The case for gender-lens investing (GLI) in Africa remains strong as evidence consistently shows the “compounding” positive effect that women have on society and the critical part they play in building economies. Women entrepreneurs are more likely to hire other women and provide more autonomy to their employees which leads to greater overall employee engagement; they also have better loan repayment rates compared to their male counterparts. Moreover, women reinvest as much as 90% of their income into the health and education of their families, compared to 40% for men. Global estimates indicate that small- and medium-sized enterprises owned or led by women need at least US$ 1.7 trillion in financing to expand. Those numbers resonate deeply in Africa, the only region in the world where more women than men choose to become entrepreneurs. More than one-quarter of adult women in Sub-Saharan Africa start or manage a business. Despite this promising statistic, women face impediments that men do not when it comes to entrepreneurship. Many African women struggle to grow their businesses beyond the micro-level and face higher discontinuance rates, in part due to limited access to finance. Women across Africa are less likely to have formal ownership to assets and property that can be used as collateral, severely limiting their access to commercial loans. They also tend to be less knowledgeable about funding mechanisms available, and about navigating the application and approval process for financing. When asked about her challenges to raise capital, Phyllis Karanja, founder of Sensei Institute of Technology in Kenya noted that, “I would like to expand the company beyond myself and immediate family; however, I don’t have a good understanding of what various investors are looking for, trade-offs between going public or getting private investors so that I can make an informed choice for my business.”
Invest2Impact is a special initiative of the 2X Challenge – Financing for Women that the G7 development finance institutions launched in 2018 to mobilize and funnel US$ 3 billion to advance women’s economic empowerment and gender equality in developing countries. Since the 2X Challenge began, the G7 DFIs alone have committed over US$ 4.5 billion in financing to businesses whose operations support women to access good quality jobs, build resilient businesses, and increase women’s economic empowerment. In June of 2021, the 2X Challenge announced a new collective target of US$ 15 billion for gender-lens investing by the end of 2022.
Invest2Impact was launched in 2019 as a business competition to identify high potential women-owned/led businesses in five East African countries: Ethiopia, Kenya, Rwanda, Tanzania, and Uganda. After a rigorous selection process, one hundred women entrepreneurs were selected to be part of the initiative and receive business development support for their businesses. In 2020, FinDev Canada funded Phase 1 of programming, which included business networking, webinars and business coaching that focused on approaches to drive and sustain commercial growth and strategic adaptation in light of the COVID-19 pandemic. Open Capital (OCA) is implementing Phase 2, which kicked off in 2021 and is funded by the Agence Française de Développement (AFD) in collaboration with their affiliated DFI, Proparco. The objective of this phase is to support participating Invest2Impact entrepreneurs in overcoming the ongoing COVID-19 crisis by developing effective business strategies and improving their investment-readiness to enable them to raise the necessary funds to ensure their growth and sustainability.
COVID-19 has negatively impacted many African businesses, including Invest2Impact participants. Doing business became harder, especially in the first months of the pandemic, due to imposed restrictions on movement and operations, while consumers experienced reduced disposable incomes and therefore reduced spending power.
Despite these obstacles, the Invest2Impact entrepreneurs have shown incredible resilience as they benefit from the business advisory support offered through the project. Many of these entrepreneurs initially struggled to manage cash flow, pay for rent, retain staff during the first year of the pandemic; some even saw their business survival threatened. Most, however, have since been able to overcome the worst of the crisis, stabilize their operations by strategically pivoting their businesses to provide new products or services, moving to digital marketplaces, targeting new clients, and adapting their supply chains.
Crystal Africa Cleaning Services, based in Nairobi, Kenya for instance, became an ‘essential services’ business during the pandemic and experienced a sudden increase in demand. Despite the global rise in unemployment, the company ensured that all its team members maintained their jobs. Crystal Africa launched the Takataka Mtaani Initiative which focused on collecting waste in neglected areas in Nairobi through a paid-service business model and collected 3,000 tonnes of waste per month through this social impact initiative.
Phase 2 – building on achievements so far
As countries emerge from the worst of the pandemic, the Invest2Impact entrepreneurs are looking to grow their businesses. Throughout Phase 2, OCA is supporting them as they prepare to attract financing and investment by providing tailored support based on their size, sector, business model and unique needs. For some, investment-readiness means updating and refining their business model; for others, it means developing a growth strategy or putting in place better internal systems and processes around financial management, governance, etc. It could also mean developing sound financial projections and investor materials to support the fundraising efforts. To that end, each entrepreneur is receiving group or individual business support, as well as individual coaching tailored to the specific needs of her business. OCA is also hosting a series of webinars and workshops that focus on specific needs and interests identified during consultations held with each of the participating businesses. These workshops are complemented with practical tools, and cover topics ranging from creating an investor memo to developing a social media strategy. Virtual meetings throughout Phase 2 and virtual or in-person regional convenings in the second half of 2021 will provide continued networking and peer learning opportunities for participating businesses.
The Invest2Impact entrepreneurs are passionate about their companies, the business challenges they are seeking to solve, and the impact they are trying to make to build their communities and countries’ economies. We are thrilled to partner with and support this amazing group of women leaders as they grow their businesses, while serving as models for many more African women looking to undertake their own entrepreneurial journey.
Nathalie Gogue-Ebo is an Associate Partner at Open Capital Advisors and heads the firm’s Gender Practice
Additional contributors to this article: Open Capital Advisors Senior Project Leader Erin Tyburski and Project Leader Ann Munyua.