By Lionesses of Africa Operations Department
This is the last of our 3 part look at investment into women’s business that, as the number clearly show, are more of a rounding error rather than the 30 or 50% equality with men that is necessary for the world to truly prosper.
Having recently announced that this is the UN’s Decade of Action to deliver the SDGs, we argue that something more than ‘business as usual’ is required, something more than simply continuing to allow the finance world to escape their responsibilities, something more than allowing homophily to control the debate, discussions and ultimately the investment.
We do not have all the answers, but we look at this from the point of business and finance and how these impact our truly inspirational membership, not from the Development Industry. If we ask uncomfortable questions, perhaps that is because we are getting too close to the truth.
"Sophia held the cause of women’s rights close to her heart until the day she died. In her later years, when asked for an entry to Who’s Who, she gave just a one line answer. Under ‘interests’ she simply wrote: ‘The advancement of women’.”
This from from the brilliantly written and researched book ‘Sophia: Princess, Suffragette, Revolutionary’, by Anita Anand (here). A tale of a woman who lost everything (including the Koh-i-Noor Diamond which her family signed over to the British - not that they were given much of a choice) and in her later life, aggressively campaigned for women’s suffrage. It was the Suffragettes which through their determination and indeed injuries at the hands of British Police, men and politicians, combined with their hunger strikes when arrested, that encouraged Gandhi to follow down the same path in his later life (as a side note, this is the origin of ‘Black Friday’ - shocking).
Having witnessed first-hand the way in which the Suffragettes fought for their cause, he commented: “Today the whole country is laughing at them, and they have only a few people on their side. But undaunted, these women work on steadfast in their cause. They are bound to succeed and gain the franchise, for the simple reason that deeds are better than words.” (here)
The Suffragettes least we forget were spurred into major action because of a new law “…permitting women over 30 and with five pounds worth of property to vote.” 100 plus years later - women now have the vote thankfully across the globe, but where are we with the ‘five pounds of property’?
The World Bank points out that the average collateral required for a loan in Africa (here) is a massive 211% and yet, “[t]oday, just 14 economies—all high income—have laws giving women the same rights as men”. As the Suffragettes pointed out - how can women have ‘five pounds of property’ if the law gives them little or no rights over property!? It’s like sitting down to a game of Monopoly to find that only your brothers can buy, you only rent!
We are, it seems, moving in the right direction for Law Equality, but it is still far too slow in many parts of Africa, as the OECD Development Centre’s SIDI highlights (here), especially over ‘Restricted access to productive and financial resources’, but even that is faster than the progress in many of the SDGs, although that’s not saying much, some are heading backwards as the UN Women confirm: “…progress on gender equality has not only failed to move forward but has begun to reverse.” here.
To build assets one (usually) needs time (equal inheritance laws help!). If women have not had law in their favour, they will have had less time to build assets, so an average of 211% collateral will be easier for males to reach than females. At no point in a loan application process is that taken into account - why should it?, If a bank can get away with it, if that is what the market can handle - then as we showed last weekend and as the UK’s DFI BII pointed out - they might as well keep throwing that ‘Green Dice’ (here) and reap the high rewards with lower risk, a serious ‘win/win’! Perhaps Monopoly should be redesigned to have these Green, Blue and Red dice. Even at a ratio of 3 throws for the Green, 2 Blue and 1 for those holding the Red dice, it doesn’t take a Rocket Scientist or Computer to know who will win - you HAVE to be on the Green Dice, no option.
The AfDB and Afreximbank report “Trade Finance in Africa” shows (here), 60% of all banks received some kind of DFI support for Trade Finance. Yet as we have seen, nothing is changing. If governments are seriously interested in supporting female entrepreneurship - here is where they should look for quick win to level the playing field. DFIs talk about providing ‘first loss’ lending or guarantees to assist banks - as we mentioned in our previous article (here), so it’s time to demand more from those banks! It seems far too easy for them to simply say that they would love to give DFIs gender breakdowns, but can’t due to regulations, shareholder concerns or simply it got lost in the general accounts, however “we must have at least 30% women accounts - to cover the minimum required by the 2X Challenge rules.”, so tick that box! All very convenient, but how can taxpayers really know if DFI money is reaching the correct destination, or just propping up the banks’ normal asset base? If the world is truly serious about gender equality (not just on Women’s Day), this is one place they should start. Truly - if there is a will there’s a way. Flex those DFI muscles.
