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Rural Women’s Access to Microcredit: Necessary but not Sufficient for Socio-economic Empowerment

21.09.2015John Kuumuori Ganle, Researcher, Kwame Nkrumah University, Kumasi, Ghana

In many parts of rural Africa today, microcredit schemes for women are increasingly being promoted as both a solution to women's limited access to credit and a strategy for poverty reduction and women's empowerment. Microcredit is simply the extension of a small amount of collateral-free institutional loans to jointly liable poor group members for their self-employment and income-generation. In a recent paper that we published in World Development (Vol. 66, pp.335-345, 2015), we studied the empowerment benefits of rural women's access to microcredit using data from a longitudinal multi-method research that we conducted with rural women who were involved in an NGO-run micro-lending programme in Ghana. We developed a simple, yet multifaceted model of empowerment in which the empowerment benefits of women's access to microcredit were evaluated based on three main pathway matrixes: material, relational, and perceptual pathways to women empowerment.

We found that some women are empowered along several dimensions as a result of their access to credit; several other women have little control over the use of loan funds and are therefore no better off due to receiving credit; while some women are subjected to harassment and abuse due to their indebtedness and inability to repay loans, and are therefore worse off. Those women who became more empowered as a result of their access to credit were women who either were already engaged in some business venture before receiving the loan or they exercised full or significant control over proceeds from their loans. Women borrowers who became vulnerable and even disempowered were however those who either received loans to start-up new businesses but who actually failed to do so due to loss of loans to other unapproved loan uses such as direct consumption, or those who had no control over investments and earnings from their loans.

Our findings suggest that having an understanding of the nature of potential loan recipients and the socio-cultural context within which they live could be vital for the survival, effectiveness and long-term success of any microcredit programme. In some cases, access to credit is the only input needed on the road to women empowerment. At the same time, our findings also suggest that in a culture in which women have little control over their loans and income from their investments, it is a singularly poor environment to give out credit to women to start-up new businesses.

This suggests the need to focus the lending approach of microcredit schemes for rural women on a number of things. First, it might be better to focus on women who already have an income-generating activity that generates sufficient income to repay the loan. This would not only help loan recipients to grow their existing businesses and generate more income, but it would also ensure the sustainability of the schemes themselves. Second, it might be useful to first screen and determine which clients have adequate control to be able to use a loan productively. This might require moving beyond individual women to focusing on families and communities to redress powerlessness and gender-based discrimination against women. Finally, borrower groups should be encouraged to build-up their own emergency savings through small regular contributions. Such funds could be loaned out (and to be replaced later) to group members who might have legitimate reasons for being unable to repay at the time of collection. This could reduce the harassment, abuse, and seizure of assets that insolvent borrowers often experience due to other group members having to cover for them out of their own pocket.

Overall, our study suggests that empowerment cannot always be assumed to be an automatic outcome of women's access to microcredit particularly in contexts such as Ghana where women still face considerable socio-economic disadvantage relative to men. However, with adequate loan size, appropriate timing, effective monitoring, and better screening methods that avoid giving loans to potentially insolvent borrowers, women's access to microcredit does have the potential to impact positively and powerfully on their empowerment.


This blog post is based on the study Microcredit: Empowerment and Disempowerment of Rural Women in Ghana, World Development, Vol. 66, pp.335-345, 2015. Corresponding Author: Dr. John Kuumuori Ganle, Department of Geography and Rural Development, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana, Tel: 0249957505, E: johnganle[at] 

About the Authors

John Kuumuori Ganle, is a population, rural and international development researcher at the Kwame Nkrumah University of Science and Technology, Kumasi, Ghana. He holds a Doctor of Philosophy in Public Health from the University of Oxford, UK. 

Kwadwo Afriyie is a Lecturer at the Department of Geography and Rural Development at the Kwame Nkrumah University of Science and Technology, Kumasi, Ghana. He holds a Master of Philosophy in Geography and Resource Development from the University of Ghana, Legon. 

Alexander Yao Segbefia is a Lecturer and Head at the Department of Geography and Rural Development at the Kwame Nkrumah University of Science and Technology, Kumasi, Ghana. He holds a doctorate degree in Geography and Resource Development from the University of Ghana, Legon.

