24th February, Mumbai: Economic Times Online recently featured an article on ‘Mainstreaming Gender lens capital solutions for women-led SMEs’ which was authored by Trina Roy, Associate, Intellecap.

The article largely talks about how Gender Lens Investing (GLI) as an approach to promote social and/or economic empowerment of women, in addition to financial returns has gained traction in the past years.

In the article Trina talks about how India currently has more than 8 million women-led businesses that represent 13.76 % of all businesses in the country as estimated in the Sixth Economic Census. With improved education outcomes, targeted interventions by the government and private sector, and other socio-economic factors; women entrepreneurship has indeed witnessed a rise over the last couple of years. States such Tamil Nadu, Kerala, Andhra Pradesh, West Bengal and Maharashtra have the highest share of women entrepreneurs.

Applying a gender lens to budgetary allocations, the government as an impetus to promote women led entrepreneurship has taken certain steps. These have included measures such as expanding the Women SHG interest subvention programme to all districts, making one woman in every SHG eligible for a loan up to 1 lakh under the MUDRA Scheme, among others.

According to the author, while these are welcome moves by the government to ease the access to finance challenge – an acute challenge faced by women entrepreneurs, the time is right to initiate conversation about bigger reforms.

She opines that, Gender Lens Investing (GLI), an approach to promote social and/or economic empowerment of women, in addition to financial returns has gained traction in the past years. Adopting the GLI approach, investors seek to channel debt and equity to businesses that create positive gender outcomes through various strategies. Some of these include supporting women as entrepreneurs, investing in development of products and services benefiting women, and channeling capital in businesses having a high share of women employees and in their value chains.

For India to unlock the potential of women entrepreneurship, concerted strategies to catalyze GLI and develop effective financing products for MSMEs (Micro, Small and Medium Enterprises) in particular will be critical. In this article we explore how the GLI philosophy is applied to supporting women entrepreneurs, specifically in the SME sector.

Elaborating on it further, she says that supporting women led SMES through targeted demand driven financing approaches and products lies at the heart of transforming the capital access scenario for women entrepreneurs in India. Depending on the type of scale and sector of an enterprise, multiple approaches can be explored.

First, after assessing the sector and sub sector category of MSMEs, tailored financing products combined with capacity building support can be developed. Majority of women led enterprises being subsistence businesses do not typically attract capital from investors or banks. Many of these women-led SMEs in India operate in sectors such as textile and handicrafts, food processing, beauty and wellness and are overwhelmingly concentrated in the micro and small scale business segment. Their particular needs are significantly different from high growth businesses to which the traditional start up ecosystem caters or steady businesses to which banks provide capital support. Bearing in mind their business models and market needs, sector or cluster specific financing products that provide patient capital aligned to growth rates and pay back periods would be instrumental to spur growth.

Second, blended financing products combining different types of capital – debt, equity and grant can also support women-led SMEs in underserved geographies or in sectors with low profit margins. With flexible capital, blended financing products reduce capital costs and can be leveraged effectively to overcome the problem of low returns and high risks; concerns that often limit traditional private sector investments. As an investment structure mixing concessionary and for-profit capital, the Women Entrepreneurs Opportunity Facility (WEOF) is a remarkable example of an effective blended finance product deploying capital to a segment often overlooked by financial institutions and global investors.

Third, innovative structuring of gender financing through development impact bonds, guarantee bonds, soft loans can also be explored to meet the needs of women entrepreneurs in the MSME sector. These serve as effective mediums to bridge social goals and economic returns. Experiments with development impact bonds and outcome bonds are at its nascent stages and have been promising in areas like health and education in India presently.

How would the DIB work? Here she suggests that adapting similar structuring to create a gender focused impact bond would channel private capital toward women entrepreneurship and augment the Government of India’s efforts to promote it. DIBs bring together the public, private and philanthropic sectors and align their interests towards a common set of objectives. Commercial investors pump in capital in a DIB, and the DIB in turn on-lends growth capital at low interest rates to a target women-led SME segment. Over the agreed tenure period, women-led SME repay back the capital with the given interest to the DIB. An independent agency monitors the outcome in terms of scale achieved by the SMEs and on its basis, a donor(s) and/or the government makes a payment to the DIB. Commercial investors are paid back by the DIB using the capital repayment by SMEs and the outcome based payments from the donors or government.

Other experiments including guarantee fund, soft loans, and interest rate subventions are viable alternatives to consider as well. To bring about a paradigm shift, efforts to build capacity and ease capital access must work simultaneously. Serious efforts by both the government and private sector are necessary to steer and mainstream Gender Lens Investing for women entrepreneurs in India.

In her conclusion she says that going forward, building a strong evidence case for GLI will be an imperative first step. Supporting data-backed research to provide insight into the performance and potential of such SMEs is crucial. Additionally, mapping stakeholders like investors, incubators, experts, enterprises, to identify opportunities of collaboration will strengthen its case. The current measures targeted towards women in SMEs provides the initial boost and is a larger signal for other ecosystem players, specifically the private sector to come forward and build on this momentum.