Moving away from lending, let’s look at the fund industry. We looked last week at the solution often mentioned - to increase the number of women in actual decision making, cheque-writing positions in the VC/PE industry, with the suggestion that this is the only way forward - to support more female fund managers and we are all for that, indeed push it at every opportunity.
Sadly as we drill down, we simply find ourselves staring further into the abyss. In VC/PE investing the part the investors are pushing towards immediately the ink is dry on the contract, is how their money, their expertise, knowledge and mentorship can grow the company towards a decent exit in 5/10 years time, at which point they will sell, take their huge profit and then invest it in other businesses. No such investor dumps cash into a company and then goes sit under a tree and lights up a smoke. That cash has to work and it has to work well. A good ‘Exit’ is essential. As the saying goes: “Anyone can buy a share in a company, it’s the selling that’s the difficult part.”
So Exit is already on their radar. If they cannot find a buyer in their time frame, they have to hang on, while their money could/should be put to better use elsewhere. That is a serious no-no from their investors.
Here’s the problem. According to Kaisa Snellman, from INSEAD and Isabelle Solal of ESSEC Business School (both serious top-10 global business schools) in their paper: ‘Does Investor Gender Matter for the Success of Female Entrepreneurs? Gender Homophily and the Stigma of Incompetence in Entrepreneurial Finance' (here), the answer is all too familiar.
We discovered this word ‘Homophily’ last weekend - sticking to one’s own - which is great for male run business (the amount of females in the investment world being more of a rounding error), here is the kicker, they found that if a woman raises money only from a female investor (as we have seen ‘only’ is often the only option), the ‘Exit’ is really tough. There is an assumption that ‘being part of the female club’ was the main reason for the initial investment and so the Exit becomes almost impossible without selling to another female investor or somehow bring in a male led fund to co-invest, just to exit.
They found (using the Cox regression model - for all you scientists out there) “Female-founded businesses that received first round financing from female investors are less likely to receive additional financing compared with other venture-backed businesses.”
DFIs and UN agencies invest into VC/PE funds that invest into developing countries, and they do so while proudly stating they are covering the 2X Challenge requirements - yet how do they know? As the UK’s BII state (here): “We do not hold direct relationships with the companies that investment funds invest in. Instead, we hold relationships directly with the fund”, which is good for our purposes, as this means the DFI can put direct pressure on the fund.
According to the Independent Audit (here): “There is a lack of evidence around efforts to increase gender-based lending in banks…There is a lack of a consistent approach to gender inclusion across DI theses of investments – The extent to which investments made a concerted effort to target women is unclear.”
Is this good enough?
Of course there will be suggestions that we are being naïve, that we do not understand the development industry, and indeed, when job adverts for this industry cross our desk, asking for people who have had 10 or 20 years of development roles to apply, when clearly there has been very little movement over the last 20 years (as the UN Women say as above), we have to agree, we do not understand the Development Industry.
Is it not about time to do things differently, to seek those who may have different ideas, to welcome those who ask the uncomfortable questions, to work with organisations such as the Lionesses of Africa that now has over 1.7 million African women entrepreneurs as members, rather than simply talk and then ‘ghost’ (to use the modern term)?
DFIs and to a certain extent the UN have a responsibility to their shareholders. These same shareholders as taxpayers are becoming more and more polarised, sadly creating a situation whereby sentiment against migrants and refugees is being whipped up (unfairly we feel) by various interested parties. The solution to this is to either appreciate the wealth of knowledge and abilities that people in this horrific situation bring and welcome them with open arms, or solve this at source. Build industries, businesses and employment in the home countries. How one does that whilst ignoring (investment in women’s businesses being more of a rounding error) the huge benefits that women bring to the home nation’s tax base, to employment, to communities, to say nothing of the health premium, is a complete mystery to us.
Is it not time as Mahatma Gandhi said, for deeds rather than words? To get tough with those that enjoy the benefits of homophily with the Development Industry, without the real responsibility to show, to confirm, to certify their actual numbers. To tighten the loose ends such as only 30% of investment into Financial Institutions has to end up with for women’s businesses. To increase the amount of women on that ‘Green Dice’. To insist that with investment, governments have to put skin in the game - and part of that is equal rights in law. This is after all the UN’s Decade of Delivery and we only have 7 years left…
Time for Action, for Deeds.
Stay Safe.