Show them the money: embedding a gender lens into climate innovation

Investing in women* or financing women-led ventures is the most effective way to tackle gender inequality. According to the International Finance Corporation (IFC), globally, women-owned small and medium-sized enterprises (SMEs) face a credit gap of $1.5 trillion. This article provides advice and tips for adequately allocating budget and resources to become more “gender-smart.” It is part of a campaign launched by EIT Climate-KIC that outlines five actions to address gender inequity in climate entrepreneurship. This week, we expand on the second action, ‘show them the money’ and we talk to Carolyne Kirabo from M-Kyala Ventures and Srinita Mitra from GrayMatters Capital, two experts from our community, to learn more.

Investing in women: a better return on investment

Once your organisation has decided to tackle gender inequality, the most effective step it can take is to give direct investment or financing to women-founded businesses. Not only will this benefit gender equality, but investing in women-founded businesses will generate more revenue than those founded by men. A report by BCG found that start-ups founded or co-founded by women generate 78 cents of revenue for every dollar raised, whereas male-founded startups generate only 31 cents.

“Approaching finance with a gender lens isn’t a checkbox – it’s an integral part of our decision-making process,” says investment manager Srinita Mitra. “I seek sustainable businesses poised for growth while advancing gender equality and positively impacting society. Selecting the right partners is crucial for achieving financial returns and social impact. Over a decade ago, during my tenure at a leading South Asian bank, I noticed the high rejection rates for women’s loan applications, primarily due to their limited or non-existent credit history. Today, the financial industry has undergone a learning curve – more women are entering entrepreneurship and improved models of credit underwriting are being implemented. Despite early-stage hurdles, I’ve observed that women-led businesses that weather the initial challenges tend to attract more capital and follow-on funding, and are poised for hyper-growth,” adds Mitra.

Carolyne Kirabo, founder of M-Kyala Ventures also notices a clear difference in growth rates of women-led businesses compared to those led by men. “In the early stages of my career, I was involved in a World Bank project and saw a clear distinction between what women entrepreneurs had done with the financing they received versus what men did. Women-owned businesses put the money to exact use as the bank had given, while men diverted most of the capital, coming up with other ideas. Women took advice – they hired, they took out insurance. There was a significant difference in growth rates, and women performed better for the bank,” says Kirabo.

Tackling the most persisting challenges 

Despite many studies demonstrating the multifaceted benefits of investing in women, access to capital remains a challenge. “Issues start with not knowing what financing is available for you – the market for financial services or products for women is limited in countries like Uganda, Kenya, Tanzania, and most of Africa,” says Kirabo. “Women start a business by using their savings, borrowing from friends and networks, using table banking groups. However, these methods have their limits, leading to a huge access gap. Interestingly, most of the women entrepreneurs we support are former corporate employees, but when they start businesses with the same banks they had relationships with, it’s a completely different scenario.” 

Mitra agrees that access to finance remains a major barrier: “Finding the right partner is crucial for launching or scaling up a successful venture. Embarking on a venture often presents a social conundrum: prioritising between family and business. Achieving work-life balance is a persistent challenge for women entrepreneurs. For first-time women entrepreneurs, navigating the complexities of financing can be daunting. Often, they pursue venture capital funding without a clear understanding of its intricacies, leading to disappointment when expectations aren’t met. Understanding investment readiness and the appropriate type of investment for their business is crucial for success. While external capital can be empowering, it’s important to recognise that capital can also be sourced from profits. This knowledge forms the foundation for sustainable growth and resilience.”

Kirabo highlights that bias plays a role in perpetuating the capital access gap. “I ran the first impact investing firm in Uganda and the access issue there became even more apparent – most of my analysts were not bringing women into the portfolio meetings. I realised there was a bias, with the ecosystem assuming that business was primarily a men’s domain.  That’s why we have been designing a fund and launched M-Kyala Capital, which will be directly investing in women-led enterprises in Africa that are tackling climate change using sustainable business models.  

Beyond social and cultural barriers, structural and institutional barriers prevent women from accessing formal banking. For example, according to a report from the World Bank, the lack of official forms of identification and mobile device access limits their ability to access financial means through official channels. 

How to best allocate budget and resources

Investing in women can also mean designating adequate resources to support women’s equal pay and access to promotion in an organisation. “Conducting equal pay audits to ensure that women are compensated fairly compared to their male counterparts for equal work is crucial. Additionally, ensuring parity among women based on the quality of their work rather than favouritism or bias,” says Mitra. 

Mentorship for women in entrepreneurship is crucial, says Mitra. “Initiatives to support career development will provide all genders with guidance and opportunities for growth. Transparent promotions and leadership opportunities will also ensure equal access to career advancement opportunities and women are not disadvantaged due to gender bias.”

According to a report by the McKinsey Global Institute, closing the gender gap in entrepreneurship could add up to $12 trillion to global GDP by 2025. UNDP also highlights the many social benefits associated with investing in women, as women invest a higher proportion of their earnings in their families and communities compared to men, leading to improved education, health, and overall well-being. This will benefit everyone. Not only women entrepreneurs, but their families, communities, and the economy.

*In the context of this article, the term ‘women’ encompasses women and minority genders. 

At EIT Climate-KIC, we’re committed to driving systemic change in gender equity across the climate innovation sector. Our gender programme, supported by Irish Aid, CATAL1.5°T and Green Hub helps partners identify gaps in their understanding of gender inequity and implement concrete actions for organisations to embed a gender lens into their everyday work.

Visit our gender mainstreaming page to learn more