Globally, and specifically in Africa, women face significant limitations accessing finance due to inherent biases among financial institutions. Women-owned and -led SMEs worldwide face major constraints in accessing financial services. The World Bank approximates that since 2013 only 3% of early-stage funding went to all-women-founded teams.
SHILUBA MAWELA CA(SA) Managing Partner: Tshiamo Impact Partners – an impact advisory and impact fund management firm
By the end of 2021, single women-founders and women-only founding teams had raised less than 1% of the total investor capital flows on the continent. All-male founding teams raised $25 for every dollar raised by female founders. Resultantly, women-owned and -led SMEs face a $320 billion shortfall to accessing credit, despite having lower non-performing loans than men.
Gender lens investing (GLI) is the deliberate empowerment of female entrepreneurs through investment, which includes increasing the access to capital for women, supporting female leadership, promoting gender equality in the workplace, and making investments into products and services that substantially improve the lives of women and girls. GLI includes the incorporation of analysis including targeted decision-making where capital allocations are made towards woman-owned and -led companies to address gender disparities that exist globally, aligning with the UN SDG Goal 5 aimed at achieving gender equality.
At the G7 Summit in 2018, a commitment by a number of global development finance institutions (DFIs) was launched, referred to as the 2X Challenge, to collectively mobilise $3 billion in capital with a gender lens. The target funding goal was met and surpassed three-fold. At the 2021 G7 Summit, 20 global DFIs committed to a new target of $15 billion for the period 2021–2022. The 2X Challenge has developed an investment framework which has become a global industry standard for GLI. Efforts are now under way to develop verification and assurance systems for 2X Challenge alignment strategies.
In Brief
The female economy represents the largest emerging market, with more than twice the size of India and China combined. Female consumers will control over $15 trillion of global consumer spending, while closing the gender labour gap could add $28 trillion (26%) to the annual global GDP by 2025. All these statistics are indicative that not only is there a clear social need to close the gender gap, but there is a strong business case to do so.
Countless reports show a strong correlation between gender-balanced leadership and the overall financial performance of a company. Investing in women in senior leadership strengthens the companies in which they work. Companies with gender-diverse boards generate a higher return on equity and outperform those with no women in terms of share price and growth rates.
The prominence of GLI has seen an increase in innovation with the emergence of new gender-lens vehicles and funds, along with instruments like gender bonds, gender impact-linked loans and gender diversity indexes. At Tshiamo Impact Partners, we currently manage allocations from two angel groupings consisting of 50 African women who invest with a gender lens, these funds have achieved both attractive above-average financial returns along with clear social value created.
The future of GLI on the continent requires a greater representation of female ownership and management, along with workforce representation. Growth will further occur where there are clear investment goals and targets that incorporate gender diversity, with increased investments into female owned and led businesses, accelerated by the development of innovative financial products, proactive strategies and gender inclusive policies within the financial system.
The success of gender lens investing will only happen when we put money where women are.
