Question #6 – Working with financial institutions

[Jenn Williamson, ACDI/VOCA]

This is our final question for everyone to respond to, including experts and participants:

What are strategies or best practices for working with financial institutions to promote gender and inclusion?

Looking forward to the conversation!

[Getaneh Gobezie]

Dear colleagues,

Strategies for Financial Institutions? … We have similar discussions last two weeks in another forum… There are a lot of evidence suggesting that for women in male-headed households, feeling of lack of fair benefit from their effort, or the lack of control over their earned income disincentivize their willingness to make maximum efforts in the household engagement.

In countries like Uganda where our team earlier did an evaluation for Oxfam Novib, there is a demonstrated distinct gender division of tasks, roles and power, with women doing most of the cultivation work. …. Men typically did only a few heavy tasks, but also came back to harvest and sell the coffee beans, often spending the proceeds on alcohol or women in town. … Yet, where husbands continue to sell coffee without the consent of wives, the latter lost interest in taking care of coffee quality, apply new (environment friendly) agricultural technology; and they also sell un-ripe coffee beans, or beans which had not been fully processed (without husband’s knowledge!) even if they sold for less, to fulfil some cash needs (Farnworth, 2017; and Farnworth and Akamandaisa, 2011, https://empoweratscale.org/wp-content/uploads/2021/01/Final-GALS-study-Bukonzo-Joint-coffee-VC-Uganda.pdf). There are many cases also from Liberia, and other countries.

I think one of the key issues often little discussed in research programmes is the potential contribution of having an (independent) SAVINGS account for women's financial lives. Such an opportunity ensures that wives can have ''control'' of income, and invest on e.g child care, or other productive activities. There are research outcomes highlighting the fact that women who are not sure of having control on her newly earned income (or even the newly accessed loan) are very reluctant to apply for loan -- even when the service is available nearby, and easily accessible!! (see an interesting recent discussion at CGAP/FinDev … https://www.findevgateway.org/blog/2022/06/how-do-savings-contribute-financial-health

However, women starting ‘’independent saving’’ can also give rise to mistrust and suspicion, and potential intimate partner violence in many contexts where patriarchy is dominant.  Efforts need to be made to promote mutual TRUST and ultimate collaboration. There are already good example in ruralfinance working such ‘’gender transformative’’ interventions, including the Gender Action Learning System (GALS) (identified by UN-FAO (2020) as one of the most effective tools promoting gender equality (view  at https://www.fao.org/3/cb1331en/cb1331en.pdf) as well as ‘’Gender dialogue’’’ programme by CARE./USAID. Ruralfinance ''group meetings'' (including VSLAs, Grameen bank group meetings), often conducted monthly and weekly, provide COST EFFECTIVE platforms to facilitate dialogues and trainings at regular intervals for participating women and men.

This activity also need to be complemented with ''gender mainstreaming strategies'', and awareness creation and tailored training at institutions' board, management, staff, etc

I hope this helps

Getaneh

[Gary Linden, WEConnect International]

At WEConnect International, our focus is on assisting women-owned businesses with access to markets, as it is our experience that there are many more organizations around the world which assist women-owned businesses with access to finance than access to markets.  So I think others in this discussion are better positioned to answer this question.

[GRACE GITU]

Dear all,

I agree with much of what Gataneh has highlighted above. Some countries like Kenya, have made effort to create a fund for women, however, few women access the fund due to lack/fear of referees, poor project planning resulting to failure, and business uncertainties due emerging crisis such as climate change. At AFNEED, we build capacity of low resource rural women to improve agricultural businesses, but poor infrastructure, especially on post-harvest managements frustrates the businesses making the women vulnerable for financial assistance.   Post-harvest facilitation can enhance such businesses and consequently financial support. 

Grace

AFNEED

[Jenn Williamson, ACDI/VOCA]

Hi everyone,

I am re-posting an additional comment that you may not have seen yet if you are accessing the web application only:

From Karen Munoko (FARA):

Dear all,

Our strategy at FARA is to strengthen relationships between women innovators and financial institutions by strengthening the capacity of financiers to develop packages that are easily accessible by women-led enterprises. On the other hand, strengthen the capacity of both the financiers and women-led enterprises to engage with each other in a meaningful way.  

Karen
FARA

[Bindi Jhaveri]

Hi all, 

At Grameen Foundation USA much of our work is centered on strengthening the supply side by engaging private sector financial institutions to develop products and services that meet the needs of rural last-mile clients, especially women; and strengthening the demand side through marketing, digital financial literacy and financial education. In Eswatini we have a DFS Innovation Prize that provides financial and technical assistance to financial institutions to develop women-centered financial products. We use gender analysis to help financial institutions understand the types of products and services that will address the needs of women clients. Like I mentioned earlier, we also provide Gender and Power Dynamics and Gender Analysis trainings to our financial institutions partners to help them develop a foundational knowledge of the specific barriers that women face to accessing and adopting financial services. 