Handling the Weather: Insurance, Savings, and Credit in West Africa

27.07.2015Francesca de Nicola, Economist, The World Bank

Farmers in developing countries face severe uninsured production risks and consequently may largely benefit from the introduction of formal financial instruments that would help them to smooth consumption. To shed light on this issue, in a recent World Bank working paper, we consider three separate policy interventions and examine their impact on consumption, investment and welfare. Specifically, we studied stylized contracts for weather index-insurance, savings and credit accounts, based on the formal financial instruments available for the rural households living in Burkina Faso and Senegal. We started our analysis from benchmark scenarios and then progressively moved towards more realistic policy interventions that incorporate the different limitations that each financial product carries.

Let's first set the stage of the study.Droughts, locust invasions, storms and floods caused by insufficient drainage infrastructure or dam system failures are among the most frequent natural hazards in West Africa. These calamities have significant livelihood consequences as indicated by the staggering number of food insecure people in 2012 (18.4 million, including about 1 million children under the age of 5), because of low and uneven rainfall coupled with attacks on crops by pests and locusts (UNICEF, 2012). These dramatic consequences are linked to the fact that when on-farm work constitutes the main source of income, fluctuations in agricultural income may have sizeable repercussions on consumption. In the absence of improved agricultural practices and formal financial products, farmers need to rely on a host of informal strategies to shield their consumption. Since the seminal work of Townsend 1994, research indicates that these informal risk-coping mechanisms, however, offer at best imperfect protection against risks, and these solutions tend to perform even worse in the case of wide-scale events such as droughts or floods. Besides, uninsured income risk has also indirect negative impact on consumption. Rare but severe weather shocks may induce farmers to under-invest in high-return, but also high-volatility projects, further depressing potential consumption.

Can weather index-insurance, savings or credit accounts mitigate these negative welfare effects? Each of these financial products has the potential to improve farmers' welfare, yet none of them completely abstract from complications that may limit the extent of the gains achievable. For example, index insurance and insured credit may not be immune from basis risk, arising because of the imperfect correlation between the insurance payout and farmers losses; on the other hand, savings may be very expensive means to cope with large shocks, and rather ineffective against calamities that occur in quick succession.

Which of these financial instruments is more welfare-enhancing? To answer this question, we set-up a dynamic stochastic optimization problem of consumption and investment and perform counterfactual analysis. A key feature of the model is that on-farm investment is subject to multiple sources of risk, both idiosyncratic and covariant in nature, and that a large part of this uncertainty is covariant. This allows us to correctly model the basis risk inherent in some of the financial innovations available. We numerically solve the optimization problem using calibrated parameters based on crop model as well as existing evidence in the literature focusing on Burkinabe and Senegalese farmers. We then show the impact on consumption, investment and welfare from the separate provision of three financial instruments: weather insurance, savings and credit. As anticipated, we start our analysis considering the effects from the provision of the "optimal" contracts (from the farmers' point of view) and then relax these assumptions and investigate the impact from providing more "realistic" contracts. The results for Burkina Faso and Senegal are strikingly similar. In both cases, the provision of weather insurance as well as credit leads to an increase in consumption and a decline in precautionary investment in riskless return-free assets. While qualitatively similar, these choices are quantitatively different as captured by the vast differences in the level of welfare gains that can be achieved.

Irrespective of the wealth owned, weather insurance enables farmers to achieve larger welfare gains which are decreasing in wealth. Over time, farmers gain less and less from the provision of these financial instruments due to the fact that the initial increase in consumption is not compensated by a sufficient increase in on-farm production. As we move away from the benchmark scenarios it becomes clear however that the welfare gains from weather insurance are highly sensitive to its pricing and that offering a relatively small discount (fee), substantially increases (cut) the benefits achievable by farmers. The introduction of saving accounts on the other hand induces farmers to save more and eventually allows farmers to consume more. As a result the welfare gains are increasing both in wealth and over time. Richer farmers gain more as they can enjoy higher returns on larger endowments. The initial contraction in consumption combined with the increase in riskless investments leads to higher consumption in the future and consequently larger gains. In sum, the selection of the "optimal" financial instrument depends on the level of wealth of the households as well as the quality of contract offered. This study offers a simple framework to reflect on these issues and assess the quantitative welfare implications of the different instruments across level of wealth and over time.

This blogpost is based on the paper "Handling the weather: insurance, savings and credit in West Africa", prepared by Francesca de Nicola from the World Bank.

