Leveling the gender playing field: How to help female farmers access finance

Women in agriculture play a vital role, yet they have been excluded from accessing finance. Helping female farmers access to finance can be made easier, but how? Barriers such as having no bank account and land can be overcome if lenders would use a common language to evaluate loan applications.

Agribusiness financing has been exclusionary

A picture of an African woman farming with a hoe. — **In the agricultural sector, women have more difficulty accessing finance than men, despite being more involved in farming.**

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, in 2016 over 10,000 farmers received agricultural credits and/or loans. However, only a quarter 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 other countries across the globe.

Female farmers are often unbanked and without collateral

A picture of an Asian woman cutting her plants. — **Although the majority of women in rural areas are working in agriculture, nearly none of them are landowners**.

Among the reasons for this imbalance is that women are less likely to have a bank account. The lack of a financial account has a negative impact on many female farmers and their ability to access loans. 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. 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%. 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 thus unlikely to get a loan at all.

The potential impact of closing the gender gap

A picture of a smiling Asian woman with a bundle of crops. — **Closing the gender lending gap could result in a 2.5% -4% global agricultural boost**.

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.

Could standardization be the answer?

A picture of a smiling African woman with a handful of money. — **Using a common language such as the Bankability Metrics would ease the collateral requirement and better facilitate access to finance for women**.

Helping female farmers and closing this financing gender gap is entirely possible. While some aspects, such as the changing of social norms, may take longer to address, there are other aspects, such as women’s lack of collateral, that can be more easily solved. The simplest solution would be for banks to stop requiring collateral and instead look at other metrics to determine creditworthiness. 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.

Creating a fail-proof method of assessing the creditworthiness of an agricultural lender was the impetus for the development of the Bankability Metrics. These metrics are standardized measurements to help lenders make quicker loan decisions. The metrics 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 and interviewing over 90 lenders and analyzing SCOPEinsight’s data sets, we found that within our data the three most important dimensions driving positive loan decisions are: market the four main dimensions that influence an agri-SME’s ability to receive a loan are 1. financial management, 2. marketing strategy, 3. internal management, and 4. record keeping. Our goal is that these standardized bankability metrics are used to link agri-SMEs and financiers.

“For women, it is even more important that alternative data are being used to assess their bankability and professionalism. Women have fewer assets, own smaller more diverse businesses, are better borrowers, prefer informal lending schemes, hence lenders and investors need to look different at women-led businesses.”
Hedwig Siewertsen
Head Inclusive Finance at Alliance for a Green Revolution in Africa

If the bankability metrics are implemented on a large scale, then female farmers’ lack of collateral will no longer be as much of an issue as it is currently. With these metrics, lenders would be able to see if these women are ready for loans, and if so, they would know if they have a high chance of paying it back quickly and in full. If recordkeeping & monitoring, marketing strategy, financial management, and governance are held with importance by lenders, then there will be other ways to judge the feasibility of a loan, and women will be more likely to receive them. To empower female farmers and give them the loans they require to grow, we must work within the constraints they face. Only then can we empower these farmers, and only then can they join the larger financial world.

How can YOU start to use the metrics?

The Bankability metrics can be used by all industry leaders –donors, business development service providers, and lenders alike.

Are you a lender? Then you can request prospective agri-SMEs to submit bankability metrics during the pre-screening process, early in the discovery phase. This can help you make a pre-due diligence decision with greater efficiency. You can share the metrics with the NGOs, incubators, and service providers, so they have clarity on your expectations.

Are you an agri-SME? When you request a loan, you can proactively submit these metrics to lenders, improving your chance of receiving finance.

Are you a donor? You can embed the bankability metrics within your agri-SME programs. Not only will this help agri-SMEs access finance, but they can also help you measure programmatic effectiveness as these are quantitative.

Are you a technical assistance or business development service provider? Use these metrics to identify the agri-SME’s weak points and build their capacity accordingly. This can help you target support and improve the agri-SME’s capacity to seek financing.

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