STRENGTH IN A SARI

Having built the world’s first social stock exchange, particularly to empower women, Durreen Shahnaz wants to take impact investing mainstream.

rowing up amid the turmoil of the Bangladesh Liberation War had a profound impact on Durreen Shahnaz from an early age.

The experience of watching her country struggle to get back on its feet in its early days of independence stirred in her a defiance never to yield to others’ notions of what she could or could not do.

“We are all a product of the country and culture we grow up in,” says the former investment banker and founder of the Impact Investment Exchange (IIX).

Bangladesh was known as East Pakistan when she was born, and one of her first memories as a child was the war with West Pakistan that lasted for about nine months in 1971.

Her father was involved in the resistance movement. Many of her cousins hid in her family home; boys were taken away and killed; girls were put in “rape camps”. It was a trying period, not helped by the fact that after the war ended, the country was hit by famine and depended on foreign aid to survive.

The struggling new nation was “being told by the World Bank, the multilaterals, the big powerful countries, how and what it should be doing”, she notes.

“That’s not very different from many other countries in this world, but I think what was very interesting was the big parallel between what I saw the country going through and what it was like being a girl in our society. It was really a life that was dictated by others — incredible restrictions and incredible limitations.”

In Bangladesh, as in many Asian countries, marriage was the ultimate goal for every woman. Everything a woman does is a means to that end. Her grandmother, illiterate, married at 11. While she and her three sisters went to school, they were reminded that their qualifications were not for pursuing a career but rather so that they could land a respectable marriage.

“You should just be happy that you have the opportunity to be a wonderful wife to a civil servant or a doctor or lawyer,” she says. Her sisters’ academic brilliance did not seem to matter as much as their parents’ intent on winning that right marriage proposal for their daughters.

“I definitely broke free from that after watching my three sisters, and not being able to see myself following their paths and the rules. I think for me it seemed like a lot of parallel, you know, with the country being told by other countries how it should grow, the same as a woman being told what to do.”

EARLY DEFIANCE

That defiance, which made her do things such as cycle around the city like the boys could, evolved as she grew older, and led her to ponder the system she was entrenched in and what she could do to change it.

When Ms Shahnaz turned 14, her father’s job posting took the family to the Philippines. Her world opened when she was enrolled in an English-speaking American school there. Being able to pursue subjects that interested her and doing debating, as well as writing and editing the school newspaper, created a hunger to learn.

From there, she set her heart on going to the United States for her undergraduate studies. At 17, she obtained a full scholarship for Smith College, a women’s liberal arts college in Northampton, Massachusetts, which she picked from several options because it was “a fantastic choice … the bastion of the feminist movement”.

Famous feminists Gloria Steinem and Betty Friedan had also studied at Smith, and it was at the epicentre of the women’s movement in the US in the 1960s.

In America, she continued to follow news of happenings in Bangladesh closely, including the series of coups, uprisings and assassinations amid a power tussle between the government and the military.

At the same time, she grew more upset at the intervention of international organisations — again — telling her countrymen what to do when they lacked an understanding of the deeper workings of the government.

The frustration of being told that she was selfish for wanting more while she was growing up had always irked her.

But now on a broader level, she asked herself the same questions again: “Are we selfish to actually aspire to be asking for more? Are we selfish to think that perhaps one day we won’t need banks like the World Bank if the world and its financial systems were working the way they should?”

She might not have known it then, but a vision was already beginning to form.

WALL STREET TRAILBLAZER

Fresh out of college, she joined the investment bank Morgan Stanley as a financial analyst, becoming the first Bangladeshi woman to work on Wall Street.

The financial world was an eye-opener for her. “I honestly didn’t even own a suit; I borrowed from my friends. I didn’t know you had to wear pantyhose,” she says. In interviews, she has likened her Wall Street experience to an anthropological study as she observed and tried to adapt to its culture and even all its excesses.

She learned first-hand that the global financial system was an “elite club” where only a select group belonged, and it developed in her a hunger to build more inclusive markets that people had access to, regardless of geography, income or gender.

In an address to the United Nations General Assembly in April this year, she said: “I wanted to change that. I wanted to open access to credit and economic opportunity to even the most remote and marginalised corners of the world. I wanted to connect the Wall Streets of the world with the back streets of underserved communities.”

She believes the traditional financial system has incredible power to do good, but it remains exclusive in that it keeps communities across the globe marginalised and trapped in poverty because of “critical gaps and a weak conscience”. She wants to see financial institutions look beyond profit maximisation to bridge the gap between finance and development.

Three years after joining Morgan Stanley, she went home, a decision that took her superiors by surprise, because of how well she had been doing. But Ms Shahnaz wanted to use what she had learnt in the US to create a more equitable society in Bangladesh.

Back home again, she found work at Grameen Bank, a microfinance organisation and community development bank that gives micro-credit to the poor, including women. This was a vision that resonated with her.

Working at Grameen, she learned that women tended to make better use of loans than men, because more often, the money actually went to benefit their children and families. Women also had a better track record when it came to repayment. At the same time, the small loans empowered them and made them more self-sufficient.

SOCIAL STOCK EXCHANGE

The idea to create the world’s first social stock exchange, the Impact Exchange, emerged in 2008 after she sold her social entrepreneurship company and had the opportunity to share her ideas of how inclusive markets can be built with financial bigwigs at a Rockefeller Foundation think-tank session.

