Closing the $300 billion capital gap: new report sheds light on Gender Lens Investing
Many financiers apply gender lens investment strategies to bring new dimensions to their investments by improving economic opportunities and social well-being for women. They often face challenges, and their insights on these hurdles and best practices to mainstream gender in investment decisions are examined in a new International Trade Centre (ITC) publication.
While other publications focus on how to apply a gender lens approach to an investment portfolio, Twelve Lessons in Gender Lens Investing shares the do’s and don’ts. It addresses the gaps to meet the needs of women-led firms and offers advice to capital providers willing to strengthen their gender lens strategies and deepen their impact on women.
The report – based on a global survey of almost 2,000 businesswomen and interviews with nine capital providers finds that women seeking finance know little about options and application processes, struggle to understand financial terms and lack collateral. The 12 lessons learned by financiers translate into action points to guide financiers to design, apply and strengthen gender lens investing strategies to help bridge the estimated $300 billion capital gap for women entrepreneurs in developing countries.
‘This shortfall is perpetuated partly because women continue to encounter barriers to financial inclusion influenced by diverse factors such as cultural norms, lack of financial information, collateral, understanding of procedures and ability to meet requirements,’ said ITC Executive Director Pamela Coke-Hamilton. ‘As both market enablers and participants, capital providers are in a unique position to change this and benefit from adding a gender lens to their investment portfolios.’
While some financiers believe that investing in women delivers substandard financial returns, a wealth of evidence shows the benefits of adopting a gender lens towards investment prospects. These include less portfolio risk, greater returns and lower costs, as women tend to be loyal customers and cautious investors.
The report highlights four broad key success factors to invest in women. The first step starts in creating change from within and leveraging networks. This involves having a deliberate plan, ensuring that top management is committed and creating a gender focus point within the organization using existing initiatives as a starting point.
The second step is pipeline development: forming partnerships with women platforms and networks to provide training, coaching and mentoring to women and to build the capacity of women entrepreneurs. The report recommends building trust by recruiting female workers and staff training.
Offering value chain financing, non-cash instruments and leasing products is part of structuring, which is the third step. The report urges investors to build partnerships with development finance institutions to de-risk their portfolios and to adapt due diligence requirements for micro and early-stage companies.
Financiers should collect data after investments are made in order to convince capital providers there is a business case - that is, to prove the value of women-owned firms and how investable they are. Collecting data consistently enables investors to evaluate performance and gaps and to support innovation to address any gaps, the report says.