November 15, 2022
The Supply and Demand Challenge: Getting More Capital to Women-Led Businesses

It’s no secret that women entrepreneurs face significant challenges in building their businesses. And it is costing them, with an estimated $1.7 trillion financing gap for women-owned, small, and medium enterprises (W-SMEs). But it’s not just limiting the entrepreneurs themselves – it’s costing society too. When women are empowered economically, they invest back into their families and communities, creating broader prosperity. Despite growing recognition of this fact, there is still relatively little practical guidance for increasing the capital available to and invested in women globally.

In September, USAID INVEST joined partners from USAID CATALYZE and the Aspen Network of Development Entrepreneurs (ANDE) to organize a half-day event to discuss the potential for women’s economic growth in the entrepreneurship sector and the global economy. All three initiatives work closely with USAID’s Private Sector Engagement (PSE) and Gender Equality and Women’s Empowerment Hubs to test and scale effective approaches to increase women’s entrepreneurship and encourage women’s economic growth. The event convened a variety of expert stakeholders – investors, fund managers, business advisory service providers, financial intermediaries, and many other partners and champions – to take a deep dive into addressing the unique challenges women-led businesses face in accessing finance and pursuing growth.

At the event, we found it helpful to divide the discussion into two halves – looking at this theme of getting more capital to women-led businesses in terms of both supply and demand.

Examining demand among W-SMEs

The “demand” angle focuses on the investees – the women-led businesses themselves. How can we increase demand for financing among these women, making sure they are both able to access capital and make effective use of it in scaling their businesses? That may mean preparing them for investment and ensuring they are as competitive as possible through technical assistance, helping them make connections, and ensuring that the structure of financing works for them.

INVEST has been working to answer these questions through our own activities in gender lens investing (GLI). INVEST partners with financial institutions and investors to connect with potential clients and better assess demand among women. Capital providers have tailored financial products and non-financial services to increase demand among women-led businesses by offering lower interest rates, adjusting credit approval process, providing technical assistance alongside financing, or offering opportunities for networking. For instance, we have been working with Mennonite Economic Development Associates (MEDA) to test strategies that remove barriers for women entrepreneurs, including determining how demand-side factors like low confidence, distrust, and lack of financial literacy might be preventing them from accessing capital.

With INVEST support, MEDA is about to complete a pilot program identifying women-led businesses in East Africa who were previously denied investment and providing training and technical assistance to build their confidence and capacity. Entrepreneurs who complete the Second Chance Success program can then reapply for funding. To date, MEDA has made three investments in these “second chance” businesses, which will allow them to compare success rates for these businesses against businesses who received funding the first time around. They have already started to share some insights from the project, including the need to address these challenges at the systemic level, not just investment by investment.

Addressing supply-side factors among asset managers

The “supply” view, in contrast, focuses on investors, fund managers, financial institutions, and other stakeholders who influence where the enormous pools of global capital go. Here, we’re considering what is limiting investors’ support to W-SMEs, from unconscious bias and lack of understanding of the different needs of women entrepreneurs, to lack of women in decision-making roles and absence of clear data or metrics to track gender outcomes.

INVEST is working to address these supply-side factors with several of our partners. Though this work spans geographies and sectors, with different local contexts, we’ve found many similarities. Often, financial institutions know that business-as-usual when it comes to gender isn’t working – at worst, it’s marginalizing or harmful to women entrepreneurs, and at best, a missed opportunity for the investor. They may be generally aware of the potential for gender lens investing, but don’t know how to take concrete steps towards gender-inclusive practices. 

For instance, Deetken Impact and Pro Mujer, who manage the Ilu Women’s Empowerment Fund in Latin America, provided gender-smart technical assistance to companies to improve their impact and financial performance. At the event, Deetken co-founder Alexa Blain shared that businesses often don’t even know where to start when it comes to gender. The biggest challenge is often identifying an entry point for engagement on gender issues that is attractive and exciting to management – the key being “selling” gender objectives as dovetailing with their existing business priorities. 

Social enterprise Pro Mujer and impact advisory firm Acrux Partners recently published an open-sourced knowledge hub full of resources that financial sector actors in Latin America can use to adopt gender-smart policies and practices. The toolkit goes beyond just investing in women-led businesses, encouraging those financial institutions to ensure that they are hiring and promoting women, collecting sex-disaggregated data, and creating products tailored to women consumers. The Gender Platform already includes a self assessment with curated resources, and an interactive gender map that will be updated with case studies in the coming months.

In East Africa, INVEST is supporting Aceli Africa and Value for Women in engaging and educating financial institutions in adopting a gender lens investment strategy, specifically in agriculture. They led a series of workshops on both the why and the how of gender lens investing, getting those financial institutions to think about applying the lessons to their own organization, from internal governance and HR to applying a gender lens to agricultural lending product offerings and lending processes. Perhaps most importantly, the workshops discussed metrics and key performance indicators (KPIs) to track gender inclusion across the firms’ portfolios and in line with the many international standards that now exist for that purpose, using the 2X criteria as a starting point. Beyond the workshops, the partners are sharing learnings on inclusive lending in agriculture, working more closely with a shortlist of financial institutions to undergo more targeted advisory, through a three-month intensive to create and implement a formal GLI action plan. By sharing case studies on these journeys, we hope to foster more adoption of these plans and actions.


Twongere Kawa Coko Sorting
Credit: George Muriama, Aceli Africa

Improving the overall gender lens ecosystem

Of course, while looking at GLI through the separate supply and demand frameworks is a useful exercise, there’s a lot that can be done to address both sides at once, building a healthier overall ecosystem for women entrepreneurs by addressing biases and structural issues holistically. 

Many of the lessons learned in what does and doesn’t work in GLI can be helpful for both investors and investees. For example, INVEST partnered with impact investment firm Renew Capital to develop the SME Gender Growth Acceleration (SG2X) Playbook, which provides both asset managers and entrepreneurs with practical tools to help support gender-smart SMEs in sub-Saharan Africa. Renew is educating SMEs through a “Private Equity 101” training, and providing fund managers with financial tools and sample policies that they can incorporate into their management.

Our biggest takeaways from the robust discussion at the event, and from our own activities in GLI, are the importance of collaboration and the need for more concrete evidence on effective interventions. We need to listen to women entrepreneurs, and we need to effect change within financial institutions—and we can and should do it at the same time, attacking the problem from all angles and using all of our tools together.

We encourage all the organizations present at the event, and working in GLI, to take advantage of the ever growing list of resources available to guide you on your gender journey. Connect with others to learn from their own experience, and collect and share data on what does and doesn’t work, so we can achieve lasting impact. We’re beyond just making the case for women’s empowerment—now we can focus on the how.

This is the second post in a jointly produced series entitled “What’s Working in Supporting Women’s Entrepreneurship?” produced from the discussions at the September 12th learning event hosted by ANDE. Read part one on Partnership from ANDE, and part three on Making the Case from CATALYZE. Collectively, this series covers the sectors’ success stories and how to recreate their structures to shift purposeful investment into what works, fostering women’s economic growth, and affirming their indispensable role in economic development.