A stronger role of the private sector, focus on women economic empowerment and call for more involvement of farmers at the CAADP Partnership Platform 2015

14.07.2015Erick Sile, Agricultural Finance Senior Advisor, GIZ/MFW4A

The 11th CAADP Partnership Platform (PP) took place in Johannesburg, South Africa from 25th to 26th of March. This year's theme was "Walking the Talk: Delivering on Malabo Commitments on Agriculture for Women Empowerment and Development", in alignment with the 2015 African Union (AU) theme on women's empowerment and development. Since this partnership meeting immediately followed the Malabo Declaration, the gathering presented an opportunity for participants to re-examine the commitments made by African Head of States in Malabo in regards to the agricultural growth and transformation agenda. In light of AU's theme for 2015 on Women Empowerment and Development, the meeting sought ways to translate the Malabo commitments into concrete actions that would result in equal access to resources and opportunities for women. It is in this context that the NEPAD Agency launched the Programme "Women in Agribusiness" to support the economic growth and empowerment of African women.

Lessons learned during the first decade of the CAADP implementation fed the reflections that led to the CAADP Results Framework. This Results Framework document, along with the Malabo Declaration, will be translated into action through the Implementation Strategy and Roadmap and the Programme of Work, documents which were drafted prior to the Platform meeting. Although the Malabo Declaration reemphasizes the need for public investment (at least 10% of national budget to agriculture), there have been urgent calls throughout the proceedings to find ways to increase funding from the private sector. The private sector funding will not only leverage existing public investments, but it will also fill the important financing gap necessary to meet the needs of investments expected to boost the agriculture sector. Moreover, implementation of the Malabo Declaration has to go beyond planning and investments to emphasize reforms in economic policies and institutional capabilities through the creation of an economic environment that fosters innovation. To support an increasingly strong private sector in Africa, all economic policy actions should put greater emphasis on farmers and entrepreneurs who are at the centre of all these reforms.

The CAADP highlighted some challenges that could affect the implementation of the Malabo Declaration. These challenges revolve around the need for more coordination and harmonization among stakeholders involved in the CAADP process. Stakeholders should particularly take the advantage of favourable economic policies and increased dynamism of the private sectors to re-mobilize various actors and partners towards financing agriculture. In addressing the challenges of the implementation of the Malabo Declarations, specific economic policies should be designed to accelerate the contribution and inclusion of women who are by far the largest providers in the agricultural production segment in Africa.

Key recommendations for CAADP implementation were given along the following five areas.

  1. Ending hunger and malnutrition in Africa by 2025: participants at the PP called for investments in more nutritious food and the need to increase dedicated financial resources to promote nutrition activities. In order to address nutrition issues, participants reckoned it is important to diversify food intake beyond known staples and cereals, and promote the use of micronutrients balanced fertilizers. Participants also felt strongly about the need to draft a nutrition advocacy document to complement the CAADP Results Framework and Programme of Work.
  2. Inclusive agricultural growth and transformation: Policies and regulations should favour access to land and credit, as a way to encourage young people and women in agriculture. Policies should also be conducive to the development of innovative financing mechanisms such as warehouse receipt systems and allow "smart subsidies" to increase access to inputs. Participants recommended the need for an inclusive value chain approach with strong farmer organizations. Such complete value chain would lead to sustainable contractual arrangements.
  3. Boosting intra-African trade: regional trade integration, fast-tracking of the continental free trade agreement, harmonization and enforcement of non-tariff measures are some of the most important actions that need to be taken to boost intra-African trade. Value chain actors should be trained on business and trade in order to be able to comfortably engage in global trade issues.
  4. Building resilience and reducing vulnerability to risks: Climate change adaptation and risk mitigation strategies should be mainstreamed in investment plans. There is also a call to develop a continental framework on integrated risk management in agriculture. Sound economic policies should create incentives for investments that result in an enabling and more predictable market environment.
  5. Mutual accountability: the CAADP Results Framework is the mechanism that countries will use to measure results. However, quality data should feed the process of measurement. To facilitate the biennial review process countries have to undergo, it is important to prioritize and focus on a set of core and easily measurable indicators of agricultural growth and development.

The CAADP has once again demonstrated the need for a multi-sectorial approach based on a strong political commitment supported by the allocation of adequate resources for implementation.

Advancing Agricultural Finance Policy Coordination in Africa

29.06.2015Erick Sile, Agricultural Finance Senior Advisor, GIZ/MFW4A

Agricultural finance has been deemed a "policy orphan" in Africa. The lack of coordination among stakeholders further deters the process of establishing common guidelines that are necessary to pull the required public and private resources towards the achievement of a common goal: providing adequate and affordable financial services to the agricultural sector.

