Diana Fletschner and Lisa Kenney (2011) ‘Rural Women’s Access to Financial Services: Credit, Savings and Insurance’, ESA Working Paper No. 11-07, Agriculture Development Economics Division, FAO, March, Rome

Enhancing financial access for women is contingent upon specific targeting of women through suitable innovations in financial products that account for the differential socio-economic working conditions for women.

Access to credit is a central requirement for the expansion of small and medium entrepreneurial activities in rural areas. The latter is an essential process for comprehensive development of poor rural communities, especially in developing countries. While the prevailing scope of rural financial services do not fare well in terms of adequately providing credit to households for diversifying into non-farm entrepreneurial activities, the problem assumes an entirely different proportion when we look at the issue from a gendered lens.

Evidence reveals that it is more difficult for rural women to access credit and undertake new entrepreneurship, given the neutrality of most financial products and services with respect to the gender question. As financial services are mostly directed to households, the male members are usually the receivers of credit and insurance in rural developing societies. Issues like the control of property which are valid collaterals in a financial markets and more intrinsic household matters relating to division of labour and varying priorities and entrepreneurial interest across male and female members typically render a financial market which is often tilted against women. In this context, women’s access to credit in rural areas requires to be dealt with greater specialization and focus.

Fletschner and Kenney in their paper outlines the more specific barriers to women’s entry in the financial markets and thereby the typical obstacles that they face in diversifying their activities and income sources. It is also pointed out that the development of more women as entrepreneurs results in developmental outcomes for the society that are different when women are mostly functioning as merely employed personnel in family enterprises, including cultivation. The paper is based on an extensive survey of literature and case studies, which are cited to develop the arguments for a women-oriented rural development model.

The paper argues that women are constrained by a whole range of economic, social and cultural factors from successfully accessing financial services. The property rights in rural areas and the consequent control of assets are usually heavily tilted against women. This poses a serious obstacle for women to enter the credit markets due to lack of security. This bias in control over assets can also be observed in case of livestock where high-value cattle are owned by men and women typically have control over lower value animals like poultry.

This differential ownership of assets across gender creates a natural exclusion of women from access to credit. Lower security in terms of asset ownership also means that women are usually less averse to risks than women and the design of financial services and products needs to take this into account in order to meaningfully assist women to diversify their income-earning activities.
Social and cultural norms which prevent women from travelling long distances using public transports or interacting with men other than close relatives also pose a significant barrier to women in acquiring vital information regarding financial services that are otherwise available. Lower literacy rates among women further prevent them from processing and comprehending information wherever they are accessible.

The authors question the commonplace notion in society and markets that women usually work in the family framework with a universal unison of purpose with their spouses. This leads to the conclusion that women typically gain access to the financial markets through their husbands and specific targeting may be redundant in nature. Investigation into the economic relationships within a family emphatically reveals that often the economic priorities of women are different from their husbands. Case studies also point towards the fact that spouses try to direct available resources to different economic activities depending upon their preferences.

It is also evident that the issues like child health, nutrition and education receive greater priority among the economic goals of women. The dynamics of allocating income earned to different household needs and savings vary significantly between husbands and wives. Thus, the availability of innovative financial instruments for initiating new entrepreneurial activities as well as for savings can not only transcend the gender relation within a family with more economic empowerment of women but also qualitatively influence the developmental outcomes for the society, leading to more comprehensive human development.

The authors refer to the experience of recent innovations in financial markets targeted at women to emphasize the usefulness of increasing credit access to women. The successful initiatives in this field like the SEWA in India, BRAC in Bangladesh or the KWFT in Kenya are examples where there has been a comprehensive enhancement of credit flow to rural women encouraging livelihood generating enterprises as well as a significant improvement in the provision of health insurances to women and their family members.

The paper concludes with a set of recommendations for the financial sector which attempts to systematically reduce the gender discrimination in the socio-economic environment (largely in terms of laws and cultural norms) and also to promote innovations in the design of financial products that can transcend the existing barriers to women’s entry into financial markets in rural areas. The authors also strongly argue for more government intervention that can make instruments of savings and insurance more gender-friendly in character.

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