3 Ways Financial Inclusion Improves Women’s Food Security

Hunger is a moral crisis: Even though we produce enough food to feed everyone on the planet, 821 million people, or 11 percent of the world’s population, are chronically undernourished. Nearly all of them live in developing countries (especially in rural areas), and 60 percent of them are women.

In 2016, the United Nations adopted "Zero Hunger" as the second Sustainable Development Goal (SDG), with the objectives of ending hunger and malnutrition, promoting sustainable agriculture and doubling the agricultural productivity and incomes of farmers, especially women. Despite global efforts, hunger has been steadily increasing every year since 2014.

At CGAP, we conducted a literature review to examine how financial services may contribute to reducing hunger. We found strong evidence that financial inclusion improves food security for women in at least three ways.

1. Social protection payments paid into women’s financial accounts increase food expenditures

Several studies highlight that women are at a heightened risk of being food insecure within households. Women and girls are more likely to reduce their food consumption in favor of men and boys during periods of hardship and scarcity. Since anti-poverty programs target households and not individuals, women may continue to be food insecure even when the household receives social protection payments to smooth consumption. Putting financial resources in the hands of women in a safe and private manner will help them to procure nutritious food for themselves.

This can be achieved when women have their own financial accounts. In Niger, for example, when social protection payments were made directly into women’s mobile money wallets, it decreased the time required to travel and collect the money from three hours to 40 minutes. This gave women more time to pursue other productive opportunities like cultivating marginal cash crops or caring for their children. Further, they used the payments to buy a greater variety of food (beans and fats), increasing their households’ dietary diversity by 9 to 16 percent and ensuring children ate one-third of a meal more per day.

2. Separate financial accounts increase women’s bargaining power and reduce child malnutrition

Men and women within a household may have different ideas about how to spend their income. It is well-documented that finances controlled by women are more likely to be spent on household expenditures like food, water, child welfare and health care, improving children’s health outcomes. For instance, when mothers in Nepal had a greater say in making everyday household purchases, their children had improved height-weight scores (an indicator of child growth). Ghanaian households in which women had greater control over consumption showed greater dietary diversity than that in male-dominated households.

Yet restrictive social norms often put women in a subordinate role when it comes to managing household expenditures. One proven way to increase women’s bargaining power is to give them access to financial accounts held in their own names, affording them greater privacy and autonomy. When women in the Philippines opened their own commitment savings accounts, they gained bargaining power and shifted consumption toward durables like stoves, fans and kitchen appliances. This effect was pronounced for women who initially had lower bargaining power in their households. Similarly, in Kenya, female microentrepreneurs who opened basic savings accounts with their local village banks were able to protect their daily business proceeds and increase food expenditures by 13 percent.

3. Savings accounts improve women’s access to high-quality farm inputs

Women’s yields are often 20 to 30 percent lower than men’s because social and economic barriers limit women’s access to land and farming inputs like seeds and fertilizer. Roughly 43 percent of the world’s 2 billion smallholders are women, and estimates suggest that closing this gender gap can decrease global hunger by nearly 17 percent.

Among the biggest financial barriers to increasing women’s agricultural productivity is their lack of credit and reliance on informal methods of saving to purchase inputs. Women are more likely than men to be denied a loan or to pay higher interest rates. They have lower access to their own formal savings accounts, too, because men often have the household accounts in their names. As a result, women tend to rely on informal savings to finance their businesses or buy essential farming inputs. This makes them vulnerable to liquidity constraints and price fluctuations, and they are unable to buy high-quality inputs.

Individual savings products like commitment accounts or liquid savings accounts in women’s own names provide a secure place to save for specific goals and protect savings from the demands of family members, friends or other relatives. There is emerging evidence that savings accounts help farmers procure higher-quality inputs for producing cash crops. However, there is need for further research in this area, especially studies focusing on food crops and reporting gender-specific impacts. A first-of-its-kind study found that when crop sales proceeds of  both male and female tobacco farmers in Malawi were directly deposited into savings accounts instead of being paid out in cash, the farmers spent roughly 13 percent more on inputs.

Financial inclusion and SDG2

Addressing women’s food security is key to achieving SDG2 targets. As farmers, agricultural entrepreneurs and household caretakers, women are at the forefront of household food security and are essential to fighting hunger. Access to useful and secure financial services have the potential to empower women and improve their food security.