Unlocking Inclusive Growth through Cluster Finance for Productive Women Segments 

Evidence continues to demonstrate the significant economic value and growth opportunities latent within the women’s segment in Nigeria. It is estimated that a third of women in Nigeria own nano, micro, and small enterprises, and this sector as a whole accounts for 87.9% of employment and 46.32% of GDP (NBS/SMEDAN, 2021; PwC, 2024). Within the critical agricultural sector, which contributes approximately 25% of Nigeria’s GDP, women smallholder farmers account for about 70% of the country’s food production and make up about 70% of the workforce (Babban Gona, 2023).

Remarkably, these economy-sustaining contributions are being made by under-resourced women’s segments. EFInA’s 2023 Access to Financial Services in Nigeria survey report indicated that only 5% of adult women accessed credit from formal financial service providers (FSPs), indicating a possible limitation on the capacity of such enterprises to grow, stimulate job creation or even remain in business. This constrained access to credit affects women across all six geopolitical zones in Nigeria, especially in the North-West and North-East regions, where the impact of social norms on women’s economic participation and engagement with formal financial services is most significant. Other demand-side factors impeding women’s access to critically needed financing include an aversion to borrowing or lack of awareness of benefits, insufficient financial literacy, inadequate business management skills, a lack of trust in formal financial service providers, absence of means of identification, limited collateral and required documentation, including transaction records. Supply-side factors responsible for low formal credit access include a lack of understanding of the business case for serving low-income women, an absence of an understanding of the nuances of women’s segments, estimations of high maintenance costs, biases (conscious and unconscious), and adverse risk perceptions. Despite these hurdles, marginal progress is being made towards strengthening the provision of credit to women nano, micro, and small enterprises, driven by continued collaboration among ecosystem stakeholders, customer-centric co-creation of relevant solutions with financial service providers, and capacity-building interventions for the targeted segments. However, to accelerate women’s access to productive credit and its responsible use at scale across Nigeria, certain key questions must be answered, including: Where can the women to be served be found? What are their contexts, capabilities, and circumstances? How can they be engaged to embrace formal credit and utilise it repeatedly and responsibly?

A common denominator across all geopolitical zones in Nigeria, and not dissimilar to observations and practices across Africa, is the clustering of women in groups that have served as powerful, though largely informal institutions, where bonds of trust are forged, common values are fostered, and members feel understood and supported. Discerning institutions have recognised the practicality and power of women’s groups as community-based sandboxes for financial innovation, channels for fostering new behaviours, and potential epicentres for engaging diverse financial services. A noteworthy success in leveraging women’s groups as a pathway to broaden financial inclusion is the ‘Nigeria for Women Project’ (NFWP), being driven by the World Bank Group, the Federal Ministry of Women Affairs and Social Development, and the Gates Foundation. The project resulted in the creation/recognition of over 42,000 Women Affinity Groups (WAGs) across most states in Nigeria, with membership in excess of 900,000 women, most of whom had their first savings and borrowing experiences within their WAGs. While this and other success stories of finding women in groups and/or building groups of women with aligned use cases and livelihoods powerfully answer the question of where women to be served can be found, these results reveal the fallacy of a “one-size-fits-all” approach. Recognising the unique contexts, capabilities, and circumstances of the communities where women’s groups are embedded, and deliberately co-creating solutions with the women, while keeping their realities in mind, increases the probability of success in providing appropriate financing to the targeted women. Gender intentionality in the design, development, and delivery of appropriate credit solutions answers the what question.  The identified, peculiar attributes of women’s groups in diverse locales would enable FSPs to adapt successful models, which will contribute to steady adoption by women in groups.

From the foregoing, one may surmise that the how question has been answered. Partially, yes. However, the pathway to enabling and supporting women in groups to embrace formal credit and use it repeatedly and responsibly comprises a three-phased model, viz.: Trust-based access – leveraging group-based, simplified onboarding, facilitated by testimonials of trusted intermediaries and literacy programmes; Profitable usage and successful repayment – enabled by continuous business support and relevant financial tools; and Growth-driven loyalty. The final phase is often characterised by the adoption of resilience-building financial services (such as insurance, pensions, and investments).

Creating pathways for growing credit access for women in groups – leveraging trusted intermediaries (growth agents)

For advancement to be achieved, programme co-design and implementation would be owned and deliberately driven by diverse collaborators, including FSPs, Development Finance Institutions, Credit Guarantee entities, providers of catalytic/concessional funds, systemically relevant women’s associations, pertinent government entities, and Regulators, at a minimum.

