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08 Mar 24

The Gender Advantage: How to Bolster Women-Led Funds in Blended Finance

The Gender Advantage: How to Bolster Women-Led Funds in Blended Finance

Gender diversity and inclusion in the evolving world of finance is an important strategic imperative to enhance profitability, resiliency, innovation, and business performance overall. Yet, the underrepresentation of women in investment decision-making roles, and in fund management positions, persists. On this International Women's Day, we explore the pressing need for increased gender diversity at the capital allocation level and delve into initiatives by various players across blended finance fund structures that are tackling key barriers to entry that women face including lack of experience and network-building, proper implementation of Gender Lens Investing (GLI) frameworks and inconsistent investor/donor requirements.

Mentorship and Training

Convergence has tracked over 1,100 blended finance transactions benefiting developing economies, with a majority structured as funds. One of the most significant challenges to increasing women-led funds in emerging markets is the lack of experience and mentorship opportunities for women aspiring to leadership positions. The reality is that social and organizational structures tend to favor male candidates and employees over their female counterparts in the financial sector. Worse yet, first-time female fund managers face an uphill battle with additional scrutiny by investors who tend to ask them prevention-oriented questions about potential for losses, rather than promotion-oriented questions about potential for gains.

Organizations can meet this challenge head on by developing dedicated mentorship programs alongside intentional sponsorship initiatives, and capacity-building activities. For example, 2X Ignite runs 2XI GP Sprint, a 6-month long capacity-building program aimed at upskilling 100 female-led gender-lens fund managers across Africa to strengthen their fundraising proposition for their investment vehicles. 2X Ignite’s ultimate goal is to grow and support the market for female-led gender-smart fund managers, unlocking more limited partner capital for gender-smart businesses. Another example, RENEW Capital provides customized training for women executives that addresses specific systemic barriers for their career development and leverages their extensive pan-African network to bolster participants’ mentorship opportunities. These efforts focus on building the next generation of female leaders; other efforts address systemic biases toward women. For instance, Value for Women has explored why women-fund managers and women investors in emerging markets receive limited funding and determines that enduring systemic cultural barriers are what's holding women back. Value for Women recommends encouraging limited partners to innovate their decision-making processes through power-sharing with women and other minority groups, piloting co-creation concepts with fund management and investees, as well as fostering an openness to experimenting while listening to investee needs.

Perception and Integration of Gender-Lens Investing

The implementation of GLI in investment vehicles presents another challenge. While numerous frameworks and guidelines exist, each investment fund must define its own strategy and investment criteria. We regularly see investment theses for blended transactions with a gender-lens incorporate female entrepreneurs as end beneficiaries but lacking an integrated and intentional female-led approach to internal leadership and investment decision-making within the fund itself.

To address this gap, FinDev, Canada’s development finance institution, launched a Technical Assistance Facility that guides a select portfolio of fund managers to incorporate a gender lens into their investment processes. This includes supporting women as executives, leaders and investors, based on the 2X criteria. In response to the growing need for support in this area by their portfolio companies, FinDev also produced a training toolkit for fund managers designed to help implement a GLI strategy that also develops gender inclusivity.

At the fund level, Chancen International’s Future of Work Fund (FWF), led by Batya Blankers, illustrates how a blended fund can incorporate GLI into its investment strategy as well as its management approach. FWF provides access to education for marginalized youth across Sub-Saharan Africa. This fund is a women-led initiative that focuses on creating opportunities for traditionally excluded populations, especially women. For Blankers, the attitudes and perceptions held by leadership become reflected in driving FWF’s success: "Our position as a women-led fund enriches our approach, allowing us to bring diverse perspectives to the forefront of financial innovation. The biggest challenge with scaling blended finance solutions in emerging markets is risk perception, but as has been proven multiple times, women are some of the best customers, and we see having a strong gender lens as an opportunity."

Investors’ Expectations

Finally, despite a dual focus on impact and financial return, women fund managers raising gender-lens funds regularly encounter investor reticence. Terra Global Capital, a US-based investment manager focused on nature-based solutions, has observed these challenges first-hand in the market. As Leslie Durschinger, CEO and Founder puts it: “These challenges are rooted in implicit biases, limited networks, and gender-related perceptions during the capital-raising process.” Leslie also states that, in her experience, some women-led funds present return potential more conservatively than their male counterparts, at times underplaying the upside potential and inadvertently negatively impacting the assessment of their funds. Leslie attributes the success in gaining investor interest in their new fund, Terra Bella Nature Based Solutions Carbon Fund, to a track record of investment management over 17 years and leveraging a team composed of 50% women.

Investors in blended funds can help shape the investment landscape by setting and encouraging investment criteria that include a higher proportion of women on investment committees or in fund leadership and being open to smaller ticket sizes for small female-led funds. Examples of such initiatives include the Visa Foundation’s investment strategy that evaluates investments into intermediaries and funds focused on emerging markets with a gender lens applied all the way from the VC partners and co-investors through to end-borrowers. Their aim is to not only increase access to capital for entrepreneurs in emerging markets, but also raise the amount of women who control the capital from the top. To further illustrate how a gender lens has been applied at the investor level, C4D Capital Partners’ Bharat Shubharambh Fund II developed an integrated gender strategy with carried interest linked with a goal of reaching 30% of their investments dedicated to women-owned or led enterprises. Tangible, measurable and intentional goals set at the investor level can drive meaningful outcomes and set market standards.

Supporting women-led transactions at Convergence

At Convergence, supporting women-led transactions lies at the heart of our granting activity, where close to 40% of the blended finance vehicles supported are transactions led by women. As investors increasingly seek to embrace roles as catalysts for change, supporting women-led funds is critical to achieve diversity in investment decision-making and achieving an equitable financial landscape.

About the Authors
Alicia Maitland

As a member of the Training and Engagement team, Alicia is responsible for fostering meaningful partnerships, identifying, designing, and delivering engagement initiatives for members and stakeholders across the ecosystem to cultivate global understanding of Blended Finance and drive impactful investment opportunities. Alicia joins Convergence with over 10 years experience across the financial services, media, and non-profit sectors and across multiple geographies. In her last role with AVPN in Singapore, Alicia worked directly with stakeholders across the spectrum of social investment, including development agencies, corporates, philanthropic foundations, impact investors as well as PE/VCs funds in support of their strategic initiatives. Holding a Bachelor’s degree in Finance from McGill University in Canada and a Master’s Degree in Strategic Studies from NTU in Singapore, Alicia’s specific area of interest and expertise lies at the intersection of profit and development and in cultivating community, facilitating important connections and providing valuable insights to catalyze impact.

Mira Minkara

Mira serves as an Associate for both the Training and Member Engagement teams. Prior to Convergence, Mira was a consultant at the International Trade Center (ITC), a joint United Nations and World Trade Organization agency supporting sustainable and inclusive trade in developing countries, where she worked in supporting business development for women-owned SMEs. Before ITC, Mira was a policy and diplomacy associate at the International Committee of the Red Cross in Geneva, Switzerland. She holds a Master’s degree in Development Studies from the Graduate Institute in Geneva, and a Bachelor’s degree in Economics from the American University of Beirut.