Photo credit Mann Deshi Bank

Why does so little funding go to women entrepreneurs, and what can we do about it?

By Susann Tischendorf, Director Communications and Digital Innovation, Inclusive Business Action Network and Katharina Münster, Junior Specialist Communications and Digital Innovation, Inclusive Business Action Network

According to the World Economic Forum, it will take over 250 years to achieve gender economic parity. Currently, only two per cent of venture capital goes to women-led startups. While investing in women entrepreneurs alone cannot fix the problem, it could help bridge this gap and reap benefits for men and women alike. What can bankers, entrepreneurs, and support organisations do to shift more capital to women entrepreneurs?

Chetna Gala Sinha never thought she would start a bank. “But women came to me and said they wanted to open a savings account”, she recalls, “one woman blacksmith was insistent that she wanted to save to buy a tarpaulin cover for the rain. The banks were not ready to let her open an account because she was saving such a small amount.”

The former activist reacted – and founded Mann Deshi Bank, the first co-operative bank run for and by women in rural India. Sinha’s story is unique, but also close to universal: It’s a story on the financial hurdles facing women entrepreneurs and the innovative ways to overcome them.

According to the World Economic Forum, it will take over 250 years to achieve gender economic parity. Currently, only two per cent of venture capital goes to women-led startups. While investing in women entrepreneurs alone cannot fix the problem, it could help bridge this gap and reap benefits for men and women alike.

What can bankers, entrepreneurs, and support organisations do to shift more capital to women entrepreneurs?

Firstly, one of the best ways to scale the impact of capital is to invest in funds that in turn invest in women-led businesses. Aruwa Capital, for example, invests in businesses that are providing goods or services catering to the untapped US$15 trillion female economy on the continent. Like Mann Deshi Bank, it was founded by a woman: Adesuwa Okunbo Rhodes strongly believes that changing the gender imbalance amongst capital allocators is a practical way to narrow the gender finance gap. “More women succeeding as capital allocators means more women getting funded, more mentors, more torch-bearers, and more examples to follow,” she says.

Similarly, the 2X Challenge, launched at the G7 summit in 2018, is mobilizing private sector investments that empower women in emerging markets. As of end-2020, the total of 2X capital invested had reached US$ 11.4 billion. At the recent G7 Summit in June, development finance institutions set a new ambitious target: US$ 15 billion in 2021-2022. “If we want to change the world, we must change the way we allocate capital,” believes 2X Chair Jessica Espinoza.

Secondly, the finance industry can do more to ensure that financial products and services are inclusive. “Women are trying hard to make themselves bankable”, says Chetna Gala Sinha, “but bankers are not prepared, because traditionally, women do not have collateral.” In many countries, land is traditionally owned by men – making it hard for women to secure standard loans.

This is what Mann Deshi Bank was founded for. Sinha has identified other foundations on which to assess the credit worthiness of its customers: Instead of looking for collaterals, her bank analyses the enterprises of potential borrowers. How large, for instance, is their market share? In addition, it offers doorstep banking and financial literacy trainings through its sister organisation, the Mann Deshi Foundation.

Lastly, we all have a role to play in making sure these women entrepreneurs are being seen and heard. Hearing real stories from women about their challenges and successes serves to inspire others to take action in new ways. Furthermore, Catalyst at Large founder Suzanne Biegel notes that storytelling can also help make the case for investors. Investing in forms of storytelling such as success stories, solid data, and compelling case studies, is therefore also an investment in changing social norms.

The Global Scale Up X initiative, an Instagram community for female entrepreneurs to connect to others, and the online series Impact Stories produced by the Inclusive Business Action Network are two examples of innovative storytelling approaches that seek to amplify the voice of female entrepreneurs.

The story of Mann Deshi Bank is far from coming to an end. By today, the bank has impacted about 600,000 women’s enterprises. As Chetna Gala Sinha puts it, “the time has come now for women business leaders to also invest in women.”

Investing in women is good business, both financially and by creating long lasting impact. But finance can only take women as far as social norms allow. Finance cannot single-handedly change social norms, legal rights, or unconscious bias.

It can however act as a catalyst to address the gender imbalance and help close the finance gap. By investing in women entrepreneurs and their business today, investors are financing a more prosperous and equal future for decades to come.

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