Progress Towards Women's Financial Inclusion

In emerging countries where MicroVest invests, women are often forced into entrepreneurship due to structural constraints that keep them from equal participation in the labor market. At the same time, traditional banks do not serve many women-owned enterprises or female entrepreneurs, and this creates opportunity for micro and SME financial institutions to step into this market gap.

Female-owned businesses often encounter challenges in obtaining financing. These businesses comprise 23% of MSMEs worldwide but account for 32% of the approximately $4.8 trillion MSME funding gap.

The COVID-19 pandemic also dealt a setback to pre-pandemic trends which saw a steady increase in financial inclusion for women. Approximately 740 million women worldwide work in the informal economy, and during the first month of the pandemic, their income fell 60%. Furthermore, the UN estimated that 47 million women and girls were pushed into extreme poverty since the pandemic started, partly due to female over-representation in sectors of the economy that were service-oriented and consumer-facing.

MicroVest makes a concerted effort to target two of the key themes in Gender Lens Investing (GLI): 1) investing in products and services targeted to women (e.g. group micro-loans) and 2) increasing capital allocation to women. By investing in financial institutions that share these priorities, MicroVest is seeking to responsibly support women who are providing valuable goods and services to their communities. To better understand and assess gender parity throughout our portfolio, MicroVest integrates gender inclusive metrics into its investment process and portfolio construction. We invest in institutions that are committed to improving women’s economic empowerment and inclusion. When the female end borrowers or our Portfolio Companies succeed, they have the capacity to generate employment and have greater resources to invest in the education, health and overall well-being of their own families.

In an effort to measure a portfolio company’s emphasis on gender equity in the workplace and in its customer reach, MicroVest collects and tracks data on the composition of a portfolio company’s board members, female senior management, and female borrowers. MicroVest believes that a gender smart approach, especially when it includes women in senior leadership roles, helps firms become more productive and innovative while creating workplaces that attract and retain high quality employees. We believe that success in these metrics also improves key traditional financial measures.

While microfinance institutions continue to have a greater representation of female borrowers than SME banks, we continue to work proactively to identify more female-led firms and work on ways to uncover opportunities that meaningfully move the needle on women’s access to finance.

[1] SME Finance Forum, MSME Finance Gap https://www.smefinanceforum.org/data-sites/msme-finance-gap

[2] International Labor Organization (ILO), https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_627189/lang--en/index.htm

[3] UN Women: https://www.unwomen.org/en/news/stories/2020/8/press-release-covid-19-will-widen-poverty-gap-between-women-and-men

[4] The metrics listed here are based on self-reported data from MicroVest portfolio companies across its two flagship funds as of 6/30/2022.