Invest in women for real prosperity

Although it is now clear that successful women-led enterprises lead to reduction of poverty around the world, investment is still heavily skewed in favour of male-led businesses. In an attempt to break the deadlock, African Business and Educate Global brought together an expert panel in a recent webinar. We report on the event.

Gender-lens investment seeks to close the funding gap between men and women by factoring gender into investment decisions in order to advance gender equality and reduce bias in investment decision-making. The practice has been around for over a decade and has attracted the interest of major funds and development finance companies around the world. For example, In 2021, the United States International Development Finance Corporation announced that it would mobilise $12bn for investment in businesses that advance gender equity in emerging markets as part of its 2X Women’s Challenge. A total of 15m women and girls in fragile and post conflict markets are set to benefit from this programme.

In March, leading global investment management firm Goldman Sachs committed to investing more than $10bn over the next decade to advance racial equity and economic opportunity by investing in Black women

In a similar vein, the United Nations Economic Commission for Africa, in partnership with Standard Bank, has launched the African Women Leadership Fund with the objective of raising a billion dollars over a 10-year period. The partnership will create a sustainable platform to support women-led fund managers.

Despite these efforts, investment in women-managed funds and businesses in sub-Saharan Africa lags well behind male-managed enterprises – with a difference in the region of $42bn between funding for male and female-led businesses.

However, the Covid-19 global pandemic has increased the spotlight on these disparities, given the different levels of impact experienced by women and women. An increased focus on the care economy has also presented an opportunity for global and African funds to direct investment towards women-led business and sectors on the continent.

Addressing the issues

Questions remain as to whether and how these efforts can succeed and make the most impact, what are some of the hurdles that need to be surmounted and what needs to be done to ensure success. African Business magazine and Educate Global brought together a panel of stakeholders to discuss these and other questions that need to be addressed in the second of a series of webinars on the topic.

Panellists for the discussion included Sandrine Henton, General Manager of Educate Global; Jessica Espinoza, Vice President for Private Equity and Venture Capital Investments at DEG/KfW and Chair of the 2X Challenge and Mary Wangari, Group Executive Director for Equity Bank.

Also on the panel were Dick Ingram, Senior advisor at RisCura and Lindeka Dzedze, Head of institutional clients Standard Bank Group. The discussion was moderated by Pedro Besugo, of African Business.

Jessica Espinoza reflected on the 2X Challenge, first launched in 2018 to direct investment to gender-smart investments. She said this was not the first such commitment from development finance institutions. A previous collective target of $3bn by the G-7 group of industrialised nations had been set for 2020 and at the time, had aroused concern about its achievability. However, through collaboration with private sector investors, $11.7bn was raised by 2020.

Even though the Covid-19 pandemic has presented some challenges, the target of $15bn by 2022 is thus achievable. It will however require more investors to join in the effort, said Espinoza.

Also just as importantly, new approaches towards channelling these investments must be considered, as the traditional ways have not been entirely successful, she pointed out.

Luckily, there is a growing number of female-led fund managers with inspiring gender-led strategies who are investing in gender smart businesses and can be relied on to show the way towards this new investment paradigm.

Espinoza said while it is difficult to

change things when acting alone, collaboration between various stakeholders would increase the chances of success.

Mary Wangari observed that a focus on gender-smart investment requires new and different perspectives. She shared the experience of Equity Bank, which has pursued a financial inclusion agenda over the years with modestly successful results.

The bank’s ethos revolves around a four-way approach – encouraging saving and investment for women; extending lending services to women; facilitating insurance and other financial instruments and enabling them to move money and undertake payments.

Women make up 52% percent of Equity Bank customers she said, and the bank is encouraged by their repayment records.

Through partnerships with DEG, African Development Bank, European Investment Bank and other institutions, Equity has been able to take greater risks which have paid off.

She said women had built scalable enterprises from as little as $100 start-up capital. This enables them to drive growth in the real economy as well as facilitate social development through, for example, paying for their children’s education.

She also pointed out that Equity Bank’s management board, with majority representation for women, reflected its gender focus. She said that time is now ripe for gender-led investing and that female entrepreneurs could succeed with the right training and support.

Profits of diversity

Dick Ingram explained that investment is by its very nature about the future. Global investors have to factor into their decisions the fact that women make up more than half of the world’s population and that Africa’s demography is dominated by youth.

However, he said, misconceptions about Africa, unwillingness to try new things and being comfortable with the familiar, solid performance of markets in developed economies mean that fund managers are hesitant to turn their attention to Africa. For example, US pension funds are currently able to post 23-30% annual returns, which does not motivate them to look elsewhere. Corporate governance structures that oversee fund managers also tend to make them conservative and averse to risk.

He observed that change will not come quickly and will require changes in public perception and the direction of political influence. Some US states, for example, require women and minorities to be considered in any public investment, which gives managers some cover to direct funds towards gender-smart targets.

He said African, female-led businesses represented a fresh and promising prospect that global investors would be well advised to explore.

Sandrine Henton pointed out that gender lens investing means targeting new From left to right: Lindeka Dzedze, Dick Ingram, Jessica Espinoza, Mary Wangari and Sandrine Henton. sectors and locales that may have not have attracted investment previously. However, the soaring market performance in developed economies may not be sustainable in the long term so it makes sense for investors to consider other, new, risk-adjusted options in emerging markets.

Diversity, she said, quoting a report from the International Finance Corporation, is associated with 20% improvement in returns for investors and among other things, brings fresh, less biased perspectives to decision making and leads to better results.

She stressed the need for investors to focus on the real economy, which includes sectors such as food, health, education and digital services, where women are more likely to be economically active but which are currently underserved.

Mobilise pension funds

Educate Global was one of 11 GPs invited as part of the 2X Challenge of the G7 to codesign a new facility, 2X Ignite, that will see more capital being allocated during 2021 to female-led fund managers on the continent – with experienced teams coming together with gender-lens strategies for the first time.

She suggested that African governments should encourage their pension funds to invest at least 10% of their assets in private equity fund managers who are investing in the essential sectors (food, health, education and digital services) in order to boost the post pandemic recovery.

In Africa, 60-80% of pension fund assets are sourced from universities and hospitals, and it is therefore vital that pension fund trustees also allocate capital to these recovery sectors. Gender-led investing is an opportunity to correct long-standing gender imbalances that have had negative repercussions for not just women but the entire continent. With various stakeholders rallying around the idea, much will depend on collaborative efforts that will be forged and the readiness of African women to seize the opportunities and help change the continent’s narrative.

investment in women: managed funds and businesses in sub-Saharan Africa lag well behind malemanaged enterprises – with a difference in the region of $42bn between funding for male and female-led businesses