Introduction to Gender Value Chain Finance (GVCF)
Gender Value Chain Finance (GVCF) deals with financing in a value chain based on gender issues the value chain presents to the women MSMEs. Through incorporating gender-responsive financing instruments, GVCF intends to improve the situation of women businesspeople in the sphere of access to financial products and their position within different steps of the value chain. This approach adds on to the conventional finance stream to offer strategic services, which leads to the promotion of a fair, effective, and efficient financial environment for both male and female entrepreneurs.
This is especially the case in Indonesia, where MSMEs are significant at a contributing 61% to the GDP and providing over 97% employment to the population, where the gender-based financing interventions are required to deal with the existing gaps that imply the differentiated access of female and male MSEs to financing, markets, and resources.
Core Components of Gender Value Chain Finance
GVCF focuses on several interlinked components to address gender gaps within the value chain:
- Gender Analysis and Segmentation: Evaluating the more detailed needs, capacities and limitations of men and women at each of the value chain stages and developing appropriate interventions.
- Gender-responsive Financial Products: Designing and delivering appropriate products and services in the financial sector that will suit women entrepreneurs. Some of these may comprise of open-ended collateral, micro credit, small loans and low-cost funds.
- Capacity Building and Financial Literacy: Organizing the capacity-building programs for improving the knowledge and understanding of financial resources by women particularly in financial management.
- Access to Technology and Digital Finance: Using information technology to ensure that many women who do not have access to conventional banking networks are served.
- Policy Advocacy and Institutional Support: With policymakers to advocate for policies within the legal and financial frameworks that creates an environment for the successful operation of the GVCF that will eliminate ingrained gender prejudices in society.
GVCF for MSMEs and Women MSMEs in Indonesia: Challenges and Opportunities
Challenges
- Limited Access to Credit and Capital: Micro and small business owned by women are very much vulnerable in getting financing because the majority of them could not provide collateral, credit history, and legal status.
- Lack of Financial Literacy: Most female business owners never receive any financial training and therefore cannot understand loan processes and financial management.
- Digital and Technological Barriers: Lack of digital skills and technology continues to hamper women’s access to financial services while those in rural areas where most MSMEs conduct physical transactions relying on word of mouth.
- Cultural and Societal Norms: Society conventions always expect woman to be at home doing house chores cutting them short from fully participating in business.
Opportunities
- Increasing Financial Inclusion Initiatives: Although the Indonesian government with all the financial institutions is also aiming at the financial inclusion the doors for the women entrepreneurs are also opening for the special financial services.
- Growing MSME Support Programs: Efforts to build up the capacity of MSMEs, facilitate access to markets, and improve supply chains are growing and GVCF must guarantee that these efforts help women-led enterprises.
- Digital Transformation: Mobile and digital wallets are already gaining popularity in Indonesia and may be used as a bridge to connect with women in remote and rural areas.
On-lending window approach within GVCF
The on-lending window mechanism is a financial strategy whereby large financial institutions offer funds on a wholesale basis to intermediary institutions (microfinance institutions, cooperatives, non-profit organizations, etc.), who in turn offer these funds to the ultimate borrowers, MSMEs and women MSMEs in this paper. This model helps to increase credit outreach actually, since intermediaries have closer relationships and trust with the communities where MSMEs are located.
Advantages of On-lending Window Approach:
- Enhanced Access: The on-lending approach allows women- driven MSMEs to borrow from community-based organizations which may be more accommodating than conventional financial institutions.
- Risk Sharing and Mitigation: Primary lenders get to work with local intermediaries to minimize risk exposure to MSMEs and maximize the chances of getting their money back.
- Tailored Financial Products: This means that intermediary organizations can design the appropriate financial instruments that would meet the needs of women in business for example, involving features like flexibility in repayments or small and affordable loans.
- Capacity Building: MSMEs receive source of funding from the intermediary organization while additional support is offered in areas like financial management, business planning, and embrace of technology making the funds provided to gain more ground.
Gender-Responsive On-lending Windows in Indonesia
To successfully implement an on-lending window mechanism for GVCF in Indonesia, several key steps and considerations should be addressed:
1. Local Intermediaries Recognition and Engagement:
- Ensure that the selected intermediaries; micro finance institutions, cooperatives and local banks are readily rooted in the community and sensitive to the gender issues and/or concerned with gender equity issues in the community.
- Setting of partner organization requirements that include offering gender sensitive services, experience in financing MSMEs among others.
2. Capacity Building for Partner Institutions
- Sensitize training of the intermediaries on financing for gender, gender analysis of risk for female entrepreneurs, and monitoring of results for gender balance.
- Promoting the use of gender equity investment items in assessing and funding credit facilities for women led MSMEs.
3. Product Development and Customization
Developing flexible and accessible financial products, such as:
- Easy credit or credit facilities with low collateral demands that will suit women MSMEs.
- Lending products tied to savings products through which people are encouraged to save and borrow at the same time.
- Digitized loan platforms that assist in reducing formalities and credit delivery to women MSMEs located at the rural areas.
4. MEL Framework
Establishing a MEL framework to track the gender impacts of on-lending interventions, such as:
- Loan disbursement rates of female entrepreneurs to male entrepreneurs.
- Monthly repayment performance by the gender to analyze creditworthiness of women-owned MSMEs.
- Changes in capacity of women entrepreneurs including increases in their financial literacy and use of technology.
Solutions for the Further Development of GVCF via On-lending Windows in Indonesia
1. Enhance Policy and Regulatory Framework in favour of Gender Smart Investing: Supporting the lobbying for policies that seek to encourage collateral free or low collateral credit facilities for women and consulting with policy makers on reducing the formalities of loans availed to MSMEs and partnering on digital financial services.
2. Promote Change in Lending Processes by Fostering Digitalization: Mobile banking and e-wallets are more accessible for women-led MSMEs regionally, and are a cost-effective way to break barriers in the financial service sector.
3. Set up of gender-sensitive loan assessment standards: Intermediaries must create and use non-discriminatory criteria, including other credit scoring based on business cash flow and social guarantees.
4. Promoting Greater Coordiveness between Financial Education and On-Lending Activities: Training on financial literacy, especially on digital finance will help women entrepreneurs to be financially smart and capable of managing finances improving on their financial sustainability and financial freedom.
Conclusion
Gender Value Chain Finance and On Lending Windows integrated has the potential to unlock the Indonesia MSME and women entrepreneurs. Through gender-sensitive financing, capacity, and innovation, GVCF provides targeted support to women MSMEs and helps them to become more productive and valuable assets to the national economy. It is not only essential for the equality in monetary sense but it also necessary to make a robust, diverse, and sustainable economy in Indonesia.
