How to Design Client-Centric Financial Solutions for Women Smallholders

On a cold, misty morning in Musanze, Rwanda, we followed Vestine, Beatrice and Asnat to visit their potato fields. We could hear the excitement in their voices as they talked about their Irish potatoes.

“I took a loan of 100,000 RWF ($88) from BRAC to lease a small portion of land and also bought seeds. I am hoping to sell them at a good profit which will give me enough money to pay for my children’s school fees,” said Beatrice.

“It is difficult to gather money during the time of harvest and also support the family. I was able to access the loan at a low cost. Now, I can grow more potatoes and make more profits,” chimed in her neighbor Vestine.

Meeting demand for smallholder financing needs

In countries where BRAC International Microfinance operates, a significant proportion of adults are engaged in agriculture. Yet, very little formal credit goes into this sector. It is estimated that $170 billion per year, or 70 percent, of smallholder farmer demand for agricultural and non-agricultural finance remains unmet.

Over the past two years, BRAC International Microfinance has been designing and testing tailor-made agri-credit solutions for women smallholder farmers in Rwanda, Liberia and Sierra Leone. By the end of the pilots, we had spoken to and learned from over 300 clients and staff at different stages of the loan cycle.

Five lessons on designing agrifinance solutions for women smallholders

1. Financial institutions need to be more deliberate in targeting women smallholder farmers by designing products for them with a client-centric approach. Unfortunately, most financial products are not designed with women smallholders in mind. 83 percent of agrifinance clients we interviewed had never taken loans from any other financial institution, indicating that our product was reaching a segment critically underserved by formal providers.

What prompted them to take a loan with us when they had never taken a loan in the past? For them, the major value drivers were the adapted eligibility criteria (collateral-free, limited documentation) and convenient repayment frequencies that matched their cash flow (grace periods and bullet payments). These features were key outcomes of the human-centered design (HCD) approach that we employ in developing and refining our products.

2. HCD needs to be balanced with operational realities. Although central to all our product innovation efforts, the HCD approach is not entirely fool-proof, as designers are not deeply immersed in the communities where we serve. What is recommended from an HCD approach may at times run contrary to ground realities and the past experiences of field operations staff.

In our approach, we prioritized having in-depth internal design workshops with field teams to validate the outcomes of HCD assessments. This not only gave us the opportunity to tailor the final prototypes based on real feedback from the ground, but also enabled us to break down staff biases and build the confidence and ownership of the field team – the internal end-users. It gave them a sense of control over the design and a greater connection to the new product they would be implementing.

3. Simplicity over complexity in product features. During the first year of testing, we were offering multiple prototypes (with variations in repayment frequencies and loan tenure) specific to each of the major agricultural activities in each country. However, we realized we were unintentionally limiting access to clients who wanted to take loans for farming activities beyond the ones specified.

Clients ultimately favored having one prototype with a single repayment frequency but variable loan tenures. In this “one-size” product, the seasonality of agricultural activities and the variation in crop cycles were accommodated by having specific disbursement windows to align with the start of land preparation for each season and by varying loan tenures to accommodate time taken for post-harvest processing and sales.

4. A single client-centric solution rather than multiple agri-credit products. Clients did not request any additional agriculture loan products, such as input loans, productive asset loans or short-term loans for hiring labor. Our agrifinance loans did not explicitly specify what they could use it for (or not use it for) as long as they were investing the bulk of it in their agricultural endeavors. Many of our clients also invested small portions of the agrifinance loan for their non-farm income-generating activities. Clients can be satisfied with just the one product as long as loan sizes are able to keep pace with their total agricultural investment needs per cycle.

5. Credit alone is not enough but can be a good place to start. Across our pilots, women smallholder farmers cited lack of training or information, limited access to markets and adverse environmental conditions as affecting their yield. However, it can be difficult for financial service providers to navigate where and how to start in providing services to address these challenges. First, bundled services generally hinge on strong partnerships but successful, scaled partnership models are difficult to find outside of regional hubs. Second, smallholder farmers may need interventions to be sequenced in a specific way. In markets like Liberia, clients were generally unable to estimate the size of land they cultivate, their investment needs per season and their yield. Financial literacy training is therefore necessary early on to have critical data for building client profiles and offering more advanced financial products.

In our pilots, we intentionally focused on first getting the credit product right, which would then be a foundational base for us to deliver other bundled services. This gave us time to better understand our clients, identify scalable models and approaches, and provide the right bundles and sequencing.

Creating resilient futures for women smallholder farmers

Women smallholder farmers like Vestine, Beatrice and Asnat play essential roles in ensuring food security, and the functioning and resilience of rural economies and global food systems.  Yet for most, credit remains inaccessible as financial institutions do not prioritize meeting their needs. In addition, standalone credit will not be enough in an era where climate change has made them more vulnerable than ever before. As an industry, there are questions we still need to answer:

• To what extent can financing build the climate resilience of women smallholder farmers?
• What are sustainable, scalable models of providing holistic, bundled services to this segment, especially where markets and infrastructure are yet to mature?

By testing the provision of bundled services over the next five years, we hope to build more evidence on what works and help create resilient futures for women smallholder farmers and their communities.