Interestingly, European Investment Bank surveys show that companies founded by women receive less than half as much funding as those founded by men—even while they deliver twice as much revenue per dollar invested.
Gender balanced leadership teams in private equity generate a 20 percent higher net rate of return, yet only 15 percent of senior fund investment teams are gender balanced.
The International Finance Corporation estimates that only seven percent of women-owned micro, small and medium-sized enterprises in Kenya have formal access to finance.
Female borrowers accounted for less than a third of all loans disbursed by Kenyan lenders over the five years to the end of December 2023, despite being better re-payers of their loans than male borrowers.
Of course, the imbalance is not just at the top of firms. In eastern Africa, women comprise 73 percent of the labour force, the highest in the continent. Yet they make between 61 cents and 89 cents for every dollar men make.
We need to bridge this gender gap. That means identifying and implementing policies and initiatives that target the specific barriers faced by women-led and women-owned businesses while involving both the public and private sectors in those changes.
Women entrepreneurs find many training programmes available to them to provide traditional business skills such as accounting or bookkeeping. However, evidence suggests that traditional skills training alone is not enough.
Women in business are more likely to face the implication that their abilities are not entirely trusted and, consequently, identified as high risk.
In some cases, women themselves may minimise their capabilities compared to men, when they operate in a competitive male-dominated environment. They end up seeming unsure of themselves.
What they need, by contrast, is to exhibit unwavering self-belief and confidence, if they are to overcome their challenges, so that they can build a competent support system and network. Many mentorship programmes to address this have been set up to complement the traditional business skills acquired.
However, they are not tipping the financing scales in women entrepreneurs’ favour yet. There is progress, but it needs to be faster. Financiers should not see female businesses as “impact investments.”
As we celebrate this year’s International Women’s Day, with the call to accelerate action, taking swift action and decisive steps to achieve gender equality, all financiers should be asking these questions of themselves and of their clients or partners. It’s these actions that will translate into real financing. That’s what will promote true gender equity.
We also work with private equity funds like Helios Investment Partners, Seedstar Ventures, TLCom, Amethis Fund, Acre Capital and many more
They ought to look at them as the successful commercial ventures that they can be with the right financing support.
The private sector, especially in Africa, is a key ally in empowering women economically.
The European Investment Bank supports Africa’s private sector, and women in particular, through our intermediated lending to local banks or microfinance institutions and private equity funds supporting SMEs.
With these intermediated credit lines, we set guidelines for how our financing can positively and significantly impact women. For any intermediated financing that we provide, the local bank has to devote a minimum of 30 percent to female-owned or -led businesses, while microfinance institutions have to dedicate at least half to female beneficiaries.
On the other hand, private equity portfolio companies need to meet at least one of our gender equality criteria to be able to secure financing from the EIB.
To ensure this happens we probe whether the investments of financial intermediaries we want to partner with have a gender impact. What share of the businesses they supports are women-owned or -led? Or have a majority of female employees? Or offer products and services that enhance the well-being of women, while tackling a recognised gender gap?
Does the financial intermediary work towards gender equality within its own institution? What is the share of women in senior management or on its investment committee? Lack of funding for women sometimes stems, after all, from the lack of women in decision-making roles.
Female entrepreneurs pitching for funding may find that at times, they are the only woman in the room.
Does the financial intermediary have a governance structure that entrenches gender strategies? How does it assess gender-based investment risks?
In Kenya, we have partnered with local banks such as KCB Bank, Equity Bank and Co-operative Bank, which have a significant focus on gender-lens investing.
We also work with private equity funds like Helios Investment Partners, Seedstar Ventures, TLCom, Amethis Fund, Acre Capital and many more
As we celebrate this year’s International Women’s Day, with the call to accelerate action, taking swift action and decisive steps to achieve gender equality, all financiers should be asking these questions of themselves and of their clients or partners.
It’s these actions that will translate into real financing. That’s what will promote true gender equity.
The writer is the Vice President of the European Investment Bank with oversight of the Eastern Africa region as well as gender-related financing.
