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Credit for Women
Microfinance has improved the lives of millions of poor people throughout the developing world, first through credit and now increasingly through a full suite of financial services including savings, insurance and other financial products such as pension funds. However, for women living in rural areas, there still exists a gap in access to even the most basic financial services. WWB recognizes this gap and is committed to investing in low-income rural women through focused microfinance lending service that meet the needs of women and are also sustainable for microfinance institutions.
Traditionally rural microfinance is based on the individual lending or appraisal-based methodology in which applicants are assessed by cash flow and required to provide collateral. This methodology can inadvertently omit women from the process. Women and men are positioned differently in the rural economy because of traditional gender dynamics. Men tend to produce crops for cash, while women engage in small animal husbandry, producing food for consumption and small income-generating activities. While women also devote considerable time to assisting men with cash crop production, their labor is viewed as supplemental, as is the income they produce from whatever additional income they bring to the family. Therefore, traditional approaches to rural microfinance bypass women, instead reaching male dominated farmer associations and by providing just one loan per household for the largest income generating activity. Among numerous other challenges, women also face gender-specific obstacles related to privacy during application processes, which have long impeded their ability to independently receive loans.
Finding ways to adapt the methodology to be more inclusive of gender constraints is critical to the fight against poverty; more than half of the world’s poor are rural women. In many developing countries, women are still an untapped market for financial services and in regions with more competition, being the financial provider of choice for rural women could potentially produce a competitive edge. While there are systemic challenges in sustainably meeting the needs of rural low-income women through microfinance, overcoming these obstacles and ensuring that rural women have access to finance is not only critical to the development of the sector, but to the overall empowerment of these women and their families.
Current Work
WWB has been working with microfinance institutions for more than eight years to introduce individual lending and has worked with six institutions on rural lending specifically. Our focus now is to ensure that rural lending works for women. We have conducted research at Uganda Finance Trust and will use that knowledge as we identify beta sites in the coming year to develop a sustainable product inclusive of women.
Reaching Rural Entrepreneurs
During 2009, WWB worked in two new rural markets, China and Uganda, to better understand the needs of customers in order to provide financial services to traditionally underserved markets. China has experienced dramatic economic growth in recent decades, yet poverty is still persistent, especially in remote rural areas. The income gap between rural and urban residents has widened considerably since the late 1970s; urban incomes are now more than three times higher than rural incomes. China remains home to 43 million rural poor, with very limited access to financial services. Only recently have regulatory authorities allowed large commercial banks to fill this important financing gap by expanding operations into rural areas of China.
When HSBC received approval to become the first international bank to enter China’s rural market, they chose WWB to provide technical assistance to service farmers and microentrepreneurs in rural China. WWB applied its rural lending methodology, providing support to HSBC throughout the design and implementation of a rural finance product. As part of the study, demographic and agricultural information from towns in the Hubei Province, the site of HSBC’s first rural bank, were reviewed to select the regions with the greatest potential, focusing lending efforts in those locations with good crop diversification, adequate road infrastructure and stable commercial channels to reduce agricultural risks.
WWB’s work in China complements its research during the past three years to introduce or modify rural lending products with six network members in three countries. This includes a partnership with Uganda Finance Trust to conduct customer research with rural women and men to develop strategies and products to better serve these customers. The findings of this research not only demonstrate the need for a customized rural lending product strategy and delivery, but also highlighted the particular challenges in providing access to credit for women in rural areas, such as onerous requirements to obtain a loan (particularly proof of ownership or a land title), limited physical mobility, and the existing social and cultural norms of rural sub-Saharan Africa.