The Covid-19 crisis has shone the spotlight on the challenges facing women in Africa, who already carried a heavy burden of care. The funding gap for women-owned businesses in sub-Saharan Africa and for women-led fund managers is currently estimated at $ 42 billion, in often neglected sectors and in industries where women are economically active. As governments, civil society organizations, international agencies and the private sector seek ways to reduce the impact of the pandemic across the continent, now is the time to identify solutions that will advance equality. gender and women’s empowerment, while working for social recovery and recovery.
Gender-focused investing (GLI) is well positioned to bring more institutional capital to Africa and can help close the funding gap for women-owned businesses, but only if investors follow a focused investment approach. on gender during their investment decision-making process. While the strategy may seem obvious – large-scale institutional capital flows into these companies are still lacking today.
At first glance, it appears that significant funding is channeled to the GLI, but it is difficult to ensure that the funding reaches the intended female beneficiaries in our lifetime.
On July 1, 2021, the United States’ International Development Finance Corporation (IDFC) announced that it would contribute $ 15 billion to gender investment by 2025. This was followed by a G7 announcement where it confirmed it would invest $ 15 billion by 2022. Goldman Sachs also invested $ 1 billion from its own balance sheet in companies run by women and fund managers, and in June of this year, announced that an additional $ 500 million was to be invested in Africa.
For Standard Bank Group Executive Head of Institutional Clients and Global Markets, Lindeka Dzedze’s announcements like these are an indicator that there is a compelling business and impact case for smart gender investment strategies, ” the momentum for gender-focused investing (GLI) is definitely starting to pick up speed. The United Nations Economic Commission for Africa (UNECA), in collaboration with Standard Bank, launched the African Women’s Impact Fund (AWIF), which aims to raise $ 1 billion over 10 years, in order to to create a sustainable investment platform for women-led funds, and we look forward to helping guide this fund.
As part of their Gender-Lens Impact Investing series, African Business, Educate Global, Goldman Sachs and Standard Bank, recently came together for a second event to discuss some key learnings they have made, some of the main obstacles that still needed to be addressed, and how more African and foreign institutional capital could be mobilized for women-led funds to improve GLI’s prospects in Africa.
Challenge our own investment criteria to examine the market opportunity
Jessica Espinoza, Vice President of Private Equity and Venture Capital Investments at DEG / KfW, and President of the 2X Challenge, explained that while they were convinced of the business impact and impact of GLI, when they launched the first 2X challenge in 2018, it was the first time they took a serious look at their core business and incorporated a gender lens from the outset, portfolio management due diligence and value creation until exits and preservation of this change.
They had given themselves a collective goal of $ 3 billion to be reached by the end of 2020. “Naturally, everyone was quite nervous,” Espinoza said. “There was a lot of debate about whether the target was too bullish and whether or not it could be achieved. However, by collectively building capacity, engaging in peer learning and engaging other private sector investors, we have been able to change course and transform our own business models in the way we allocate capital. In doing so, at the end of 2020, we were at $ 11.4 billion, if we also count the co-investments.
The new $ 15 billion commitment for this year and next has become a bit more difficult with the COVID-19 pandemic. What is emerging is what Espinoza calls an industry “blind spot”. Progress has been made, but investors are looking at opportunities in the traditional way of DFI investment strategy and criteria.
She shares that there are a growing number of women fund managers with very inspiring gender strategies who are investing in exactly the types of businesses that are gender sensitive and want to see funded. “Their approaches are more innovative, but because they are often new entrants, they are not necessarily on the radar of large institutions and do not necessarily meet the investment criteria set by those institutions decades ago.”
Espinoza notes that this is an opportunity for all of us to question our own investment criteria to examine the opportunity in the market, taking the perspective of the opportunities that exist to avoid limiting the opportunities for investment.
Reactive interventions that help ease the pain of running a business run by women
Equity Bank Executive Director Mary Wangari says this COVID-19 pandemic has led to a rapid response with interventions that included granting moratoriums on a case-by-case basis, in accordance with target sectors, to ease the pain of companies, and a personal point of view, in terms of what these women were going through. Through Equity Bank, women-owned businesses could benefit from risk-sharing coverage of up to 75 percent, alleviating the burden of providing additional support to help recovery beyond of the pandemic.
“What Equity Bank has done, and it has been going on for years, was simply to speed up our responses due to the emergency caused by the COVID-19 pandemic. We looked at the interventions in four ways as part of the financial inclusion agenda that we have promoted over the years. The first is savings and investments for women, including young people, because we cannot talk about women without talking about young people because there is a direct correlation. The second intervention is to borrow for small loans, especially for micro-enterprises and retail, and we have seen that the record of women in loan repayment is very good. The third is insurance, because we believe it is essential not only for preserving the assets that these women create, but also for dealing with eventualities that cannot be prevented or predicted. The final talk was about how we help businesses move money to pay for things like bills and business purchases. ”
According to current data from Equity Bank, 52 percent of its customer base is female, and its goal was to make interventions that would work well for their customers. “The moratoriums ranged from three to thirty-six months, based on our own predictions of how long we have seen the impact of the pandemic last,” Wangari said. “What I believe is that the focus on gender requires different interventions, from different perspectives, and that is because there are so many ways to look at initiatives led by women and men. opportunities available to them, as well as the challenges they face, ”Wangari explained.
Combat misconceptions about Africa to overcome national prejudices
The challenges from an American perspective have been identified as widespread misconceptions about Africa and inertia – the natural human tendency to stick to what is familiar and comfortable. This is not something that is going to change quickly, especially in the context of the governance of boards of directors of public pension funds in particular, but it needs to be questioned.
Emerging markets in this context are not China, but rather Rwanda, DRC and South Sudan. Some of them are fragile economies, with underserved sectors that are critical to accelerating the post COVID-19 economic recovery. The consensus is that the time has come for foreign institutional investors to increase their allocation to the alternative investment space.
“Investing in youth and women as drivers of the consumer economy in Africa is good for impact. It is also very good for companies and for institutional investors to carefully examine their sector allocation, in particular food health education and digital services, and their geographies to overcome the domestic bias ”, says Sandrine Henton, CEO of Educate Global.
It’s time to look for higher risk-adjusted returns and higher degrees of diversification, fighting the domestic bias to invest in lesser-known geographies. It is about bringing together the full spectrum of all capital providers, into a single group, including local pension funds, global pension funds, DFIs and Multilateral Development Banks (MDBs). , private equity and venture capital funds, and other types of LPS. .
Take a gender-focused investment approach
A number of challenges still need to be overcome to close the gender gap and reduce the impact of the pandemic on women-led businesses across the African continent. It’s time to change the discourse by questioning your organization’s investment criteria to examine market opportunities, implementing reactive interventions that can help ease the pain of running a business. led by women, and by not letting misperceptions about Africa create domestic biases during your investment decision-making process.