Overall, I haven't seen an aversion by financial institutions to trying harder to reach women clients. Women are seen in many rural contexts as more likely to repay their loans. Also agree with all of Getaneh's points. 

Best, 

Bindi

[Morgan Mercer]

Great points from Getaneh above about the need to look at a range of financial products, services, and providers - from loans to savings products to the importance of financial literacy - as well as understanding how A2F activities are influenced by and impact household level dynamics like control and decision-making power over financial resources. A few other points to mention related to how to work with financial institutions to promote gender/inclusion outcomes from my experience at ACDI/VOCA:

• The value data plays in influencing FSPs to invest in the development of new, gender-responsive products or services. One example of this is supporting FSPs to conduct consumer research to understand needs/preferences of potential clients or to better capitalize on untapped market segments (like unbanked women) or like Bindi mentioned to share your own market research/gender analysis findings with FSPs so that they can better understand women's needs when it comes to access to finance. While this is important at the outset to get them to try out/test new products/services, I've also found that FSPs need to invest in their own data collection efforts to sustain and scale these types of gender-responsive initiatives. As an example, supporting FSPs to collect sex-disaggregated and age-disaggregated data can help gather evidence to support a business case for women's/youth's financial inclusion and to better understand and respond to the gendered aspects of their customer base and market opportunities. Creating a set of gender performance indicators, or disaggregating data by sex/age, can allow financial institutions to track and measure customer segments and usage rates and assess whether there are product or service gaps that could be addressed. 

• The need to focus not just on gender-responsive products and services, but also working with FSPs to understand how to reach women customers and what gender inclusion looks like across their business model. As an example of this, in Bangladesh, ACDI/VOCA worked with three banks to support agent banking models (impact study can be found here) to expand reach to customers in rural communications. One of the key learnings from this work was how the expansion of female agents in these models increased the number of female clients for the bank. 

Thanks,

Morgan

On Wednesday, February 1, 2023 at 2:55:59 PM UTC-5 grac...@gmail.com wrote:

[Hans Muzoora]

Hi everyone and thanks for your contributions. My name is Hans Muzoora and I am part of the ag finance team  under the Bureau for Resilience and Food Security based in DC. While the bulk of our work happens at the country level through our missions, we also support activities at the central level, Washington DC  which  help support our goal of mobilizing private capital in agriculture to help improve the lives of smallholder farmers. Some of these activities include INVEST, CATALYSE and the Aceli Africa Activity.

Aceli Africa is a market incentive facility that aims to address constraints on both the capital supply and demand sides of the agri finance market, and mobilize over $600M in private capital for agricultural SME lending in Kenya, Rwanda, Tanzania, and Uganda by 2025. Aceli benefits agricultural SMEs by enhancing access to lending from private financial institutions for enterprises, particularly for women-owned or benefiting SMEs, SMEs engaged in food crops, SMEs supporting climate smart agriculture, and first time borrowers To achieve this goal, Aceli provides financial incentives to increase the risk appetite of 30+ financial institutions while also facilitating technical assistance (TA) to expand the ability of high-potential SMEs to qualify for and manage financing. Aceli Africa envisions a thriving market where capital flows unlock the growth and impact potential of agricultural SMEs. Agricultural SMEs (e.g., that distribute farm inputs such as drought-tolerant seed and fertilizer, provide post-harvest handling services to reduce food waste, process staple grains to add nutrition for local consumption) are essential for ensuring that agricultural transformation is inclusive of smallholder farmers and low-skill workers. Reliable access to finance, in turn, is a necessary ingredient for agricultural SMEs to thrive.  Aceli aims to increase lenders' motivation to seek out and serve gender inclusive SMEs. Aceli offers an “Impact Bonus” in addition to first loss coverage and origination incentives for loans to enterprises that have significant positive impact across one or more of the following four areas: gender inclusion, food security and nutrition, youth inclusion, climate & environment.  Aceli’s product offering is designed to address the full profitability gap so that lenders can earn a return in their agri-SME lending that is comparable to other sectors. Importantly, Aceli’s incentives address both risk (through a portfolio first-loss approach explained here) and transaction costs. Aceli has adopted the 2X Challenge standard for gender inclusion that has been designed and implemented by leading Development Finance Institutions globally. The 2X Challenge defines a business as gender inclusive if it meets minimum thresholds for women’s participation in ownership, management, board membership or as employees, suppliers, or customers. The 2X criteria assesses gender inclusion in investments across five dimensions: entrepreneurship, leadership, quality employment, consumption, and investment through financial intermediaries. During Aceli’s first two years of operations (September 2020-September 2022), Aceli registered 569 loans (with a threshold range between $25K-1.75M K) totaling $71M with 31 lenders across the four focus countries. 65% of these loans meet the Aceli high standard for gender inclusion . Aceli has also offered technical assistance to 83 early-stage agri-SMEs with annual revenues of $50k-500k, limited access to finance, and basic needs in business and financial management. Additionally, Value for Women, a specialized advisory firm, has been working with Aceli to strengthen its gender-smart efforts. Through USAID’s initial support of US$10M, Aceli has been able to attract an additional $50 million from the Swiss (SDC), Dutch Ministry of Foreign Affairs, UK Foreign, Commonwealth & Development Office (FCDO), and the IKEA Foundation