Recognition of the unique attributes of women’s groups and clusters is essential to developing a feasible, self-sustaining model that drives growth. For example, within women’s groups, such as the ‘Women Affinity Groups’ of the ‘Nigeria for Women Project’, members are already accustomed to saving small amounts and accessing loans from the group, based on agreed rules, which cover elements such as a flat and affordable interest rate, loan limits, and tenure. Additionally, some members lend to each other, upon recognising the opportunity to generate supplementary income by providing incremental financing to fellow group members who are unable to get adequate capital to meet their needs. These nuances would and should inform the co-design of potent credit solutions and enable FSPs to determine the most effective engagement pathways.

A practical approach to leveraging the strong bonds of trust within women’s groups is to identify and collaborate with a Growth Agent within each group. A Growth Agent is a trusted and respected woman within each group who is most comfortable with credit, may already be offering loans to other women, and is effective in leading knowledge transfer within the group and driving the adoption of digital financial services. To distinguish the credit availed under this program, the credit to be availed may be bundled with ‘Life, Health, Business’ insurance, through the payment of an affordable premium amount to be included in repayment instalments. A points-based system may be introduced, enabling Growth Agents and all new credit users to accumulate redeemable points that could yield reduced interest rates, larger loan amounts, and/or longer loan repayment terms. Points would also be awarded for each formalised woman-led business.

The Growth Agent would also be vital for building support for the digitalisation of women’s activities in the group and for handholding group members through the process of using digital tools and channels. This role is vital to countering apathy and reversing the aversion women have to credit, driven by beliefs and an unwillingness to challenge existing power dynamics in their communities. The Growth Agent would also ensure that all group members benefit from services and information made available via analogue means (e.g., pamphlets, booklets) and quasi-digital means (including USSD). Information to be shared periodically would include trends in the relevant sector (e.g., entrepreneurship or agriculture), the benefits of credit, and peers’ experiences with growth and expansion.

The FSPs would provide capacity-building training to the Growth Agents and ensure the digitalisation of loan disbursement directly to eligible women in groups through a simple workflow that enables vetting by Growth Agents. A USSD component, digitalised loan repayment tracking, and a feature that allows a linkage to markets and investments would be incorporated into the solution provided by the FSP to women in groups. This solution would enable women in groups to progressively build credit histories with participating FSPs, which in turn would enable FSPs to offer larger loan amounts to eligible women. Simultaneously, while women entrepreneurs access credit from FSPs, they would be provided with capacity-building and platforms that give them visibility to potential clients and markets. Depending on the peculiarities of each location, FSPs may choose to provide the credit in the form of stock to hedge against diversion and incorporate a moratorium period to enable women entrepreneurs to start benefiting from the usage of the loan prior to commencing repayments. The above measures would contribute to increased turnover for women’s businesses and to their greater capacity to obtain larger loans at commercial interest rates. To provide a buffer against non-performing loans, suitable Credit Guarantee Companies should be brought on board from the outset.

Development Finance Institutions would play a key role in providing catalytic/concessional funding to help women in groups access larger capital at affordable rates, lower than prevailing commercial rates. A “stepped” system would be included in the loan product design, starting women in groups in the lowest-interest-rate tier and progressively allowing larger loan amounts with the accompanying higher interest rate as the businesses of the women thrive and flourish. For women in groups to smoothly make the transition from concessional funding to commercial interest rates, the business volumes and turnover for each group member should be steadily grown over time, and this would be facilitated by providing women with the requisite capacity building and facilitating their access to markets.

In this regard, Public-Private Partnerships would be critical towards creating connections between women in groups and facilitating seamless access to markets and off-takers. Vital stakeholders in this regard include systemically relevant women’s associations, such as Chambers of Commerce, as well as the Ministry of Women Affairs at both the Federal and State levels.

Sustainable and responsible credit would be incomplete without the role of Regulators in creating policies and/or interventions that recognise women’s groups/associations as trusted channels for administering credit and advancing financial inclusion. The policy angle will also advocate for contextualised means of verification for accessing credit/insurance, as a practical substitute for traditional collateral, and a transition towards collateral based on social trust and groups.

This market-driven, collaborative approach is anchored in quantitative and qualitative insights from deep, cross-cutting engagements within the financial services ecosystem and represents a workable collage, beckoning implementation. Despite global headwinds and local constraints, the potential, promise, and sustainable prosperity inherent in the women’s segment are compelling motivations for us to partner with committed stakeholders and deploy. With the evidence we have consolidated and the opportunities awaiting unlocking, we at EFInA invite you to join us on this journey of impactful collaboration.