The capital women need, for the future we all need

For nearly two and a half decades, I’ve had the privilege of meeting women from across the world and speaking to them about their dreams and challenges. Through that experience, I’ve learned that if you want to understand the realities of someone’s life, the best thing to do is ask them questions. That’s why, as part of our work to expand women’s economic power, the Bill & Melinda Gates Foundation recently commissioned a survey asking more than 200,000 women in Kenya and Nigeria about their greatest economic ambition.

The number one answer we heard, across both countries, was that women wanted to own or expand a business. Their individual dreams were wide-ranging: Some wanted to open clothing boutiques; others wanted to expand their restaurants. But when we asked them what was standing in the way of those dreams, nearly two-thirds had the exact same answer: They couldn’t get the startup capital and equipment they needed.

One in four African women is an entrepreneur—but women receive only a fraction of the capital that men do. There are a number of interrelated reasons why: Women are less likely to own property in their own name, which means they lack collateral for a loan. They’re also less likely to have a bank account and formal credit history, so they’re seen as a riskier investment.

On top of all that, women face unconscious biases—if not overt sexism—from lenders who are used to dealing with men and skeptical about lending money to women, even though women are actually more likely to pay it back. (Research from M-KOPA, a digital micropayment company serving customers across Africa, shows that women are 10% less likely than men to default on their repayments.) And all of these lenders operate within a bigger system that wasn’t designed with the needs of small borrowers—particularly women—in mind.

Globally, there’s a US$1.7 trillion gap between the amount of capital women want and the amount they get. By closing that gap, we can add as much as US$6 trillion to global GDP.

When women succeed financially, they and their communities are more resilient to the kind of health, security, and climate shocks that come more frequently each year. They invest their earnings back into their families’ health and education, accelerating social progress and economic growth. They create jobs for other women, breaking down gender barriers in the workplace. And collectively, they have the potential to help lift entire countries out of poverty.

In a moment when so many nations are struggling to reinvigorate their economies, it’s urgent to break down the barriers that prevent women from accessing capital and pursuing economic opportunity.

In this paper, we call on countries and economic decision-makers to embrace promising, systemic solutions for closing the financing gender gap. Among them:

• Governments should pursue regulatory reforms that remove the barriers faced by responsible lenders that are trying to serve low-income customers while still protecting people from predatory lenders. Rather than treating small microfinance lenders the same as large banks, regulatory systems should increase minimum capital requirements and compliance expectations along with the size and complexity of the financial institution.

• Governments should invest in digital infrastructure so financial institutions can adopt digital tools that make it easier to add customers and assess creditworthiness. While women may often lack collateral and formal credit histories, there are ways to assess less traditional data—like whether they pay their bills on time or their track record of participating in informal lending systems like self-help groups.

• The development community should make funds from donor countries available to lenders in order to manage their perception of risk—because if lenders know they’re covered, they’re more likely to invest in a more diverse range of entrepreneurs. And by providing those guarantees, donors can incentivize larger African lenders to loan to smaller, more nimble lenders in their own countries. When those smaller lenders are able to work with local currency rather than hedging against volatile international exchange rates, they can save money, and offer lower interest rates to their borrowers in turn.

Any economy is better off when women are able to access the capital they need. But in Africa in particular, which has the highest proportion of women entrepreneurs in the world, the potential benefits are enormous.

It’s been inspiring to see the momentum generated in West Africa by Thiaba Camara Sy’s WIC Capital, which has raised over US$5 million in capital and supported eight women-owned businesses, which in turn have already employed 372 workers and quintupled sales. Meanwhile, Janngo, a firm founded by Fatoumata Bâ, invests in women-led companies that develop technology for the public good, and builds digital platforms in high-growth sectors like agribusiness and health care that help women entrepreneurs develop their skills.

What is women’s economic power?

• Learn more

Because of these investments, individual women are building businesses, creating opportunities, and fulfilling their dreams. But no financial system can depend solely on the work of a few investment funds, no matter how visionary. And those funds can’t make up for the massive shortfall left by lenders, who can and must do more to serve those women who fall through the cracks of financial systems. The women who run boutiques and beauty salons, who operate restaurants and sell vegetables at the market: They are the ones who stand to benefit most, just as their countries stand to benefit by investing in them.  
 
At a time when African countries are looking for ways to grow their economies and lift up their people, they need to unlock women’s economic power. When women can create jobs and grow businesses—when they’re equipped to meet old problems with new solutions—everyone is better off. By building a financial system that connects women with the capital they need, we can build the future that everyone needs.