Aceli has recently released a Learning Brief on Gender Inclusive Lending for Agriculture in Africa based on a gender inclusive loan analysis and inception to date portfolio metrics. Aceli and Value for Women facilitated a webinar distilling the findings from the gender lens investing technical assistance engagements with Mango Fund and Family Bank. Both organizations released blogs on the topic as well as case studies:

•Both / And: Facilitating gender inclusive lending for agricultural enterprises

•Supporting Gender Lens Investing for Agri-SMEs with Value for Women, including Case Studies

SDC has written a case study on Aceli Africa that profiles Aceli’s approach to incentivizing lending to agricultural small and medium enterprises in East Africa, key insights and results to date, and opportunities for the model to be applied to other markets.

We expect to publish a Technical Assistance Learning Brief and second annual Learning Report  in Q1 2023 followed by a learning brief on Climate & Environment later in the year.

Thanks.

Hans.

[Christine Loftus]

Hi all,

Great points from all thus far.

After taking a moment to unpack this question, I believe that there are two underlying questions embedded within it.

1. How can we enable and incentivize financial institutions (FI) to more equitably serve women?
2. How can we promote gender equity within FIs?

These questions are not mutually exclusive – Palladium’s experience suggests that women-owned enterprises often prefer engaging with female loan officers and female FI staff, although it varies somewhat depending on geography, age, and a number of other factors. Therefore, promoting gender equity and opportunity for women within FIs is part of the solution for mobilizing capital to women.

How can we enable and incentivize financial institutions (FI) to more equitably serve women? At its core, this question speaks to how we can support behavior change within FIs. To reach this goal, Palladium has undertaken a number of gender diagnostics with bank and non-bank financial institutions globally and guided financial institution leadership as they benchmark the FI’s gender performance against its peers and identifies opportunities to better reach/serve women (see case study here). Often, diagnostics result in follow-on technical assistance to develop gender-responsive products and services or embed gender equity into other aspects of the business model. Under the USAID CATALYZE program, for example, Palladium conducted a gender diagnostic with BAC El Salvador and provided follow-on support to develop a data-driven financing product targeting women-owned MSMEs that has mobilized upwards of $2M in six months (see success story here).

One challenge that we often see when working with banks to develop gender-responsive products/services is the belief that there is limited-to-no pipeline for the products. Women-led enterprises are perceived as too small or too informal to qualify for financing. Palladium has found that Business Advisory Service Providers (BASP), and particularly women BASPs, can connect FIs with a pipeline of female clients and position the women-led MSMEs to submit successful financing applications (see success story here). BASPs can also enable FIs, particularly banks, to reach smaller women-led MSMEs by bundling them into groups to decrease transaction costs and mitigate risk. As implementing partners, we can support FIs forge relationships with BASPs and, in turn, enable FIs to more efficiently reach female clients. 

While building awareness of actionable opportunities to capture the women’s market and providing support making the requisite adjustments to products/services/business models can enable FIs to better serve women, some FIs need a bit stronger of a nudge. As Hans noted, incentives can play a key role in motivating FIs to serve the segment by offsetting transaction costs and overcoming real and perceived risk. Under USAID CATALYZE, Palladium has partnered with financial institution globally to provide incentives to reach underserved sectors and segments and, in many cases, an additional bonus for serving women (see success story here). To date, multipronged approach to driving behavior change in FIs has mobilized more than $45 million in financing for W-MSMEs under the USAID CATALYZE program.

How can we promote gender equity within FIs?

As noted, we cannot separate FIs reach amongst women from the role of women within the FI. While data suggests that women are well-represented amongst FI staff overall, enhancing their role across the organizational structure is believed to increase responsiveness to the women’s market. Palladium includes questions on human resources and FI policies in gender diagnostics in line with our belief that promoting gender and inclusion in FIs requires all to look both internally and externally. 

Looking forward to others’ thoughts as well.

Thanks,

Christine