Even though women entrepreneurs like Elynour Rummyng had already begun to emerge during the 16th century, their reach was restricted to only a few industries. Most of them were engaged in cottage industries by selling home-made brews, rural medicine or ran family inns and taverns. Not much has changed in the 21st century. This is where gender-lens investing runs into its most tricky challenge.
Let me break this down for you.
Impact investors, including those who are involved in gender-lens investing, want to fund businesses that possess two key qualities:
i) they drive social or environmental change
ii) they are profitable and can provide healthy returns
For instance, ventures that innovate on renewable energy, assistive AI, microfinance, sustainable agriculture, accessible healthcare in low-income regions among others, could be the primary targets for such investments. Statistics show that most businesses owned or founded by female entrepreneurs do not satisfy these two golden rules of impact investments. The GEM-Women’s Entrepreneurship Report 2022 reported that almost 50% of female entrepreneurs across the globe are engaged in wholesale or retail businesses that have little to no social or environmental impact. Similarly, a World Bank study found that 30% of women entrepreneurs work within “traditionally female sectors” like retail or service that are too small-scale and localised to generate high returns. This creates a structural barrier for gender-lens investing to create the impact that they are looking for.
It is no news that the Information and Communication Technology (ICT) sector, colloquially referred to as the “tech industry”, has made seismic changes to the world we live in. Encompassing functions such as software development, machine learning, AI, data science and more, this industry has revolutionised human lives and consequently attracts a big chunk of the impact funds. So an analysis of the participation of female entrepreneurs in this industry can reveal the finer points of the issues faced in gender-lens investing while funding women-owned businesses.
The GEM-Women’s Entrepreneurship Report 2022 notes that only 2.7% of women business owners have ventures in the ICT industry. Among the summer 2022 batch of companies that entered the well-known tech startup incubator, Y Combinator, only 9% were founded solely by women. Studies have found that most number of female tech startup founders are based in North America at 15.7% , while the lowest numbers are located in MENA countries at 10%. The dismal involvement of female entrepreneurs in the highly lucrative and impactful tech industry is owed to quite a few serious gender gaps. This includes gaps in access to STEM education, traditional gender roles and social pressures, rampant gender bias, experiences of discrimination as tech employees, lack of role models, financial weakness and more. When extrapolated to other impact industries, these gender issues remain more or less the same. This significantly limits the pool for gender-lens investors to find and fund a gender-equitable business ecosystem.
But there’s light at the end of the tunnel. And it’s only getting brighter.
Female entrepreneurs are rising worldwide as social trends shift towards greater inclusion, equity dismantling of historical discriminations. In this watershed, gender-lens investing is perfectly poised to direct change and close the loop of disadvantages that female entrepreneurs find themselves in. As they fund more female founders, they can create role models who inspire more women to impact industries like tech, sustainability and healthcare.
According to research by the German Investment Corporation, gender-lens investing can also have a multifaceted impact on the gender equity metrics of investee companies. It can create more spaces for female leadership, augment equal opportunities initiatives, help in the prioritisation of gender-based wellbeing and safety. It also reduces inequalities like gender pay gaps and disparities in wealth and economic security. When workplace experiences of women improve and their financial status strengthens, they will become more likely to develop entrepreneurial aspirations in high-returns, impact sectors.
The gender-lens investing landscape is a developing one and still has to overcome some well-entrenched issues within our societies and the world of work. But they are already beginning to demonstrate their impact in granting female-owned businesses their day in the sun. Notwithstanding a nuanced reality, gender-lens investing is facilitating a future of business that is female.
Read Part 1 of this article to catch up on previous discussions.
Picture Credits
Cover image: Korean “yogurt ajummas” are one of the most well-known small-business entrepreneurs in their country; MONTANA JOURNALISM ABROAD.