How digital finance creates decent work for women in agriculture

Above: A Technolinks+ client processing her produce

International Development Week in Canada takes place from Feb 5-11th this year. This week, MEDA will examine several key themes, including the role of localization, biodiversity, gender equality and social inclusion, and market systems.

This blog by Jessica Villanueva and Regina Nyakinyua discusses how market incentives can help close the gender gap among women producers and entrepreneurs by providing them with critical access to capital, technology, and technical assistance.

With equal access to resources, women could contribute much more to the economy. The FAO estimates that if women farmers (43 percent of the agricultural labor force in low and middle-income countries) had the same access as men, agricultural output in 34 low and middle-income countries would rise by an estimated average of up to four percent. This could reduce the number of undernourished people in those countries by as much as 17 percent, translating to 150 million fewer hungry people.

For 70 years, MEDA has led in impact investment, innovative finance, and technical assistance support across agricultural market systems – from small-scale producers (especially women and youth) to processors and SMEs, to de-risking mechanisms for the financial sector (insurance, guarantee funds, and high-risk-bearing capital options), and building and collaborating with others in impact investment funds. MEDA’s expertise has shown that integrated and systemic approaches can make an essential difference in achieving the Sustainable Development Goals and reducing poverty.

One area of focus for MEDA has been providing access to improved farm equipment and small machinery to increase productivity and income generation for women in agriculture. This is especially critical for women in terms of reduction of work burden in agricultural production and to access and use of labor-saving assets that can save women time and fuel enhance income-generating opportunities, and reduce health risks and post-harvest losses (CGAP).

Small-scale women producers face constraints in adopting high-value farm inputs and services that boost yields. They have disproportionately less access to high-quality inputs, equipment, and technology due to limited access to information and skills required for appropriate usage (e.g., quantity and timing of application), hired labor, and modern farming practices.

Market incentives can contribute to lasting change

MEDA provides incentives to producers for them to buy new environmentally friendly technologies. We also worked with technology providers and financial institutions to lend to producers so they could purchase the technologies. For example, for women producers to effectively access resources, they typically encounter procurement challenges due to gender bias and discrimination, market-based constraints, and other social and economic disparities that negatively shift the power dynamics between men and women. MEDA’s investment strategy addresses these access gaps by providing incentives that enable collaborative, growth-oriented relationships between producers and input suppliers. Incentives also have the power to change the gendered perceptions of suppliers by illustrating the need for diverse producers’ access to untapped markets, which can sustain their market activities.

Above: A Technolinks+ client beside her equipment that will support her farming activities

MEDA also:

  • Provided electronic discounts in combination with financial products and services that focus on supply chain financing. This offers a lower-risk option that is appealing and promotes outreach and scale to a multitude of market players. These discounts further provide incentives to suppliers through coupons as performance rewards for prioritizing and fulfilling deals with women or other diverse groups of entrepreneurs or farmers.
  • Pre-purchases sustainable and gender-responsive digital payment technologies that meet the needs of an array of farmers and entrepreneurs’ de-risks production for suppliers in the ‘thin’ markets that MEDA typically operates in while enabling the demand that programs stoke to be met effectively.
  • Adopted improved digital payment systems and investment into these systems, which can also address access to finance barriers for underserved populations, support more efficient supply chains, and ideally influence the perception of financial intermediaries (FIs) of women lead farmers (other diverse farmer or entrepreneur groups such as youth, religious and ethnic minorities, etc.) as key client segments. As a result, digital payment systems improved transparency. They strengthened relationships between Fis and the producers by tracking transactions, and sharing information about financial products and services, increasing financial literacy.

It is critical to support transformative change for women entrepreneurs in their own ecosystems by supporting them while working with their investment partners to adjust their processes and the conditions in which they provide capital. Creativity to provide access to finance for small-scale women producers to reduce barriers such as collateral, amount of loans, period of repayment, etc., is relevant to improve the management of the farm and their self-employment. MEDA´s proposition is to use an integrated approach. Fis need to understand the power dynamics within the ecosystem and what levers can be used to create change.