Access to agriculture financial services remains a challenge throughout Africa, affecting both the capacity of smallholders to generate sustainable income from their farming activities, and the ability of countries to attain food security and self-sufficiency. An overall financial systems approach to agricultural finance, rather than a "funding agriculture" approach, should be adapted to unleash the potential of the agricultural sector. As such, there is need for a strong agricultural finance policy coordination to guide the often-fragmented interventions that are ineffective among government ministries, regulatory and supervisory authorities.

To address the challenges facing access to agriculture financial services, the Making Finance Work for Africa (MFW4A) Partnership has been supporting the implementation of the Kampala Principles, a set of 11 policy principles that suggests the actions most urgently required to unlock agricultural finance in Africa. Since the first Kampala Principle called for the existence of "a single entity as the advocate of agricultural finance", it became apparent to examine the state of agricultural finance policy coordination in Africa, in order to assess not only the different policy frameworks of the various countries, but also the level of coordination for the potential establishment of agricultural finance policy in these countries.

A recent study commissioned by MFW4A, in collaboration with GIZ, drew on the agricultural finance policy case study experiences in five African countries across different sub-regions. It suggests recommendations to enable country-level stakeholders to strengthen agricultural finance policy coordination, and provides the relevant background and orientation for the Partnership and its Agricultural Finance Stakeholder Working Group (AFSWG) for future advocacy and implementation activities in agricultural finance. The result of the study confirms the lack of agricultural finance policy coordination across case-study countries, despite the existence of well-articulated agricultural sector policy documents. The study also reveals the strength of agricultural development policy documents drafted as a result of the Comprehensive African Agricultural Development Program (CAADP) process. However, key players such as central banks and other financial sector regulatory and supervisory authorities, private sector financial institutions, agribusinesses and civil organisations along value chains have often not been involved in the drafting process of the CAADP investment plans. Moreover, agricultural development policy documents do not address the key issues of access to finance in a holistic way, failing to take into considerations constraints to access agricultural finance faced by smallholder producers and institutions.

Lack of collateral, high transaction costs, weak legal and regulatory frameworks, limited appropriate financial instruments, high perceived risks of agricultural loans, weak financial infrastructure, limited financial literacy of clients are some of the shortcomings to agricultural finance. While these constraints are common to most African States, each country uses different mechanisms to address them, and are often fragmented.

A dedicated policy response is necessary to address the challenges posed by agricultural finance. This will result in building a sound financial system able to increase financial intermediation in favour of the agricultural sector. A policy response will also serve as the basis on which financial institutions and the private sector would develop adequate products, tools and mechanisms to meet financial needs of various actors along the agricultural value chains.

In the process of developing an agricultural finance policy, the role of a coordinating body becomes even more important. Such an entity will not only bring all the relevant stakeholders from the public and private sector around the same table, but it will also ensure that elements of agriculture and elements of finance are both considered when establishing an agricultural finance policy framework. The juxtaposition of agricultural development and financial systems policies in one policy document will result in responding to specific needs expressed by the agricultural sector.

The National Agricultural Investment Plans (NAIPs) developed as part of the CAADP process highlight issues of agriculture finance in some countries. While the CAADP process could offer a coordination avenue to address agriculture finance in a holistic way, NAIPs have tended to focus primarily on public sector investments. The active participation of the private sector in the CAADP process could lead to successful agriculture finance mainstreaming in the NAIPs, provided key aspects of sound-practice agricultural finance policy are integrated in the process.


Erick Sile joined GIZ/MFW4A in November 2014 as the Agricultural Finance Senior Advisor to support NEPAD/CAADP. Previously, he worked for the United Nations Capital Development Fund (UNCDF) as Regional Technical Advisor, helping to promote financial inclusion. As Program Manager and Project Director at the World Council of Credit Unions (WOCCU), he worked in several countries in Africa developing policies and procedures, implementing various methodologies of reaching out to the unbanked. Erick holds an MBA in Finance and Information Systems from the University of Wisconsin, Madison, USA.

Message from the Coordinator

12.01.2015Stefan Nalletamby

Dear Readers,

Happy New Year to you and your loved ones! 2014 was an important year for the MFW4A Partnership Secretariat, characterised by substantive progress in the implementation of our 2012 - 2014 Strategy and our move from the African Development Bank's (AfDB) temporary home in Tunis to the Bank's statutory headquarters in Abidjan. The move was made possible thanks to the resilience and goodwill of our staff who worked hard to ensure business continuity.

