Leveling the Gender Playing Field: How to Help Female Farmers Access Finance

May 7, 2021

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A picture of a female farmer with a hoe

This post was originally published on the SCOPEinsight website and was written by Xoe Juliani.

Agribusiness Financing is Exclusionary

Globally, 36% of women working in agriculture say they have less access to financing than men. Some women are incapable of getting loans at all, due to legal or cultural barriers in their country, and if women do manage to get loans, they are often smaller than the loans granted to men for similar purposes. In Rwanda, for example, over ten thousand farmers received agricultural credits and/or loans in 2016. However, only a quarter of these farmers were women, even though nearly 80% of Rwandan women work in agriculture, compared to approximately 55% of Rwandan men. This, unfortunately, is a reality for women in agriculture in many countries across the globe.

Female Farmers are Often Unbanked and Without Collateral

There are many reasons for this imbalance. Among them is the fact that women are less likely to have a bank account. Globally, there is a difference of seven percentage points between the percentages of men and women who have such accounts (72% for men vs 65% for women), and when looking only at developing countries, this gap rises to nine points. Some areas have differences that are even larger; in the Middle East and North Africa, for example, there is a seventeen percent gap. The lack of a financial account has a negative impact on many female farmers and their ability to access financial aid and other financial services. A financial account is often the first step towards other financial services, and without one, gaining access to finance is much harder.

Another impediment female farmers face when attempting to access loans is a lack of collateral. When a person applies for a loan, most banks will ask for collateral before granting it. A common form of collateral, especially in the agricultural sector, is land. However, there is a significant gender inequality when it comes to agricultural landowners. Globally, the share of female agricultural holders is 12.8%, but in some countries, it can be as low as 0.8%. If a woman does not own or have control of the land she farms on, she will not be able to offer it up as collateral for a loan. As these women are unlikely to have anything else they can offer up as collateral, they are unlikely to get a loan at all.

The Potential Impact of Closing the Gender Gap

There is evidence to show that closing this gap and equalizing male and female farmers would have a significant impact on agricultural productivity and global hunger levels. The current yield gap between male and female farmers is normally found to be between 20 and 30%, but studies have shown that this gap is mostly due to a difference in productive inputs, which women are less likely to have access to. If female farmers had similar input levels to male farmers, it is estimated that the world would see a gain of 2.5 to 4% in agricultural production. This gain could decrease the number of undernourished people by 12 to 17%, which would equal approximately 100 to 150 million fewer undernourished people. Clearly, helping female farmers gain access to finance is critical.

Where We Can Make a Difference

Helping female farmers and closing this gender gap is entirely possible. While there are social norms and cultural limitations that cannot be straightforwardly addressed, there are other aspects, such as women’s lack of collateral, that can be much more easily solved. The simplest solution here would be for banks to stop requiring collateral and instead look at other metrics to determine credit worthiness. Just because women have little in the way of collateral does not mean that they are incapable of repaying a loan. In fact, research has shown that women are better borrowers in microfinance and are better credit risks for MFIs. The problem that must be solved here is helping women to prove that they ought to receive a loan, even if they have no collateral to back it.

A Solution is Standardization

Creating a fail-proof, data-driven method of assessing the credit worthiness of an agricultural lender was the impetus for the development of our Bankability Metrics. These metrics are a standardized measurement to help lenders make quicker loan decisions. They were developed by SCOPEinsight and the Center for Financial Inclusion (CFI), with the support of the Alliance for a Green Revolution in Africa (AGRA).

After researching lenders and analyzing data from years of SCOPEinsight farmer assessments, we found that the four main aspects that influence an agri-SME’s ability to receive a loan are recordkeeping & monitoring, marketing strategy, financial management, and governance. Our goal is to create standardized bankability metrics that can be used to link agri-SMEs and financiers. We hope to do this by giving financiers a standard measure with which to judge agri-SMEs. If these metrics can be implemented on a large scale, then many farmers who are currently left behind financially, including female farmers, can gain access to finance.

With the bankability metrics, female farmers’ lack of collateral will no longer be as much of an issue as it currently is. These metrics would show lenders if these women are ready for loans and if they have a high chance of paying the loan back quickly and in full. If recordkeeping & monitoring, marketing strategy, financial management, and governance are held with importance by lenders, as our data shows they should be, then they can be used to judge the feasibility a loan. This will help women and other farmers who lack traditional means of proving creditworthiness.

To empower female farmers and give them the financial aid they require to grow, we must work within the constraints they face and create systemic, inclusive, and sustainable change to break down these barriers. Only then can we empower female farmers, and only then can they join the larger financial world.