By Doreen Ashimbiwe, Manager- Banking and Financial Services at Microsave Consulting (MSC).
According to the Finscope Survey 2016, the overall gender gap in financial inclusion in Rwanda is relatively small. In terms of the total rate of financial inclusion, women show a difference of 4% percentage points. Eighty-six percent of women are financially included compared to 90% of men. However, women still lack access to formal financial products, especially in rural areas. Based on this finding, Access to Finance Rwanda (AFR) felt the need to ensure that more women are financially included. They concluded that the process of inclusion had to begin with the design of appropriate products and services that meet the needs of women.
AFR commissioned MSC to support three selected financial institutions—Bank of Kigali, Umwalimu SACCO, and Copedu through product development processes. The focus of the assignment was the design of women-centric financial products. Additionally, MSC also trained five local consultants in Rwanda to equip them with skills in market research and product development. As a result, the institutions designed three new gender-centric products, two credit products, and one savings product.
We share some key insights on the product and behavioral preferences of the women customers whom we developed these products in the following section.
Women have financial needs and have the capacity to save and repay their loans.
The large numbers of women who signed up for the product demonstrated this.
Over six months, women accessed a credit portfolio of RWF 1 billion in one institution. Another institution registered a repayment rate of 100%. We cannot ignore this performance. It confirms that women are a viable segment that FIs can focus on.
2.Individual lending as opposed to group lending
Most women prefer to access loans as individuals and not through the group lending approach.
They prefer to take responsibility for their own debt and not for others. In one of the FIs, the product had been designed to allow women access in groups of five or individually, but all of them opted to access the loans as individuals.
The women reasoned that they wished to access the loans individually. They explained that they found it difficult to make comparatively less responsible groupmates repay the loan committedly. The women did not want to take on the burden of having to repay the loans for members who defaulted.
3. Reasons for the decline of loans
The key reasons for loans declined by the bank were poor banking history and negative listing by the Credit Reference Bureau (CRB).
Many of the women, especially in the rural areas do not save formally with FIs and thus had no banking history records. They, however, saved informally in their savings groups, SACCOs, via mobile money at their homes, or even jointly with their spouses, among other methods. The financial institutions that considered banking history as a major determinant to accessing the loan, therefore, had to be flexible.
The negative listing by CRB resulted from the fact that the women had guaranteed their colleagues while borrowing as a group, and eventually the colleagues had defaulted. As guarantors, therefore, they too were blacklisted. This could explain the reservation against borrowing through the group lending approach.
4. Spousal consent
Women prefer to access these loans without the consent of their spouses.
Most financial institutions require women customers to get consent from their spouse before accessing the loan—regardless of the loan amount. The women, however, explained that they were happy if they had the opportunity to access money without their spouse’s consent.
The women explained that in most cases when they involved them, their spouses were more likely to divert the loan funds accessed to cater to things other than the loan purpose.
On the other hand, the staff of the financial institutions said they were uncomfortable lending money to women whose spouses had not consented. To them, in the case of default, recovery would be challenging because the spouse would not be supportive as he had nothing to do with the loan.
5. Joint business ownership or collateral
Women find accessing credit independently to be a challenge.
In general, most of the women either lack collateral registered in their names or jointly own it with their husbands. They, therefore, opted for unsecured loans. This means that they often qualify for smaller sums of money, as larger loan amounts often need to be secured.
A significant number of women run their businesses together with their spouses. In most cases, the businesses are registered in their husband’s names, therefore, their husbands had to be involved in the loan process as guarantors.
6. Savings ability
We had originally assumed that teachers would not be able to save much since their salaries are quite small.
Yet like any other people, teachers have many responsibilities.
One of the institutions designed a savings product that targeted female teachers. Eventually, their male counterparts also signed up for the product. It was therefore interesting to see that the teachers were able to save more than triple the projected savings amount during the pilot period.
We discovered that these women have other sources of income and are actually willing to save even more, so long as they can access their money as and when they need it and can earn some interest on it.
Besides pursuing a systematic product development process, we made a number of recommendations. The first key recommendation was to encourage women to save formally so that they can increase their chances of accessing loans. This would, in turn, ensure that those customers who are able to save can access their money as and when they wish through alternate banking channels. The second key recommendation was to digitize the loan application process to improve turnaround time. Doing this will not only promote uptake and usage of the product but also lead to the retention of existing customers.
The financial institutions have expressed optimism in rolling out these products. It is therefore important that they keep track of product performance and continue to refine the products to make them even better. Overall, no less than 200 new customers signed up for the various products designed with the teams from the three financial institutions. This proves that the products do have great potential. In the near future, we would be keen to conduct further studies to understand the repayment behavior of these clients, especially for the uncollateralized loan facilities since the pilot test time was only six months. Some of the loans disbursed had loan periods of up to 24 months, so we would be interested to monitor if the performance still holds 24 months later.