The International Finance Corporation (IFC), a member of the World Bank Group, aims to improve the standard of living, especially for those on low incomes or in vulnerable circumstances, and develop the economy in emerging markets by encouraging private sector growth. It works in over 100 countries.
Its Banking on Women strategy aims to support small and medium-sized enterprises (SMEs) in countries with “large numbers of women entrepreneurs” and “strong, enabling ecosystems”.
As of January 2023, as mentioned in our previous piece on the Economic and social benefits of gender lens investing, the programme had invested over US$4bn to finance women-led SMEs through local financial institutions.
We spoke to Jessica Schnabel, the head of the programme, to find out more.
What is Banking on Women and why is it important?
One of the things that we noticed over ten years ago was that financial institutions didn’t necessarily recognise women as customers who bring in growth. They weren’t recognised as good customers, so there weren’t tailored financial solutions for them. Women also face regulatory, legal, and sometimes historical and sociocultural challenges. Sometimes business experience and credit files may be thin or nonexistent for many women operating informally.
So, it is necessary to work with financial institutions to tailor and orient their financial solutions and the information, education, networking, and training they provide alongside capital, specifically to women customers and entrepreneurs.
That’s what Banking on Women is all about.
Sounds fantastic, so how does it work?
We invest in private sector financial institutions and provide those financial institutions with expertise, advisory services, actionable research and data analytics. We also help them design new products and services for women entrepreneurs, particularly women-owned SMEs. We’ve done so in over 66 countries with over 204 financial institutions.
We are interested in mobilising capital markets to finance women and women’s employment, empowerment, agency and voice. One example is through gender bonds, which we have helped our clients launch in six markets, and another example is the Women Entrepreneur’s Debt Fund, launched in 2016, which offers investors an opportunity to co-invest alongside IFC in our Banking on Women portfolio.
Why should investors consider gender lens investing?
Oh, so many reasons. Studies show that gender-balanced leadership, having a certain percentage of women in the C-Suite and women on the board in private sector companies, means they perform better, creating higher returns for investors. That’s for companies of all kinds across the financial and retail sectors, and manufacturing. We also have evidence that women-led startups and founders give better returns to venture capital and private equity investors. And, when you have gender balance in the fund management structure, those fund managers return a more diverse portfolio to their fund investors and achieve higher returns.
So, it’s a sound investment. What are some of the other reasons to invest through a gender lens?
Data shows that loans to women customers have lower non-performing loans on average, and women bring other financial benefits to banks, like asset and deposit growth, opportunities for cross-selling, and as mentioned, better asset quality.
In the climate space, the narrative we often hear in the environmental, social, and governance investor circles is that women are victims of climate change. This stems from a number of factors – social, economic and cultural. Changes and movements in land and people affect women first and affect poor women first, mainly because 73% of the 1.3 billion people living in conditions of poverty are women, and 40% of the poorest households are headed by women, according to the United Nations. In addition, “women predominate in the world's food production (50–80%), but they own less than 10% of the land”.
Can you give us some specific examples of projects?
We launched a programme in the import and export business called Banking on Women – Global Trade Finance Program. In our trade finance programme, we have a well-established business, but we didn’t see any women traders or women-owned businesses importing and exporting.
So, we launched the Banking on Women global trade platform to support banks’ ability to work with customers who may not be able to import and export what they need. We made it available to the hundreds of banks we were working with.
And one of the first ones was a woman trader in Burkina Faso who was trading, importing and exporting in her local market. The financing supported her to import critical commodities and goods.
In 2022, we invested in a gender bond issued by Tanzania’s National Microfinance Bank. Not only is it the first gender bond in sub-Saharan Africa, it is also a signal to women entrepreneurs and investors that they are a source of growth for the bank. The women who come to the bank can feel welcome, knowing that its doors are open. They’re running small factories and retail businesses, they’re trading, and they’re in every sector of the economy in Tanzania. When you make the links between a capital markets instrument, like a gender bond, the promise that it holds to investors, and then trace it down to its use of proceeds, which is lending to 2,000 small women-owned businesses in Tanzania who create jobs and spur growth, it’s about as exciting as it gets for a banker.