Crowding-In: The Case for Changing Metrics Measuring Successful Financing of Women Entrepreneurs

Finance for Development MOOC

Current State of Affairs… Today, there are approximately 1B people in the world

living in poverty, subsisting on less than $1.25 per day 70-80% of the poor are women The International Fund for Agricultural Development

reported that the number of women living in poverty has increased disproportionately to the number of men over the last two decades

The UN describes this ‘feminization’ of poverty as being a direct result of the lack of economic opportunities and resources available to women, particularly in developing nations

When women get jobs and start businesses…

Studies agree… The International Center

for Research on Women has shown that women have a higher propensity to use their earnings to buy goods and services that improve family welfare, which supports the development of human capital, fueling economic growth. 

The International Labour Office reported that the socioeconomic empowerment of working mothers leads to a direct improvement in overall family welfare and a decrease in child labor.

The Economist reported that a 10% increase in borrowing by woman for business (vs. male borrower) led to:

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Benefits to local communities and beyond… When women play an active role in civil society

and politics, governments tend to be more open, responsive and transparent.

When women are at the negotiating table, peace agreements are more durable.

Women often lead the way in managing and adapting to the impacts of climate change.

(Source: USAid, “Empowering Women and Girls”)

More women in the labor force can significantly boost GDP growth.

Increasing female access to capital has a tangible impact on per capita income in developing and emerging markets.

Women business owners are more likely to mentor and teach business skills to other women. (Source: Goldman Sachs, “Giving

Credit Where Credit is Due”)

Challenges faced by female entrepreneurs… Women-owned businesses in the developing world face barriers to

entry and business growth that include access to education and training, legal, and cultural barriers. 

SMEs account for more than 90% of enterprises in the global economy and contribute 50-60% of employment in the world. Women-led SMEs make up roughly 33% of this market, the majority of which are in developing countries. Despite the growth and contribution of these businesses, there is a tremendous gap in their access to finance.

IFC estimates that as many as 70% of women-owned SMEs in the formal sector in developing countries are unserved or underserved by financial institutions, resulting in a financing gap of approximately $285 billion.

Closing the gap to empower women entrepreneurs…

Microfinance

Traditional Microfinance: Since 2008, IFC has committed more than $785 million to women through microfinance institutions and commercial banks. This includes a program in Tanzania where the client bank extended 174 credit lines. This approach was then replicated across eight countries in Sub-Saharan Africa. 

Online Microfinance: Founded in 2005, Kiva is a non-profit organization with a mission to connect people through lending to alleviate poverty. Leveraging the internet and a network of microfinance institutions on 5 continents, Kiva lets individuals lend as little as $25 to provide loans to people without access to traditional banking systems. When choosing a borrower, the first filter is gender, allowing lenders to funnel their loans to women.

Bank Support Facilities Goldman Sachs and IFC have partnered to create

the first-ever global finance facility for women-owned SMEs. The Women Entrepreneurs Opportunity Facility, seeded by the Goldman Sachs Foundation and IFC, is raising $600 million in capital through investments from additional public and private co-investors. The Facility extends lines of credit and shares risk with local banks in emerging markets enabling them to on-lend to women-owned SMEs.

Measure the socioeconomic benefits, not just capital deployed… Public and private financings

should include gender-specific components in structures to encourage an increase in woman-owned SMEs, in an effort to close the substantial credit gap. The social and economic returns from these enterprises could be tracked through initial documentation and periodic updates.

Data collected from financial facilities provided to women entrepreneurs using innovative measurement techniques can be shared throughout the industry to support change and use of best practices.

Crowd-in private sector finance to empower women entrepreneurs and you will crowd-in many of the UN’s Sustainable Development Goals.