MEDA’s market incentive work in Nicaragua and Ghana

Technolinks+ used market incentives to encourage small-scale producers (30% women) and enterprise clients to increase their investments in clean technologies. These incentives included electronic vouchers (e-vouchers) to target smallholder producers and challenge grants for distributors and processors. Technolinks+ also partnered with financial institutions to develop financing mechanisms for producers. MEDA’s hypothesis was that if we increase the access to finance (one of the main barriers identified) while building their knowledge of the technologies that were clean and inclusive, they could afford the technologies and increase their adoption. In turn, this will result in increasing productivity and income for themselves.

It is also relevant to identify division of labor and to accompany women in the process to ensure the adoption is happening and will be sustained. For example, there are a number of differences in the preferences between women and men. For women and men, agricultural covering fabrics were the most used technology (29% of men and 30% of women). However, the biofertilizers and nutrients (15%) and the irrigation hose (15%) were the next most popular for women. These results reflect the need for preliminary market research to identify the technology preferences of both women and men, which the Technolinks+ project completed in baseline surveys and selected technologies desired by both women and men. However, during the implementation of the discount mechanism, interviews with producers showed that the promotion of access to these technologies and the development of financing mechanisms that are gender-responsive (in terms of outreach and marketing strategies and responsiveness to collateral constraints) are the most critical to ensure women’s improved access, even beyond the technology preference.

In Ghana, as a result of MEDA assessing the needs of women farmers, which included higher-value technology such as motorized tricycles, overall sales of motorized vehicles to women increased alongside the productivity of women farmers. MEDA used investment to “unstick” some entrenched challenges in markets that cannot be addressed by market systems incentives alone. An incentive helped encourage the 3-wheeler distributors in Ghana – they saw a clear market opportunity, and MEDA came in to de-risk them by selling to women. In that case, there would likely be no reason to invest.

In our GROW project in northern Ghana, we supported over 23,000 women farmers to get better access to inputs, information, and markets. One important component of the project was to facilitate access to finance for women farmers, many of them smallholder farmers operating informally and other value chain actors. In combination with other market-shifting activities under this objective, MEDA made a CAD$100,000 investment in Tumu Credit Union (TCU) with the goal of de-risking low-interest loans to women farmers while at the same time demonstrating the viability of providing targeted products and services to women. TCU agreed that at least half of the invested capital would be lent to women farmers and other value chain actors active in the areas involved in the GROW project. With almost a 100% repayment rate on loans to women clients and a far greater repayment rate than men clients, TCU recognized the importance of providing services to women clients with targeted loan products.

Why combining technical assistance and market incentives is best

Above: GROW clients preparing to transport their goods to the market

Appropriate and customized technical assistance accompanies nearly all investment and financing instruments. Our work in inclusive finance includes the formation of informal savings groups when appropriate and helping them grow into formal credit cooperatives where feasible; facilitating linkages and coordination with producers and financial services providers; supporting institutions in financial product design for agriculture (loan, insurance, payment channels); mobilizing and deploying investment capital; and encouraging the financial sector to strengthen its last-mile outreach through de-risking mechanisms. A consistent theme across this work is that it has been in the agricultural sector.

Through our technical support, we have learned that we need to go beyond investment readiness (being capital ready is good, but it is not enough). MEDA uses investment to catalyze change in the system where a women entrepreneur operates, not just individual enterprises. We pair our investments with technical assistance to various organizations: lead firms, small farmer cooperatives, and agribusinesses.

MEDA creates a pipeline of market actors that include producers and SMEs that have the potential to benefit from de-risking mechanisms channeled through project resources to enable them to become investable enough to attract and build confidence in investors (FIs). MEDA then identifies and strengthens the capacity of financial service providers to better understand the differentiated financial needs of producers and SMEs and are willing to adopt gender equality and social inclusivity (GESI), as well as the environment and climate change (ECC) to unlock the gender financing gap in target agriculture sectors.

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  • Jessica Villanueva

    Jessica Villanueva is MEDA’s Senior Director of Technical Areas of Practice with more than 20 years of management experience, focusing on agri-food market systems, financial inclusion, impact investment, and gender and climate lens investment projects in Latin America, Africa, and Asia.

    View all posts
  • Regina Nyakinyua Kagiri

    Technical Specialist, Impact Investment

    View all posts
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