Harnessing Gender Lens Investments for Sustainable Impact and Inclusive Finance

Authors: Joana Silva Afonso – Gabriela Erice García.

On May 15th, e-MFP joined forces with FinEquity and held a webinar on how to operationalise Gender Lens Investment (GLI) approaches in inclusive finance aiming to engage investors and financial services providers (FSPs) in the quest for a more equal society. The session was moderated by FinEquity’s Nisha Singh and counted with contributions by Christina (CJ) Juhasz, Chief Investment Officer and Managing Partner of Women’s World Banking Asset Management (WAM) and Veronika Giusti Keller, Head of Impact Management at BlueOrchard Finance. During the webinar, Juana Ramírez, a consultant member of e-MFP, presented a new e-MFP initiative, the Gender Lens Investing Action Group[1]. In this blog, we share the key messages from the session and the call to follow and join the activities of the new e-MFP GLI Action Group.

The emergence of Gender Lens Investment (GLI), a category of investment that recognises gender-based disparities and directs capital to address them, is a necessary and welcome trend – investing in women is a smart financial decision that has potential spillover benefits to the household. Despite the growing evidence on the business case of investing in women, gender gaps persist, and it could take a projected 135.6 years to achieve full gender equity[2]. Historically, the financial inclusion sector is well known for serving women. Nevertheless, what is now clear is that the goal of inclusion must go beyond just access and focus more on usage and benefits for women so that they can be socially and economically empowered.

WAM and BlueOrchard are impact investors that are pioneers in the gender lens investment space. Throughout the webinar discussion, CJ and Veronika shared the strategies, tools and solutions that, as equity and debt investors, respectively, they have developed to meaningfully operationalise GLI within their investment processes, and address the challenges to ensure that their investments create positive change.

In June 2023, BlueOrchard launched a new GLI investment strategy, with the mission of advancing economic and social resilience of vulnerable populations, particularly women, indigenous groups and other underserved groups in Latin America and the Caribbean. This strategy stands on 3 pillars:

1. Investments in FSPs offering gender, diversity and inclusion (GDI) products and services: to ensure increased availability of products for women that address their specific needs;

2. GDI performance at the target investees: the focus is on the FSPs themselves and their own role in promoting gender, diversity and inclusion practices; and

3. GDI data and reporting: to improve the overall data availability and reporting capacity to better understand the GDI needs and enhance the development and implementation of GDI products.

The new GLI strategy uses an innovative blended financing approach, with funds from public and private investors allowing for different layers of risk and return. In addition to financing, the strategy also includes a technical assistance facility.

The objectives of the strategy are implemented using BlueOrchard’s B.ImpactTM Framework, which is complemented by a gender rating tool that allows them to assess and track investees’ performance on the three pillars of the impact strategy. Based on B.Impact, BlueOrchard tracks the FSPs’ GDI performance, and assesses how they are evolving on their journey from no gender lens towards a gender smart institution.

Women’s World Banking established WAM and launched its first fund in 2012, following the results of a study that showed that when MFIs transformed into for-profit institutions, there was a 20% drop in women being served in the first years after transformation.

WAM has developed its Gender Lens Investor toolbox to apply GLI throughout the whole investing process:

1. Identifying investment opportunities, including criteria such as gender diversity within the institution, women owned/led business served or the provision of products and services that empower women to ensure investing in FSPs that have the capacity to serve women with meaningful services and create jobs;

2. Carrying out the due diligence and documentation processes, checking ‘where’ are the women within the FSP (from field staff to the independent board) and among its women customers (i.e: are women mostly receiving group loans, smaller loans or do they have equal access to SME and more meaningful loans), as well as including gender commitments in the shareholders agreement such as establishing gender targets, gender reporting including gender disaggregated data, participating in gender studies and creating  gender plans;

3. Monitoring and reporting activities including gender disaggregated data, with management and board being informed of these data and understanding its implications, and when planning to exit an investment, enquiring about the gender policies of the interested buyers.

Accountability, which in this sense means being able to attribute responsibilities and having mechanisms in place to track performance, is key to achieving gender goals. Equity investors like WAM can include gender clauses in their shareholder agreements and are part of the strategic conversations and decisions taken by their investees. CJ highlighted that, while challenging, it is important to create consequences and rewards, including management KPIs and incentives such as stock option programmes or bonus (if possible) as well as vesting on a performance basis. By contrast, for debt investors such as BlueOrchard, the main accountability tool is the engagement letters. Veronika pointed out how these engagement letters allow for important conversations with their investees and to clearly define what are BlueOrchard’s impact expectations and the FSP’s commitments. They include objectives for each of the GDI strategy pillars and they can be followed by an Action Plan or by ‘best intention’ commitments.

