Gender Issues in Rural Finance

The research of Khandker (1998) cited above supports the increasing consensus that women are better credit risks for rural finance and that they also make better use of borrowed funds for improving household welfare. Microfinance lenders have been quick to target women in their programs:

One important achievement of the microfinance movement has been its relative success in deliberately reaching out to poor women living in diverse socioeconomic environments. Of the nearly 90 thousand village bank members worldwide that have received loans from the Foundation for International Community Assistance (FINCA), 95 percent are women. The Association for Social Advancement (ASA), one of the most prominent microfinance institutions in Bangladesh, has provided US$200 million exclusively to women borrowers. In Malawi, 95 percent of loans provided by the Malawi Mudzi Fund go to women borrowers. Since 1979, Women's World Banking has made more than 200 000 loans to low-income women around the world. Literally hundreds of similar examples can be found in Asia, Africa and Latin America.120

Nevertheless, in spite of these advances rural lending still goes predominantly to males. The FAO provides several empirical examples about the gender distribution of rural lending; although they are somewhat out of date, the pattern is still approximately the same today in many countries:

A 1990 study of credit schemes in Kenya, Malawi, Sierra Leone, Zambia and Zimbabwe found that women received less than 10% of credit directed to smallholders and only 1 % of total agricultural credit.

In the Indian government's Integrated Rural Development Programs, although the proportion of credit directed at women increased, by 1989 women only received 20% of the program's credit.

In a survey of Kenya only 3% of women farmers surveyed had obtained credit from a commercial bank compared to 14% of male farmers. Similarly in Nigeria the ratio was 5 % to 14%.

Under Chile's Institute for Agricultural Development small farmer credit program women were only 12% of borrowers in 1992.121

Among the reasons adduced by the FAO for this pro-male bias in lending, in spite of the better productivity of funds lent to women on average, are the following:

120. Manohar Sharma, 'Empowering Women To Achieve Food Security: Microfinance', A 2020 Vision for Food, Agriculture, and the Environment, Focus 6, Policy Brief 10 of 12, International Food Policy Institute, Washington, DC, USA, August 2001, p. 1.

121. FAO, SEAGA Macro Manual, draft, Food and Agriculture Organization of the United Nations, Rome, July 2001, Module 13.

• Credit is often concentrated on particular types of activity such as agricultural production rather than the whole chain of activities including processing, storage and trading where women often predominate.

• Credit is seldom provided for consumption activities despite the fact that women are more likely than men to borrow small amounts on a more frequent basis to meet short term family consumption needs.

• Credit is sometimes channeled through rural organizations to which women lack membership access.

• Credit delivery sometimes forms part of an overall input and extension package aimed towards more progressive commercial farmers.

• Collateral loan requirements disadvantage women who often lack legal ownership of resources they use, especially in the case of land tenure.

• Cultural barriers may limit women's engagement in the formal sector, restrict their mobility and interactions with men and hence their access to financial institutions.

• Women's lack of literacy and numeracy may limit their knowledge of credit availability and make it difficult for them to follow application procedures.122

Although these barriers may appear formidable, the experience of many microfinance institutions has shown that they can be overcome and, indeed, that women make up the vast majority of a microfinance institution's clients in a number of cases. Purposive policy can assist in overcoming the barriers through steps such as the following:123

(1) Provide materials and training to raise awareness in financial institutions of the value and importance of targeting women clients to a greater degree, and to strengthen their capability of improving outreach to this group, for both savings and lending.

(2) Train women farmers in basic literacy, numeracy, cash flow management and the requirements of credit programs. In some cases, subsidies can be provided to credit programs for training components along these lines.

(3) Remove legal and regulatory constraints that may limit women's access to credit and savings facilities, such as requirements for a 'head of household' to authorize borrowing contracts and savings deposits.

(4) Reform land tenure laws to strengthen women's title to land, which often serves as a source of collateral.

(5) In legislating the use of movable property as collateral (see Section 7.4 above), include jewelry and other household items that are likely to be owned by women. In many countries, the greatest possibilities for expanding the coverage of financial institutions lies in the potential of women, especially rural women, to become clients. Experience suggests that a financial institution's performance indicators are likely to improve to the extent that women represent a greater proportion of its clientele.

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