By Farida Tahir (CEO, Grassroots Microfinance Bank)
Most people’s greatest desire is to be able to take care of themselves and their loved ones. What this means may differ from person to person, but some of the constants across the board include: the ability to give our children a roof over their heads, food to eat, and an education, as well as access to health care when they are sick.
Unfortunately, our ability to do this can be made difficult by limited personal finances. Even when we are able to plan adequately for life’s expenses, there are many that blindside us – and our ability to effectively respond to these can sometimes mean the difference between life and death.
Savings can be a buffer in times like these. Beyond unexpected expenses, savings can also give us a springboard from which to grow or stabilise our businesses. This is especially true for microbusiness owners who rarely qualify for traditional bank loans because of a lack of collateral, formal book-keeping and low income levels. Even where microbusinesses are able to meet these requirements, they often remain unattractive to commercial financial institutions who have pre-set targets, and who view customers within this demographic as contributing too little to those targets.
Without access to credit, many microbusiness owners may be unable to grow or expand, as their income usually needs to be spent catering for basic needs and/or ploughed back into the business to sustain it. Without access to credit and savings, they are left without a ‘financial safety net’, which many larger businesses and corporations take for granted.
Halimatu owns a microbusiness in Sabon Gari market in Kano, a kiosk from which she sells water and soft drinks. All she wants is to be able to support her husband in providing for the family but because she is only able to buy stock in small quantities at a time, she cannot negotiate for lower prices on the stock, which in turn limits the margins she is able to make on them and her ability to support her family as much as she would like. Despite her challenges, Halimatu manages to save routinely- she stashes a little money in a wooden lockbox for emergencies and household needs, a tin jar for her daughter’s school fees and a brown sack for financing her business.
Halimatu is one of many. According to recent research by EFInA – Assessing the Impact of Female Financial Service Agents in Driving Financial Inclusion – women are more likely to save than men, yet they are less likely than men to have a bank account, and they make up 55.9% of the financially excluded adults in Nigeria. There are several factors responsible for financial exclusion among women in Nigeria. The most significant is poverty, closely linked to irregular income and unemployment. Many women willing and able to work are unemployed, and thus rarely earn any income and are unable to save. To worsen the situation, an estimated 14% of women in Nigeria – according to the EFInA 2018 report – have not had any formal education (i.e. education within a school) and are more likely to rely on informal financial services due to their limited financial literacy. Other relevant factors include socio-economic constraints, cultural and institutional barriers. With 59% of women in Nigeria living in rural areas, many of them have limited access to banks, mobile phones and economic activities.
Despite the significant progress Nigeria has made in advancing financial inclusion, this gender gap has persisted. Halimatu exemplifies the mindful saving behaviour of many women in developing countries, using mental discipline and resourcefulness to save the little they have even without supporting financial systems and frameworks. Saving is important for Halimatu, but she should not have to rely on insecure lockboxes, jars and sacks to save. These methods can present a potential safety risk. How can we redesign the formal financial banking system to make it more attractive for women like Halimatu? More generally, what can we change about the financial sector to help close the gender gap?
These are the challenges that my organisation, MIA (mata iyayen al’umma), was set up to provide a solution to. MIA is a cooperative society that empowers women through interest-free financial and non-financial services including access to credit facilities and a savings platform. The cooperative model is a Savings, Credit and Marketing model. Members agree to mandatory savings for six months before loans are extended to them. MIA full and permanent members are granted credits, after which they must agree to a compulsory savings from their weekly profits in order to repay loans. The marketing element of the model is centered on supporting members with getting their products to the market, through channels such as exhibitions at trade fairs and other public forums through the Chamber of Commerce; this helps to expose them to information, markets and competition. After a period of 2 years with a positive impact assessment of our women (i.e. sustaining a viable enterprise, enhanced capacity in business management, and building up a savings portfolio), those qualified are transferred to microfinance banking institutions, where they are given access to formal financial services like bank accounts, payment services, insurance and pensions services. MIA has an MOU with Grassroot Microfinance Bank Ltd to absorb MIA graduants for upgraded packages where and when needed.
Halimatu recently received an interest-free microloan from MIA, which allowed her to purchase stock for her kiosk in bulk and benefit from the associated economies of scale. The cooperative also enabled her to eventually start saving formally and safely, giving her a much needed buffer and more holistic ‘finclusivity’.
The role of Cooperatives
My work through MIA has shown me that sustainable, effective and convenient tools tailored to women’s needs – which seek to address the challenges faced by women and enable a savings culture for women – can significantly reduce the financial inclusion gender gap and empower women. Halimatu doesn’t know if she’s financially included or not, and the truth is, she doesn’t care. Inclusion means nothing to people like Halimatu if it does not translate to a better life.
Economic growth in rural areas cannot be achieved without putting in place well-tailored programmes to address infrastructural inadequacies that will increase their access to financial services. Cooperatives have a critical role to play in ensuring that those who are hardest to reach, and who are the most disadvantaged, are served. Cooperative societies are formed to meet their members’ common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.
It has proven to be an effective tool through which to overcome low financial literacy rates and build trust in using financial services. In Uganda, a study revealed that women participating in savings groups experienced increased decision-making power in their homes. In Rwanda, results showed that women in savings groups experienced improved incomes, an increase in domestic support from their husbands, and improved partner relations.
No developing economy can afford to downplay the importance of savings because of its relevance to economic growth. Cooperative societies encourage the habit of savings amongst members by linking other services such as access to loans and credit to the savings obligation of the members.
Where a member saves money within the framework of MIA knowing that she will be able to access an interest-free loan when she needs it, as well as incentives on the money saved, it encourages a habit of saving. The continued focus on developing and sustaining cooperatives must be a part of any strategy designed to meet the financial needs of the unbanked and underbanked.
I have seen the impact that cooperatives can have on the lives of women who would otherwise have no access to financial services. Since MIA was founded, over 2,000 members like Halimatu across different rural communities in Kano have benefitted from these interest-free financial and non-financial services. This is especially important when we consider the gender disparity when it comes to financial inclusion. If supported, cooperatives will be able to do more, leveraging their unique position in the rural areas to encourage savings and deepen inclusion.
One Size Does Not Fit All
It’s clear that to bring women into the banked population – especially women in rural areas – requires a bespoke approach. Agent banking, while a useful tool in hard to reach areas, has not had the desired effect on the female unbanked, because of religious and cultural nuances (e.g. the fact that most agents are male limiting their ability to interact with and onboard female members of the population). Cooperatives represent a way to drive inclusion, to simplify the banking process for the vast number of unbanked and underbanked adults in Nigeria, bringing financial enlightenment to them and driving financial inclusion.
As we engineer solutions to solve our exclusion rates, we need to ensure that there are solutions within that plan that cater for people like Halimatu in other prospective areas in Kano, and the hundreds of thousands of other Halimatus across the country.