Gender lens investing is gaining traction with investors around the globe and Africa is no exception. WSII’s Senior Gender Lens Investing Advisor Suzanne Biegel reflects on discussions and lessons learned at Sankalp Africa Summit, a 2017 gathering of more than 1,000 investors, fund managers, entrepreneurs, and intermediaries focused on building inclusive economies. Along with co-author Isis Nyong’o Madison, she shares key takeaways for reducing barriers and improving the investment ecosystem.
In a tent under the Nairobi sky, we recently gathered for engaging conversation on gender lens investing in early stage and growth businesses in Africa. What are the barriers facing women entrepreneurs? What biases are women entrepreneurs subject to? What types of capital are available – or still needed?
At Sankalp Africa, four powerhouse African women led the discussion: Andia Chakava from New Faces New Voices, Isis Nyong’o Madison founder of Kenyan parenting platform MumsVillage and advisory firm Asphalt & Ink, Wanjiru Kamau Rutenberg from AWARD and GAIA, and Makena Mworia from Kenya Women Holding.
Gender lens investing is most commonly defined as “the practice of investing for financial return while also considering the benefits to women” or gender equity.
Attendees shared differing views about what gender lens investing means in the African context, but the definition used by Kenya Women Holding—one of the leading African financial institutions with a reach of 800,000 female customers in Kenya—resonated most strongly: gender lens investing involves investing in workplace equity and decision making, funding the development of products and services focused on women and girls, and increasing women’s access to capital.
Over the course of several days, we heard from many voices about the specific challenges facing women entrepreneurs in Africa. Four key themes emerged.
Lack of Capital
The supply side of capital–including banks, microfinance organizations, angel investors, among other options–still does not meet the varied needs of businesses with different shapes and sizes. For example, bank financing is structured for businesses with consistent cash flows with no grace periods—and many women entrepreneurs in Africa may not have these consistent cash flows. This gap is particularly evident for businesses that are past microfinance but not yet ready for venture capital or private equity. What will it take to increase investment in these areas?
The capital raising process itself can be biased against women. In conversations, we’ve heard that women entrepreneurs often need to meet higher standards in order to be considered worthy of investment and are frequently questioned about their abilities or commitment to running a business.
Competitions losing allure
As their numbers increase, the competitions, fellowships and awards aimed at bringing more visibility to female entrepreneurs are losing their shine. Some entrepreneurs view these as a PR tool rather than a valuable exercise leading to the capital or connections that truly matter to growing businesses. Competitions that require pitching on a public stage, for example, are relatively new to the region and seen as unreasonably intimidating and artificial compared to one-on-one meetings with investors in a private setting.
Unfriendly networking norms
Networking is critical to business success across the world. But the how and when matter a lot and the group identified this as a pervasive barrier to accessing opportunities. The social norm of evening cocktail networking events was particularly frustrating for many women around the table, who strive to balance work, life, and family responsibilities with limited hours.
These challenges individually may seem surmountable, but collectively result in a large portion of women self selecting out of capital raising altogether. New research published by New Faces New Voices found that 62% of East African women entrepreneurs have never applied for a loan because they don’t think they meet funding requirements and the bank products are not aligned to the needs of their businesses. Given that business loans are the best understood form of financing locally, avoidance of loans is an indication that many African women entrepreneurs will not be able to scale their businesses to levels critical for Africa’s overall economic growth.
Given the gender-specific challenges that women entrepreneurs face, here are five suggestions to move forward:
Increase Number of Women Investors
While the broader debate in Africa centers on deal flow quality versus capital availability, there is a significant pipeline of investable women-founded, women-led and women-focused businesses across sectors.
But to bring capital to these businesses, we need women investing in women as much as we need more men investing in women. It matters who has access to capital, who directs capital and how power structures are formed.
The impact of more women in decision-making positions at venture capital funds, private equity funds, banks and other funding institutions is multifold. First, it will help to counter the biases currently locking female founders out of formal funding and is likely to grow the number of female founded businesses.
Second, our conversation reflected the belief that “you can’t be what you can’t see.” When there are more senior women being seen as visible role models as investors, board members, and founders, a new self-reinforcing cycle can attract more women into the investment profession and encourages them to pursue formal funding routes.
Address Bias in the Capital Raising Process
Conscious and unconscious bias has an impact in the capital raising process. There’s a seemingly unshakeable perception from both local and global investors that businesses led by African women are microenterprises without the potential to scale, and thus the funding is approached from that lens. (Of course there are exceptions and there are some exceptional women founders getting funded by great investors. But we’re pointing out the larger persistent trend.)
Investors can work to overcome unconscious bias by collecting data around current practices, asking questions such as “how diverse is our network to build deal pipeline,” “how many jobs created by our investments are held by women,” and “can we see patterns of investing only in people who look like us?”. Low-cost, high-impact experiments to understand and address organizational biases can be found in What Works: Gender Equality by Design.
Establish New Networking Norms
African women form networks around many areas of their lives—the use of group savings networks is one highly effective example. But there is an opportunity to build more connections among these existing and emerging online networks and to draw connections to regional and global networks.
Similar to the U.S.-based Dreamers & Doers, a new wave of women business networks forming online in Africa via WhatsApp and Facebook groups share opportunities and support each other. These organic online groups are ripe for establishing new norms and benefiting from networks in ways more reflective of women’s needs rather than men’s preferences.
Build Women Collaboration Spaces
Africa is participating in the global rise of co-working spaces, incubators and accelerators. Women-centered spaces appealed to entrepreneurs at Sankalp, primarily as an opportunity for meaningful networking and business collaboration designed around the needs of women and working mothers.
Build the Base of Gender and Sex-Disaggregated Data
We all agreed about the importance of having better data. There are significant but early efforts on gender specific data collection and analysis in business and financing, from World Bank and IFC, to an $80 million commitment by the Bill and Melinda Gates Foundation to address gender data gaps. This work needs to be better coordinated, more pervasive, and better amplified.
The discussion closed on a high note. A strong sense of optimism blended with acknowledgment that there’s a lot of work to be done to bring transformative change with real system-level shifts to realize the potential of women entrepreneurs.
For more blog posts and insights on building inclusive economies, browse the gender lens investing category on the WSII website.
Suzanne Biegel is Senior Gender Lens Investing Advisor at Wharton Social Impact Initiative and Investment Director for the SPRING Accelerator, an accelerator focused on accelerating businesses which have products and services that can improve the lives of adolescent girls. She’s based in London.
Isis Nyong’o Madison is the founder of MumsVillage leading online platform for women in Kenya, and a Principal at Asphalt and Ink, a strategic advisory firm. She’s based in Nairobi.