Adapting Asset-Based Finance to Meet the Promise of Inclusivity
Asset-based financing is often touted as a solution to enable resource-poor farmers, including women, to access productive assets. The Feed the Future Innovation Lab for Small Scale Irrigation (ILSSI) is investigating the potential for asset-based finance to reach women with irrigation equipment, especially solar pumps. Research supported by ILSSI and related research points out that while there is a link between asset ownership and empowerment, women face considerable resource constraints that reduce their ability to get credit. Interventions that strengthen women’s access to finance are needed to break the multiple and reinforcing boundaries to asset ownership. But asset-based finance may not be living up to expectations. Through a literature review, financial tool analysis and action research, ILSSI’s interim findings suggest many off-the-shelf consumer finance products will have to be adapted to overcome the main constraints that limit women’s access to credit for assets.
Understanding women's asset portfolios
Partnering with the Consultative Group on International Agricultural Research (CGIAR) and the private sector, ILSSI supports solar irrigation pump suppliers to better target women through gender-responsive asset-based financing tools. Solar pump companies are filling many of the gaps in direct finance to farmers. These companies take on risks, so they rely on credit scoring tools to assess the ability of farmers to pay for solar pumps over time.
However, much like the traditional credit assessments, asset-based finance score cards tend to exclude indicators that capture women farmers’ creditworthiness. Many women do not qualify for asset-based finance if standard indicators are used to assess their ability to repay. Typical criteria used often include existing assets, farm size and crops and financial savings. Compared to men, women tend to have more non-farm and diversified income. Also, women tend to participate in a lot of organizations and social networks. There is a greater variance in women in terms of financial literacy, which is also an important indicator to assess their ability to make informed decisions with their financial resources. Another consideration is that women, compared to men, usually focus also on availability of credit for complementary inputs; women do not want to take out credit for a solar pump if they don’t have credit for other farm inputs. Finally, access to production, market and extension information fill out the factors in women’s creditworthiness.
Considering irrigation equipment assets
However, many women crop and livestock farmers need access to irrigation equipment. So how can we ensure that women gain the needed access through asset-based finance? To begin, ILSSI and partners are re-designing the credit scorecard by integrating gender-sensitive criteria into credit scoring tools. In addition, solar pump companies are adapting their credit scoring process overall, ensuring that applications from women are given extra consideration by credit committees. In Mali, one private partner is prioritizing qualitative information, and in doing so, testing whether a qualitative approach to assessing credit worthiness is robust and also more inclusive. In Ghana, our partner solar pump supplier helps guide women and resource-poor farmers in gathering documentation for credit applications.
Beyond the first step of credit scoring, asset-based finance may also require adaptation. For example, some solar pump companies are adjusting down-payment requirements and responding to women farmers’ needs to spread out monthly and seasonal payments. The solar pump equipment partners are also addressing agronomic information needs and helping link women farmers to produce offtakes, whereby a producer and a buyer agree to purchase or sell portions of the producer's upcoming goods. Partnerships are also needed to integrate other irrigation-related inputs into asset-based finance, because women farmers often want to ensure they can afford wells and pipes before they invest in a solar pump.
While ILSSI works directly with companies and research partners, the implications are wider. Many companies enter frontier markets in sub-Saharan Africa without considering women as a high-potential market segment. ILSSI is sharing knowledge through multistakeholder dialogues to raise awareness about and offer guidance on how to approach women farmers as clients. Through these partnerships, innovative solar pump companies are responding and adapting their marketing and financial tools, and finding their client base increase as they reach more women farmers and agripreneurs.