Poverty is a complex phenomenon with deeply embedded root causes in political and economic structures. Limited infrastructure, discrimination and inequality, environmental degradation, social dynamics and poor economic and political policies all contribute to the persistence of poverty. Financial exclusion, which prevents access to capital and other financial services, perpetuates poverty among these groups. Smallholder farmers and micro-entrepreneurs in lower-income countries, especially women, face systemic challenges in accessing financial tools and services, hindering their economic situation and resilience to climate and economic shocks. About 25 percent of people worldwide don’t have a bank account. 26 percent of men and 32 percent of women are unbanked in developing countries, revealing a 6 percent gender gap. Many women with bank accounts still lack broader financial services, such as credit and insurance, further restricting their economic opportunities.
To address poverty, systemic and structural changes that go beyond individual-level barriers are needed. Among the systemic challenges that need to be addressed, financial exclusion is a significant one, and some of the key challenges include:
The gender gap
Despite comprising 43 percent of the agricultural workforce and producing between 60 and 80 percent of the food in lower-income countries, women globally own only an average of 15 percent of the land. Cultural barriers to land ownership, combined with limited access to financial education and a lack of financial products tailored to their needs, maintain gender disparities and leave women at a disadvantage when it comes to accessing capital and formal financial services. Additionally, rural populations, particularly women, frequently find themselves unable to access finance. The World Bank reported in 2021 that in countries affected by conflict, women are 37 percent less likely than men to have access to an account.
The cycle of financial exclusion
Smallholder farmers and micro-entrepreneurs in rural areas of lower-income countries often experience financial exclusion despite the presence of Financial Service Providers (FSPs). Local FSPs are financial institutions that usually provide small loans to individuals who cannot access traditional banking services. However, smallholder farmers and rural micro-entrepreneurs are often considered high-risk borrowers by FSPs due to their reliance on seasonal crop harvests for income and their vulnerability to external factors such as climate change and pests. Barriers like insufficient identification, limited credit history, poor access to mobile phones and distance from financial institutions prevent SheCan’s target population from accessing financial services. Moreover, smallholder farmers and micro-entrepreneurs, especially women, often lack the financial literacy needed to navigate the financial system and the tools to securely and transparently deposit and track their savings. This results in a cycle of limited financial opportunities in rural areas, perpetuating the cycle of poverty and having a greater impact on women.
Demanding loan conditions
FSPs themselves face high loan servicing costs in rural and remote areas, as they lack the necessary infrastructure and digitization of their processes, which leads to expensive terms for potential clients in these areas. Besides high interest rates and commission fees, excessive collateral requirements often require smallholder farmers to access finance. This requirement disproportionately affects women, as they are significantly disadvantaged relative to men with regard to land rights and inheritance laws.
