MSD Hub editor's note (Michael Field, Senior Systems Specialist, Vikāra Institute):
This blog provides an interesting case of how to engage vulnerable populations, recognizing that in many cases public-goods services and functions are also required in addition to services and relationships from market systems. It is important to note that public-good services like financial literacy or skills training, also need to be localized as they are likely an ongoing need. The blog also highlights that it is critical to start any change process from the perspective and contexts of the local actors. Any expected change really does have to add value from the local perspective, as well as emerge as an internal change that is reinforced and supported via localized feedback/incentives.
By 2030, 26 percent of the world’s population and 86 percent of the world’s lowest income people are expected to be living in fragile countries. Low-income people in these countries have lower financial and digital literacy, are more risk averse, and invest less than their nonfragile peers. People living in fragile contexts, especially women, are disproportionately represented in the world’s “unbanked” populations. Women in low-income communities in fragile contexts, often facing increased vulnerability to climate and other shocks, as well as social norms limiting their role as economic actors. This blog will seek to answer the following questions:
How can market systems development approaches catalyse changes in fragile contexts so vulnerable and hard to reach groups, including women, can benefit?
How can MSD approaches promote access to finance for women in thin markets with limited numbers of players, leveraging existing communities’ structures as a source of resilience?
Three lessons from WV- SOMREP’s “Somalia Enhanced Resilience through Inclusive Economic/Market Systems development and Climate Smart Approaches" (SERECA) project are highlighted below.
(The SERECA project is funded by Australian Government under the Australian NGO Cooperation Program, and implemented as part of the SomReP, a consortium of seven INGO and one Local NGO (Action Against Hunger, ADRA, CARE, COOPI, Danish Refugee Council, Oxfam, World Vision and Shaqodoon))
Access to finance is critical to the resilience and inclusiveness of agricultural and livestock market systems.
In Somalia and Somaliland prolonged conflicts and recurrent droughts, floods, have not only devastated key agricultural/livestock systems but also eroded the resilience of local communities with millions of Somalis highly vulnerable and struggling to meet their basic needs.
To address these challenges, World Vision’s Somalia Enhanced Resilience through Inclusive Economic/Market Systems development and Climate Smart Approaches" (SERECA) project is working to improve resilience and well-being of targeted poor communities in El-Afwayne and Dollow in Somalia working in the livestock sector, with a focus on women’s economic empowerment (WEE).
Women play an important role in the livestock market mainly in meat and dairy value chains in Somalia, particularly in the post-production stages such as processing, marketing, and selling of livestock products and bi products. In pastoralist and agro-pastoralist communities, they are often responsible for milking animals, managing household consumption, and selling surplus dairy products like milk, butter, and ghee in local markets. In the meat value chain, they frequently handle the slaughtering and processing of small livestock, as well as the sale of meat in informal markets.
Despite the important role they play, women still face significant barriers, particularly a lack of access to suitable and accessible financing, which limits their ability to grow and formalize their businesses. A key issue is the lack of availability of services, as well as social norms where women are not seen as a viable customer segment by financial service providers (FSPs).
Key Constraints and Root Causes: SERECA’s market analysis
In target areas like Dollow, there are no formal financial service providers, making it extremely difficult for women in the dairy and meat value chains to access finance.
In areas where micro-finance institutions (MFIs) do exist, such as El-Afwayne, financial products and services are not tailored to the needs of women. Women are often overlooked as potential clients because they lack access to collateral, such as land or other assets, which are typically required to secure loans.
Another significant hurdle is financial literacy. Many women running informal businesses lack the financial knowledge needed to engage with the financial market or to effectively manage and scale their enterprises.
Most of all even the available financial service providers (MFI) don’t have the capacity to develop a financial product suitable for this target participants (Women Entrepreneurs and Women businesses)
Flexible adaptation of the MSD approach to work with formal, semi-formal and informal financial service providers is key
Our iMSD approach promotes market systems change that includes poor and marginalized groups, while also strengthening their productive capacity to participate and benefit from market systems. We work through market actors on inclusive business models that engage poor women and men as producers, employees, and consumers. However, to catalyse inclusion outcomes, when there are no appropriate partners, World Vision also integrates household interventions like skills development, knowledge transfer and market linkages.