On accountability in the implementation of gender action plans, CJ stressed that challenges can be external. Even when investees see the value of hiring more women, cultural barriers, safety considerations and other needs and preferences need to be taken into consideration. However, the cost associated with market research to identify these and identify the opportunities to hire women staff is often high, and TA is therefore necessary, CJ and Veronika agreed. For Blue Orchard, it is important that the investee has ‘skin in the game’ and so the costs of TA are usually shared to make sure that the partner also has interest in being successful.

The other ever-present challenge relates to collection and use of gender disaggregated data. Both CJ and Veronika highlighted that collecting this data is not ‘rocket science’ and often no new parameters are needed – the institution can use its existing MIS. Complexity should not always be used as an excuse – sometimes it is just a matter of including a field for gender in the sign-up form template or gender disaggregating metrics for data already being collected.

Nevertheless, the process can be more complicated if investors are working with intermediaries or partners who are not collecting this data, or when there is intersectionality between different data (i.e.: women who are also members of other minority groups), or when definitions are not clear or shared. Veronika pointed to the definition of women SMEs, for which BlueOrchard uses the 2X definition, which might not be aligned with the definition used in their partners’ MIS. Looking at the challenges associated with data, it is  crucial to ensure that data and reporting requirements are not too burdensome for the investee, and to find the balance between showing impact and maintaining the business case.

The experience of WAM and BlueOrchard underlines key elements for operationalizing GLI in financial inclusion:

1. Ensure that the investees have a sustainability commitment that makes business sense;

2. Set up upfront the investor expectations and agree on what is achievable – data needs and requests must be discussed and agreed during the investment transaction documentation process, this is the moment when management can push back, and honest conversations can take place;

3. Empathise with the investee (who already has significant data requirements to comply with regulations) and ask for the relevant data, which will actually be used, and to the extent possible, define and standardise data requirements and KPIs;

4. Include data requirements in the covenants agreements to ensure accountability;

5. Use sampling and assumptions when data is not available;

6. Take advantage of TA to hire external consultants to conduct impact surveys with end clients; and what is already in place (and sometimes providing support to ease some of the data collection and reporting burdens) are a good starting point.

There is a business case for GLI and there are solutions (even if not always easy) to the main challenges investors and FSPs encounter in their path to gender equity.The e-MFP GLI Action Group will facilitate a learning and collaborative space to identify best practices, advance GLI and collectively improve impact management and measurement systems to ensure they are inclusive and gender balanced. As a first step, the AG will map the expertise of e-MFP members and partners active in gender finance to identify frameworks, products and tools, as well as needs and challenges.

The authors thank Christina (CJ) Juhasz, Veronika Giusti Keller, Juana Ramírez and Nisha Singh for their comments and contributions to the blog.

[1] Action Groups (AGs) are an opportunity for e-MFP members to join forces on specific projects or activities on common areas of interest providing a unique cross-sector forum that enables constructive dialogue and cooperation.

[2] World Economic Forum Global Gender Gap Index report, 2022.

Joana Silva Afonso is Financial Inclusion Specialist at e-MFP, overseeing coordination and outputs of e-MFP Action Groups, being part of the content team organising the European Microfinance Week and the European Microfinance Award, and overseeing coordination of the European Research Conference on Microfinance.  Since 2023, she is a Board member of the Social Performance Task Force (SPTF). Before joining e-MFP, Joana was an academic researcher in the United Kingdom and Belgium. Her research focused on evaluation methodologies in microfinance and client protection. She holds a PhD in Economics and Finance from the University of Portsmouth, UK and a masters in microfinance (European Microfinance Programme) from the Université Libre de Bruxelles, Belgium. Joana began her microfinance career as a credit officer at the NGO ANDC in Portugal.

Gabriela Erice García is Network Development Coordinator at e-MFP, where she is responsible for managing the relationship with members and partners, expanding the network outreach and fundraising. Prior to this position, she was Senior Microfinance Officer and was in charge of managing the European Microfinance Award and coordinating the European Microfinance Week programme. Gabriela joined e-MFP in 2013; previously, she worked at the Colombian microfinance bank Bancamia, the European Parliament in Brussels and the Office for Economic and Commercial Affairs of the Spanish Embassy in Belgium. She has a degree in Business Administration, a Master in International Business Management and a Master in Microfinance and Development.