The third Partnership Forum in Dakar, Senegal, in June 2014 was a significant milestone for us. The event provided a unique opportunity for African opinion leaders, financial sector stakeholders and development partners to take stock of progress in Africa's financial systems, share experiences, exchange best practices, and discuss innovative approaches to challenges facing African financial systems. All of us at the Partnership Secretariat are grateful for your enthusiastic support as evidenced by the participation of more than 350 delegates from over 40 countries. Our thanks also go to the Organising Committee for putting together such a rich event. You can view a selection of photos from the Forum on Flickr, and download the full Forum report from our website.

In 2014, the Secretariat placed special emphasis on its work with African financial sector stakeholders. The Advisory Council was revamped and reconstituted as a smaller body with a mandate to provide advice and effectively support and contribute to the Partnership's strategic objectives. We look forward to engaging with our new Advisory Council members in 2015. Last year also saw the establishment of the African Pension Funds Network (APFN), a platform for the exchange of knowledge and expertise amongst industry participants across the continent. The network already counts several achievements, including the release of a joint publication Pension Funds and Private Equity: Unlocking Africa's Potential, with the Commonwealth Secretariat and the Emerging Markets Private Equity Association (EMPEA).

We also continued to strengthen our existing networks, including the Community of African Banking Supervisors (CABS), whose 2014-2016 work plan and budget was endorsed by the Association of African Central Banks (AACB) Bureau. In agricultural finance, we supported the Comprehensive Africa Agricultural Development Program (CAADP) through institutional support projects. We hired an agricultural finance expert with the support of GIZ to help with the policy process in the CAADP implementation. GIZ also funded a study to review the status of agricultural finance policy coordination across five African countries. You can download the Synthesis Report in both English and French.

Another cornerstone of our success in 2014 was our commitment to support regional and pan-African networks. We launched programmes to support the Conference Interafricaine des Marches d'Assurance (CIMA), the insurance regulator covering 14 francophone countries in West and Central Africa; and, the Conseil Régional de l'Epargne Publique et des Marchés Financiers (CREMPF) the capital markets regulator for the West African Monetary Union (WAMU), to raise funding for their respective market development strategies.

We also continued to coordinate donors' efforts to support financial sector development. The Housing Finance Donor Working Group (DWG) initiated discussions on the launch of a training programme for the francophone participants, in collaboration with Cape Town University and under the leadership of the Agence Française de Développement (AFD). Moreover, work plans were endorsed for both the Digital Finance and Remittances DWGs with plans to launch joint donor interventions in 2015 that respond to the priorities of Africa's financial sectors.

Our website was upgraded in 2014 to provide an enhanced browsing experience. The high and continuously increasing usage of the website, blogs, social media, newsletters, press digests, and the knowledge centre that houses publications confirm the value of MFW4A's knowledge products and services. We have also developed an Online Collaborative Platform (OCP) designed to facilitate interactions among MFW4A working group members, foster knowledge sharing and promote peer-to-peer learning. Last but not least, we have been maintaining a comprehensive Donor Projects' Database that is proving useful for our stakeholders seeking information on financial sector related projects in Africa.

Our Annual Supervisory Committee (SC) Meeting was held in December 2014, hosted by the German Federal Ministry of Economic Cooperation and Development (BMZ) in their headquarters in Bonn, Germany. MFW4A SC members, staff, and some Advisory Council members discussed the Partnership's new three-year Strategy, expected to be endorsed at the end of January, 2015. The 2015-2017 Strategy will put the Secretariat and the Partnership in a stronger position to deliver the change that Africa's financial sector needs. Specifically, the Strategy aims to:

  • Transform MFW4A from a partnership of donors to a partnership between donors and African financial sector stakeholders;
  • Elevate the Partnership from its current position of a knowledge hub into an effective catalyst for positive change in the financial sector landscape; and
  • Ensure long-term financial sustainability for the Partnership and the Secretariat.

The achievements of the MFW4A Partnership Secretariat are the result of hard work and commitment of our partners and African financial sector stakeholders. I would like to extend my heartfelt appreciation for all of your support and engagement with our vision. MFW4A has become a key voice on financial sector development in Africa, and a lot of the interaction and the sharing of the knowledge and experiences in the field stem from the Partnerships' initiatives. Let's continue to keep this positive momentum going!

Stefan Nalletamby
MFW4A Partnership Coordinator




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