Financial inclusion can drive progress on food security

By Brenda Behan, Director of Gender, Protection and Inclusion, World Food Programme

One in ten people will go to bed tonight on an empty stomach. Over 300 million people around the world are facing acute food insecurity. The numbers are getting worse, thanks to conflict, the climate emergency, and residual economic aftershocks of COVID-19.

What does this have to do with financial inclusion? A great deal.

When people have access to basic financial services, they are more food secure. That can be as simple as having a safe place to put your money and accumulate it, so that you can access it in a time of crisis. Without access to financial services, it’s difficult to build up that buffer. When a crisis hits, there is no rainy-day fund to help.

In the absence of formal financial services, many people’s only option is to turn to risky and costly informal alternatives, which penalize those who are already in a vulnerable situation.

For the people producing our food, access to finance is vital. Take the example of a smallholder farmer, working on a tiny plot of land with very small margins. Farmers are entrepreneurial and will always seek to increase their productivity. But for this, they need access to credit – for seeds, tools, or technology. And unless they are financially included, credit is difficult and costly to obtain.

This is especially true for women, who have a much tougher time accessing financial services. At the World Food Programme, we are working hard to put more money into women’s hands. In doing so, we improve not just their own food security, but that of their families and their communities. We plan to help ten million women get their own mobile money accounts by 2030. Once they have an account in their name, it will open access to other financial services like loans, credit and insurance, giving women the means to build a future for their families. 

In Uganda, where WFP has a large-scale cash transfer operation in a refugee camp, a focus has been on delivering digital and financial literacy training. As well as women, we include men and boys in this conversation. We need men as champions, who will talk to other men about the advantages of their wives having access to cash, and the importance of making joint financial decisions about household needs.

In Jordan, which has the world’s second-highest refugee population per capita, WFP has been working to extend mobile wallets to beneficiaries in refugee camps, providing technical assistance to the national government in terms of payment digitization, verification and validation processes, and training beneficiaries on how to open and use mobile wallets.

We are learning how to make cash transfers more cost-effective. Previously, WFP had a specific in-house system, where everything was linked to our own processes, and money could only be sent to a particular card. Today, recipients can choose where and how they want cash to be delivered to them. With this new approach, WFP is saving money, can leverage more flexible commercial systems, and can better verify that cash is going to the people it’s intended for.

What role for central banks and financial regulators?

If we are to tackle the financial exclusion facing food-insecure communities, central banks and regulators need to be at the forefront. They can help break down access barriers, such as the need for an identification card when opening accounts. They can contribute to tackling social inequality and power dynamics issues by ensuring a safeguarding process for financial services, helping to guard against sexual exploitation and abuse. 

They can generate vital sex-disaggregated data, shedding light on patterns and differences for men and women in accessing financial services. They can also make sure that financial service providers demonstrate gender parity in locations where they are in direct contact with people.

They can be at the forefront of consumer protection, helping to tackle fraud, ensuring that access to financial services is safe and robust. They can take the lead on financial literacy initiatives that empower people with the skills needed to function in the digital world.

Central banks and financial regulators cannot resolve these issues alone, but equally, they cannot be resolved without them. Currently, financial exclusion is aggravating food insecurity, worldwide. If we can expand access to financial services to the people who need it most, those shocking hunger statistics will start to fall.