Operational Issues: Designing Financial Services for Women

Paper
Date Published: 
Sep 1995
Publisher: 

How can the needs and preferences of women clients be met?

This article is available on pages 70-72 of this compilation document. The paper:

  • Looks at the characteristics of financial services that are appealing to female entrepreneurs in both cost and methodology, and offers tips for managing joint liability and solidarity groups;
  • Identifies ways to attract and serve the financial needs of women by revealing certain characteristics of financial services to them;
  • Suggests that gender of loan officers can affect the level of female participation in certain social contexts. Female promoters are necessary in strictly Islamic areas such as Pakistan or where social norms would limit the acceptable interaction between married women (clients) and men (loan officers), such as in rural areas of Latin America. Female loan officers can also serve as positive role models for female clients.

However this is not always the case as the experience of the Grameen Bank suggests that appropriately trained male bank workers can reach out to female clients. For instance, Grameen operates in an Islamic context yet less than one-third of its field workers is female. Nevertheless, Grameen maintains its female participation rate of nearly 90% because its field staff are trained to understand the special dynamics and constraints of women and their businesses, and to develop qualities that inspire trust and confidence among rural women.

Points out that lack of collateral is a primary constraint to female participation in the formal financial system. Thus methodologies that tap into workable alternatives for collateral have been the most successful in attracting women clients. Joint liability and solidarity groups, pioneered by ACCION International and the Grameen Bank, are such mechanisms. Basing an entire group's qualification for a loan on the default history of each member creates tremendous peer pressure on all the members and is one of the most effective and least costly ways of motivating repayment.

Recommends that:

  • Savings services should be designed to meet client needs and preferences and be tailored to mimic traditional savings products, such as rotating savings and credit associations;
  • Non-financial services to women should include initial training focusing on credit consciousness, the responsibilities of the client, and how to be good savers and borrowers. Subsequent training could include courses on marketing and input supply, or on nonbusiness topics such as household budgeting, use of income, family planning, child care, and personal empowerment;
  • Loans should be approved in small amounts for short-term working capital, and repayment schedules should be frequent to correspond with women's business cycles. Loan size may be increased upon satisfactory repayment of first loans;
  • Alternative guarantees to collateral (solidarity groups or character references) should be available. Neither the signature of a husband or male relative nor literacy should be a requirement. Home-based businesses should receive due consideration. Training should be optional and the approval process should be swift;
  • Data collected should be disaggregated by gender, in particular the number and amount of loans and savings accounts, the numbers of clients receiving technical assistance, and the number of clients by industry, sector, and activity, in order to undertake a thorough impact analysis.

[Adapted from the author's abstract]

Type: 
Paper
Countries: 
Egypt, Pakistan