Key to implementing iMSD in fragile contexts, is taking a localised approach to implementation, particularly when it comes to the availability of market actors in the area. When assessing the potential intervention feasibility and scope, the project found that in Dollow, there are no formal financial service providers. In El-Afwayne, MFIs did exist, however, financial products and services are not tailored to the needs of women. Women are often overlooked as potential clients because they lack access to collateral, such as land or other assets, which are typically required to secure loans. Therefore, the implementation approach was adjusted accordingly.
Where there is a Financial Service Provide (MFI) in El-Afwayne: The project partnered with a local micro-finance institution (MFI) to co-create an inclusive financial business model, designed to offer tailored revolving loan products specifically but not limited for women entrepreneurs and businesses involved in dairy, meat, and livestock trading. Two tailored financial products (Women’s Empowerment Loan Product and Women’s Business Growth Fund) specifically designed for women-led households and businesses is now in place and operational. Crucially, these new products offer solutions for those unable to provide land or assets as collateral, addressing cultural barriers that have historically limited their participation in the formal financial system.
Where there is no Financial Service Provider in Dollow. SERECA identified an entry point to build on the existing informal financial structures, such as Village Savings and Loan Associations (VSLAs) and livestock associations, within the target areas. Recognizing the potential of these grassroots groups, the project brought together the strongest VSLAs and associations to form a quasi-financial service provider known as the District Bank Committee (DBC). This newly established entity serves as a localized financial platform, bridging the gap between informal savings groups and more formal financial services. In fragile contexts, VSLAs are important community structures that can provide an important first step enabling these households to transition to formal finance over time.
Financial literacy is a key enabler of resilience and entry point to promote women’s agency
SERECA has integrated financial literacy – GIFT (Gender inclusive Financial Literacy Training) as a vital tool to empower women and vulnerable groups, providing them with the knowledge and skills to understand and manage various financial services and products. By equipping them with knowledge and skill, SERECA enables Women and vulnerable groups to gain greater control over their personal and household finances. This, in turn, leads to improved decision-making power within their families and communities.
Through enhanced financial literacy, women and vulnerable groups become more resilient to economic and environmental shocks, as they are better able to access financial resources, accumulate savings, and manage risks. This increased financial awareness opens doors for greater participation in markets and entrepreneurial activities, allowing them to take advantage of economic opportunities. Ultimately, SERECA’s focus on financial literacy strengthens the overall resilience and economic independence of these target participants, fostering more inclusive and sustainable development outcomes.
Result (ongoing)
Two tailored financial products (Women’s Empowerment Loan Product and Women’s Business Growth Fund) specifically designed for women-led households and businesses is now in place and operational. This initiative helps vulnerable groups, traditionally excluded from both the financial and livestock markets, gain access to appropriate financial services. Crucially, it offers solutions for those unable to provide land or assets as collateral, addressing cultural barriers that have historically limited their participation in the formal financial system.
Launch of 125 Loans: In the coming months, 125 loans will be disbursed, targeting women, vulnerable groups, and small businesses. This initiative aims to provide crucial financial support to those traditionally excluded from formal lending, empowering them to expand their businesses and improve livelihoods.
Financial Literacy Training for 120 Participants: So far, 120 participants from the target areas have been trained in financial literacy, equipping them with essential skills in financial management, planning, and budgeting. This training will continue in the coming months, ensuring more participants are prepared to effectively manage loans and grow their economic activities.
Establishment and Strengthening of the District Bank Committee (DBC): A new financial service provider, the District Bank Committee (DBC), has been established and strengthened to serve as a quasi-formal financial institution. The DBC is designed to bridge the gap between informal savings groups and formal financial markets, providing accessible financial services to underserved communities.
Capacity Building of the MFI: The micro-finance institution (MFI) involved in the project has been capacitated to adopt an inclusive business model, specifically designed to offer women-friendly financial products. This model ensures that financial services are tailored to the needs of women and vulnerable groups, making it easier for them to access loans and other financial resources without traditional collateral barriers.
Authors:
Tewodros (Teddy) Mekonnen, Senior Inclusive Economic Development Technical Advisor – (Inclusive Market Systems Development), World Vision Australia
Patrick M. Nyamai, Economic development & Market systems advisor, SoMRep Somalia/Somalialand
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