Last year, IIX worked with DBS Bank to issue and list on the Singapore Exchange a US$8-million Women’s Livelihood Bond (WLB), a debt instrument that raises capital for organisations benefiting women, and the first of its kind to be listed on a stock exchange.

It was an emotional accomplishment for Ms Shahnaz who cried when the bond was listed because it “represents my grandmother who never had a chance, my mother and my sisters who didn’t get the chance, the millions of women who still aren’t getting the chance”.

The bond issue was followed by another announcement in September this year that DBS and IIX would aim to issue a series of bonds totalling $100 million under the WLB scheme, to fund South and Southeast Asian enterprises tackling financial inclusion, clean energy access and sustainable agriculture, also with the goal of benefiting vulnerable women.

It wasn’t all plain sailing. Ms Shahnaz confides that the structuring and bookbuilding of the first WLB had turned out to be more challenging than she expected. For one thing, it was difficult to win investor confidence for the novel idea. And she admits to having done something against her feminist grain.

“I would consciously send men to the investor meetings, because investors don’t like a woman, much less a South Asian woman, telling them how they should be looking at their investments differently,” she explains. “So you have to give them something that they’re familiar with – better if they are Caucasian men. They like to hear it from people they innately trust.”

There were other pushbacks as well. Some investors also asked to exclude women from the bond — a ludicrous idea to her when women were precisely who the bonds were designed for.

“They said: ‘Why can’t it just be a high-yield bond for emerging markets?’ And I said, ‘Because it’s actually focused on creating women’s livelihoods, and I want to put women front and centre in the name of a bond in capital markets’.

“You cannot even imagine how I have to fight to keep the women in the WLB. The bankers said, ‘Just drop this, and we can sell it right away’, and I said, ‘No, I would much rather not sell the bond’.”

Along the way, her initial idealism about how investors would surely take up the bonds when they see the benefits of helping half a million women gave way to the pragmatism of private-sector investors who wanted to see more de-risking mechanisms put in place before they would subscribe.

For the first WLB, the United States Agency for International Development agreed to provide credit protection and the Department of Foreign Affairs and Trade of Australia also helped to subsidise the bond, but still, these were not good enough for the investors, who wanted someone to absorb the first loss.

“At this point, it had been two years [of working on the bonds]. I sat down with my husband, Robert (Kraybill), who’s also the managing director at IIX, and discussed how we all worked so hard on the bond and it is so close to the finish line.

“Robert said, ‘You know what, we’ll just put in our last savings.’ I was hesitant because we had already sacrificed so much for the company, but knew that we had to do it.” The bonds ended up being oversubscribed.

Looking back, she says: “I think this comes down to the fact that a lot of what IIX does is ahead of the curve. No one really tells you that being a pioneer has its struggles and one has to figure out the most effective way to engage the market.

“While we have been able to create a cohesive ecosystem by engaging lawyers, banks, and donor agencies to work side by side to make this a reality, the risk aversion of private-sector investors to enter new frontiers continues to be an obstacle that I have yet to address.”

To date, IIX has brought in $75 million from the private sector to benefit 23 million people in 40 countries — not just through the WLB, but also through IIX’s crowdfunding platform, Impact Partners, and also through the IIX Acceleration and Customised Technical Services programme which supports early- and growth-stage impact enterprises. It has worked with partners such as Bank of America Merrill Lynch, the Rockefeller Foundation, JP Morgan and USAID to unlock investment capital.

Ms Shahnaz hopes to tap $1 billion in private-sector capital to help 100 million people in underserved communities by 2020. She also hopes to launch more WLBs in other major exchanges around the world.

IIX’s latest project is the structuring of the Women’s Health Bond in the US, which looks at gaps in women’s health services and financing. Its feasibility study has identified women-specific cancers, maternal health and reproductive rights as areas where innovative finance can make the biggest impact in saving lives and reducing future costs.

SIGNIFICANCE OF THE SARI

A miscommunication on the day of the interview resulted in the photographer turning up when the photoshoot had been rescheduled. Ms Shahnaz firmly declined to be photographed in her contemporary outfit of blouse and culottes.

Later, she explained: “You might be thinking, ‘She looks fine; why can’t we just take a few pictures?’ But I specifically wear saris (for photos) because when someone sees a woman in a sari, the immediate reaction is to think that they are provincial. A woman in a sari and finance? No way. “For me, it is really that. We need to consciously break the barriers and push the envelope in making people think, in this case, that a sari is not a symbol of weakness, which it is most of the time in our culture. It is a symbol of strength.

“There are millions of women working in saris in the fields. Reports have shown that women perform over 60% of the world’s work. They’re doing most of the work in the field, they’re raising the children, and yet they only get a fraction of the global wealth.”

For her, it has become a resolve to change the system slowly, so that people can see that it is possible to be a brown-skinned woman in a sari and still be “damn good at finance and take on Wall Street and even the financial system”.

In her address to the UN, she said that her grandfather used to tell her that according to the astrological charts, the moment she was born came only once in a century. That moment was called chura moni — the peak and jewel of a moment, ensuring that a child born that moment will reach great heights.

“My grandfather would then continue on to say, ‘If only you were born a boy, then you could have reached the peak.’ I stand here today, proudly, as a woman who is reaching her peak with defiance and with optimism.”

Are we selfish to think that perhaps one day we won’t need banks like the World Bank if the world and its financial systems were working the way they should? I wanted to connect the Wall Streets of the world with the back streets of underserved communities