By Katie Naeve and Charity Wallace
When you run a small enterprise in a rural community, it’s difficult to access the financing you need to grow. If you’re a woman running one of these enterprises, it’s even harder. The International Finance Corporation estimates that up to 70% of women-owned enterprises in emerging markets are overlooked by lenders.
These women-owned enterprises face a $1.7 trillion financing gap — but the costs of not investing in women are so much higher than that. A study by Boston Consulting Group found that for every dollar of investment raised, female-run startups generated 78 cents in revenue, while male-run startups generated only 31 cents. Closing the gender gap in entrepreneurship would add an estimated $2.5 trillion to $5 trillion to global GDP.
That’s why development finance institutions from all G7 countries — including U.S. International Development Finance Corporation (DFC) — created the 2X Challenge, with the aim of catalyzing at least $3 billion of investment in women by 2020. Inspired by DFC’s 2X Women’s Initiative, the 2X Challenge commits these institutions to mobilize their own funds, as well as private capital, to unlock resources that will help advance women as entrepreneurs, business leaders, employees, and consumers of products and services that enhance their economic participation. Investments under the 2X Challenge are measured against the 2X Criteria, metrics which are helping set a global standard for investing in women. The 2X Challenge participants have already exceeded their initial goal, mobilizing $4.5 billion for women’s economic empowerment from government, private sector, and other sources.
Root Capital and DFC are long-time partners. We’re proud that DFC has invested $26 million in Root Capital since 2011 — and even prouder that these loans now officially qualify as part of the 2X Challenge, a testament to our collective commitment to women’s economic empowerment. Through its Women in Agriculture Initiative, Root Capital has become a global leader of gender lens investing in agricultural enterprises. Since 2012, the organization has disbursed more than $407 million to 241 gender-inclusive agricultural businesses that collectively reach over 415,000 women farmers. Over the next few years, Root Capital is rolling out an ambitious agenda to grow the proportion of gender-inclusive and women-led businesses in its lending portfolio, as well as to implement strategies to help agricultural enterprises increase women’s inclusion. These strategies will help the organization continue to meet the 2X Criteria, and ensure that any future DFC loans to Root Capital will also be 2X-qualified.
Through our participation in the 2X Challenge, Root Capital and DFC are demonstrating our commitment to rural women. We know that investing in women not only advances their own economic wellbeing, but also that of entire communities and countries. When women prosper, we all do.
Katie Naeve is Root Capital’s Director of Impact and Partnerships and Lead of the Women in Agriculture Initiative. Charity Wallace is DFC’s Managing Director for Global Women’s Issues, leading the agency’s 2X Women’s Initiative.
This story can also be read on Root Capital’s blog.