources and inputs, meaning it is important to engage with them to demonstrate why investing in women’s businesses is good for everyone, says Baffour Awuah. “We can’t address the issue about women and gender inequality without bringing the men on board.”
Lenders should also identify the crops that women grow, which tend to be horticulture or food crops rather than the cash crops men focus on, and then target them through farmer associations or input providers, says Baffour Awuah. As part of the Malawi Oilseed Sector Transformation project, which Ussar consulted on, as private sector companies started to see commercial opportunities for sesame, they were encouraged to sign contracts with the traditionally female growers rather than their husbands, as previously. This gave the women more financial autonomy and allowed them to benefit from ancillary training to improve yields and creditworthiness.
Smallholder income flow diaries collected by the Consultative Group to Assist the Poor (CGAP) also showed a preference among women for savings over credit, which questions the common practice of banks offering savings and loans in a bundle, which can force women to take a product they do not want, states Benni. A focus on savings can also be a double-edged sword for women, creating a culture of caution where female farmers are wary to spend or invest in their business, adds Ussar.
Insurance products can also help women through periods of lost income due to sickness, or cover sudden expenses such as a funeral which, in Malawi, tends to be a woman’s responsibility. On top of compulsory life insurance for its borrowers, CUMO offers insurance covering funeral expenses if a family member dies. It is also exploring ways to offer clients some form of retirement product, says Phiri, noting that few smallholders and even fewer women have a pension.
Serving female smallholders
In order to reach more female smallholders, financial service providers must understand their aspirations, income patterns and product preferences and tailor products accordingly, a recent brief by CGAP concluded (https://tinyurl.com/ycyaet54). Drawing on data from detailed financial transaction and income flow diaries collected from smallholder households in Mozambique and Tanzania in 2014-15, the brief found that women farmers prioritise and have responsibility for household and family expenses like education and groceries. Products like commitment savings for education could therefore appeal.
Women also experience longer periods of illiquidity than men and enjoy fewer income peaks during the year, suggesting they could benefit from longer-term loan repayment schedules. Products could be tailored so that, for example, credit is offered during low-income periods and saving deposits are requested during income peaks – which often occur at different times to men. Granting women longer-term credit products, especially in periods of illiquidity, can allow them to gain some economic independence, says brief co-author Benni.