Fairer Economies

How microlending for women can address the gender gap and help alleviate global poverty

Patience, a DFS+ agent that helps women entrepreneurs in northern Ghana access funds.

Patience is a DFS+ agent that helps women entrepreneurs in Pwalugu, a small community located in the Upper East region of Ghana, access funds. Image: Grameen Foundation

Zubaida Bai
President and Chief Executive Officer, Grameen Foundation
Gigi Gatti
Senior Director Program Strategy and Learning, Grameen Foundation
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Fairer Economies

  • Patriarchal policies, intractable risk formulas and high interest rates of many financial services providers limit women entrepreneurs from accessing credit.
  • Holistic solutions that dismantle gender bias will resurrect the original intent of microlending and accelerate our global race to gender parity.
  • Here's how microlending can enable financial service providers to create win/win scenarios for their organizations and women entrepreneurs.

In 1983, Professor Muhammad Yunus launched Grameen Bank in the belief that microlending – very small loans offered to groups of low-income women – offered a pathway to lifting women from poverty.

Thirty years later, the microlending industry had exploded, reaching 211 million customers. By 2020, the global market for microfinance was estimated at US $156.7 billion and was projected to grow to US $304.3 billion by 2026.

The spirit of microlending, however, was largely lost as many financial institutions applied patriarchal policies, intractable risk formulas, and interest rates that could soar above 100%.

Such practices prevent poor women entrepreneurs and small-scale farmers from securing affordable capital to grow and sustain their businesses – or worse, trap them in cycles of debt.

One billion woman worldwide remain unbanked

Meanwhile, one billion women around the world remain outside the financial system, often lacking access to even a simple savings account. These women are also trapped – unable to save or invest and often beholden to men for access to whatever cash exists.

In either case, the inherent economic power of women to drive equitable, sustainable development remains untapped.

The World Economic Forum forecasts that global gender equity will take 131 years to achieve. But the world’s poor cannot wait that long.

We can shorten that timeline by deploying holistic approaches to eliminate the structural barriers that women and girls face, and resurrect the spirit of microlending, which was never about loans but rather about supporting women to reap the benefits of their own capabilities.

This is why, rather than lamenting prohibitive practices and exorbitant interest rates of many financial services providers (FSPs), development partners need to work with FSPs to create opportunity that benefits financial organizations and low-income clients, especially women.

Institutional reforms that move capital to women more quickly and at lower cost can yield profits for both parties and shorten the gender parity timeline by decades, if not more.

Dismantling gender bias in financial systems

While Grameen Foundation was originally inspired by Professor Yunus to take his anti-poverty model global, we learned over time that loans alone are not the answer.

To advance the professor’s original intent, we turned our focus to designing holistic solutions that dismantle gender bias in financial systems and in agricultural systems where women play a crucial yet largely unseen role.

Building effective partnerships with financial service providers (FSPs) serving low-income women is key to success. However, doing so takes more than a declaration of intent. It takes a comprehensive approach: working with FSPs, households, communities, and, of course, the women themselves.

Key components of this work include:

● Engaging and training men to change gender-biased mindsets

● Creating lower-cost loan funds to catalyze greater lending to women entrepreneurs

● Helping women create financial identities, including through providing FSPs with technical assistance in digitalization

● Training female entrepreneurs on why and how to grow their businesses, and providing integrated financial, digital, and health services

One example of this approach is found in Northern Ghana, where Grameen Foundation partnered with three civil society organizations and the telecommunications company MTN Ghana to design and implement WE GAIN.

The programme trained 90 women, the majority of which were young, to be digital financial service agents plus (DFS+). That “plus” is key as it indicates that training went beyond business and financial skills. In this case, it also provided services to support victims of gender-based violence, which affects about one-third of all women in the region.

This approach enabled the new DFS+ agents to not only address the complexity of their own situations, but also spoke to the diverse needs of their low-income female client base.

One of those clients was Fuseini. She makes a living as a trader, processing and selling rice, and raising her three living children while her husband farms. Like many in her community, she visited mobile money DFS agents regularly to access financial services and business advice.

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But only after she switched from a male agent to working with her female neighbour Ayisha, a WE GAIN DFS+ agent, did things really begin to change for her.

Fuseini now felt comfortable discussing household dynamics and health issues. This built a bond of trust that enabled Fuseini’s to grow as an entrepreneur and opened access to a range of social support.

Both clients and DFS+ agents have benefitted from WE GAIN. DFS+ agents increased their incomes up to fourfold. In a region long afflicted by extreme poverty, agents’ aggregated household income rose to 37% above the average. Many agents initiated new businesses and enjoyed an improved quality of life.

These are not just numbers; they are real stories of change.

Dismantling gender norms that limit power of women entrepreneurs

Effective work in international development requires an understanding of the structural barriers and gender norms that limit the potential of women entrepreneurs, and to find solutions: open dialogue, creative financial services and system changes capable of dismantling those barriers.

As documented by the Consultative Group to Assist the Poor, many programmes and organizations that serve young women – from Eswatani to Bangladesh – are increasingly adopting integrated programmes, often incorporating elements of financial and digital literacy, sexual and reproductive health education, nutrition education, and more.

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The results have included increased financial literacy, better savings habits and greater asset accumulation. Beyond financial benefits, they’ve enhanced sexual and reproductive health, reduced risky behaviours, and increased equity in family relationships.

They’ve improved food security and nutrition. Participants have gained in self-confidence, goal setting, workforce engagement, educational attainment and entrepreneurship.

Global poverty is on the rise when it should be on the decline. Investing in young women, making the best use of new technologies, and reviving the original spirit of microfinance as part of a comprehensive approach can change this. As Professor Yunus says: let the power of poor women prevail.

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