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Accelerating financial inclusion of women in agri-food systems: What works?

Avni Mishra, Ranjitha Puskur, Linda Etale

One cannot refute the contribution women provide to the agriculture sector where they constitute 43% of the agricultural labor force. 79% of these women depend on agriculture as their primary source of income. In addition to the agricultural activities which span from production, post-harvest, marketing, and agro-processing activities, women are also actively involved in other unpaid domestic activities. Greater access to farming resources for women can improve agricultural production by as much as 4%. Often women are unable to access inputs and productive resources needed for farming due to capital and cash constraints. As a lot of their labour is unpaid, steady incomes and cash flow often becomes a challenge for them. In most rural societies and households, men also control women’s income and make decisions on its use. Access to capital is thus important for women, but continues to remain a challenge. They continue to depend on usurious moneylenders resulting in a debt trap. Financial inclusion of women is critical to allow them and  their families to progress.

Being financially included can be transformative for women within agriculture and food systems. Active participation of women in the financial system can enhance their access to inputs, labor, equipment, markets, technology, and sustaining their agri-businesses. They can better manage their risks, smooth consumption in the face of shocks and fund household expenditure that is likely to contribute to their social and economic empowerment and that of their dependents. Women in Uganda, Rwanda and Bangladesh were able to rely on their savings for emergency response instead of borrowing from informal sources and demonstrated resilience in the face Covid 19 Pandemic.

Why are women excluded from accessing financial products and services?

Women face several barriers in accessing finance from formal sources. In Africa, 4 out of 5 women lack access to an account at a formal financial institution, compared to about 1 man out of 4. Biases in legal regulations and social norms limit women’s ability to obtain credit directly from these institutions. Women do not own or control assets and resources, especially land, that are accepted as collateral to access loans. Lack of a formal identity proof, onerous documentary proofs, and low financial literacy also play a role. Lack of account ownership, personal asset accumulation, and intra-household dynamics such as access and control of income and expenditure play a role in limiting women’s financial access. Financial institutions also face challenges when extending services to rural women, partly due to a lack of general understanding of the rural and agricultural sector, including the gender dynamics. Banks often provide women with smaller loans as compared to their male counterparts for similar activities and also charge differential interest rates.

What kind of strategies are effective in achieving financial inclusion of women?

Interventions that increase personal savings show positive impacts for women and household welfare. Women’s access to individual private savings accounts not only fosters economic resilience, but also enables women to invest in essential quality goods and influence their bargaining power in the household. The opening of goal-based commitment accounts in the Philippines increased savings by 81% and resulted in greater intra-household bargaining power for women and increased expenditure on women-oriented consumer durables. Women seek savings vehicles and use personal savings to invest in their businesses. Even poor women are eager to save if given favorable interest rates, convenient access to a facility, and flexible accounts—with bankers in Indonesia, rural Mexico and South Asia finding that convenience generally beats interest rates.

Easily accessible, no-fee savings accounts offered to female heads of households living in slums in Nepal resulted in 84% of the women opening an account, which boosted spending on health, education and nutritious food and allowed them to better respond to emergencies.

Financial and digital literacy is a key strategy that can enable women farmers to improve their bargaining power. Such an effort increased awareness of money management and self employment in India. Similarly, designing the right commercial banking product can have an incremental impact on women’s economic empowerment. M-PESA, a mobile financial transaction platform launched in Kenya in 2007 has allowed rural women to save and build up financial cushions and weather occasional shocks. The experience from M-PESA suggests that it is not enough to make financial products only available and accessible but also make them relevant, applicable and acceptable. Women’s World Banking and Diamond Bank designed a BETA Proposition for low income entrepreneurs in Nigeria that offered doorstep service through a network of mobile agents to open and service accounts and transact digitally on mobile phones. Since its launch in 2013, this product has attracted 480,000 new customers for the diamond bank.

Instead of depending on land or an immovable asset as a collateral, Grameen Bank of Bangladesh lends only to self chosen groups that act as joint and several guarantors who exert peer pressure and guarantee repayment of loans. The bank has a recovery rate of over 95% and resulted in a positive impact on rural wages, especially of female loanees.

How do we accelerate the pace of women’s financial inclusion?

Although there has been significant improvement in financial inclusion globally between 2014 and 2017, an 8 percent gender gap exists. It is important to take specific actions to close the gender gap and accelerate women’s financial inclusion.

Access to and use of financial products and services by women is not just limited by resource constraints, but is inherently biased due to social and gender norms. We need a better understanding and evidence on how labour laws, gender wage gap, unpaid care and domestic work, geographical and cultural factors and awareness about women’s rights affect women’s access to and use of financial services. Digital financial services have the potential to be cost effective and close the gap, but lack of digital assets and digital literacy constrains their use by women. We need evidence-based gender-responsive financial product designs, alternative delivery channels, risk management products and price structure that suit the financial needs and preferences of women. There is a need for alternative metrics to determine women’s creditworthiness.

Financial policies and frameworks need to adopt a gender lens to reduce gendered inequalities, barriers and constraints. Incentives that enable women to play a larger role in wealth creation and enterprise development are the need of the hour. Civil society and private sector organisations should pursue agendas that are financially gender inclusive.