Saturday 22nd February , Mumbai: Aavishkaar Group was recently featured in Business Standard in a story tilted ‘ Early mover advantage’ when Vineet Rai Founder and Chairman in an exclusive interview with Anjuli Bharagava as part of ‘Lunch with BS’ spoke about how high risk appetite combined with strong survival instinct is the recipe for success.

The entire interview with Business Standard :

In the early 2000s, when the world was yet to wake up to the promise of impact investing, Vineet Rai was registering a firm with the princely sum of Rs.5,00O to raise funds to transform rural India. The following year, he borrowed a lakh from his wife and registered an advisory com¬pany to help new entrepreneurs. Around the same time, in the United States, Jacqueline Novogratz set up Acumen, first as a fund and which later became a non¬profit. A year later, UK businessman turned philanthropist Sir Ronald Cohen set up Bridges Fund Management that in due course crystalised into an impact investing company.

That makes Aavishkaar group chairman Rai a pioneer in the impact investing space in India arid one of the early entrants globally. We are meeting for a long pending Dinner with BS at The Table in Mumbai’s Colaba area. Without wasting time we order a SoBo salad that we intend to share. Rai opts for shrimp tacos and a diet coke and I order a roasted almond tortellini. The term “impact investing”, he explains, was coined many years later —at a meeting at Lake Como, Italy, in 2008 by 10 members of the impact community. Would he then qualify as the “father of Impact investing” in India like his mentor Basix’s Vijay Mahajan, who is ofetn called the father of micro-finance? He laughs off the suggestion, adding that would be too laudatory.

Rai was 29 when the idea that a blend of talent and high risk capital could trans¬form rural India gripped him. He present¬ed his idea before the board of the Gujarat government non-profit he was CEO of only to be told that venture capital was barely available in Indian cities, let alone raising such capital for rural India.

Meanwhile, a small group of Indians based in Singapore had heard of Rai and sent him a ticket to visit them (Rai couldn’t afford the tickets for what would be his first-ever visit outside of India). They hosted a dinner of SO local Indians, sat through his presentation and a bunch of them committed some money to his plans, not expecting to get it back.

A bull in a china shop and keen to prove his theory, Rai returned to India, quit his job — to his wife’s horror — and set the ball rolling. He had earlier helped Vikram Akula in building SKS Microfinance as a friend and consultant and had become quite familiar with the micro-finance landscape in India. But the going wasn’t easy for Aavishkaar in its early days and by end-2003, Rai was struggling to keep his head above water. That’s when Mahajan pointed out that Rai was in a unique position — he knew more about micro finance than most people in the equity space did and he knew more about equity than most in the micro-finance space did. So why doesn’t he just marry the two?

He followed the advise and worked “30 hours out of 24” with his small team of equally committed people. At that time, Intellecap was assisting two billionaire Kiwi brothers, Richard and Christopher Chandler, find the right opportunity to invest in India’s micro-finance industry. Impressed with his handling of the deal, the brothers offered to pick up a majority stake in Rai’s business. Rai refused. “At the time, Intellecap had Rs. 1 crore in spare cash and I thought I was the richest man in the world,” he says. That apart, he also knew there were no free lunches and was scepti¬cal of the strings that might be attached. The Chandler brothers were not accus¬tomed to taking a “no” for an answer and persuaded Rai to sell 40 per cent in Intellecap for $8million. The year was 2007.

Our dinner is over and Rai orders a cap¬puccino. We are by now in 2011 and the pressure on Rai to find a way to return the money invested by the Chandlers was building up. So he took another mad gam¬ble, against the advice of all. He went ahead and created Intellegrow (an NBFC) and bought Arohan, a micro-finance com¬pany, which he got cheap at the peak of the micro-finance industry crisis.

As they say, fortune favors the brave. The Aavishkaar fund became one of the first investors in several early stage, highly successful MFIs of the day including Equitas, Basix and Utkarsh. Arohan grew by leaps and bounds and is the fifth largest MFI in India today.

Rai starts talking about a mind-blow¬ingly complex restructuring of the group that I tune out of and by the time I catch him again the holding company Aavishkaar Group has been born. The group sold stake in the holding company twice, raising over $100 million in two years (part of the money was used to buy back stake from the Chandlers), taking Rai and his associates’ share in the group down to just over Si per cent.

I interrupt to point out that many in the impact space have questioned his decision to venture into Africa and South East Asia, arguing that he’s bitten off more than he can chew. “Can we go wrong? Yes, we can. But if I don’t take risks, we die,” argues Rai.

If some describe Rai as a risk-taker, others say he is ambitious. The group today has Rs.8,O00 crore in assets under management, and by 2025, he aims to be well entrenched in the international market, with assets under management to the tune of Rs.50,0O0 crore. He’s also under pressure again to create exit options for his present set of investors.

I switch to a broader debate: Over the years, there has been criticism globally that the impact sector is seeking to take a moral —high ground and make other businesses appear soul—less. This lot argues that every business will have some impact and that the impact community comprises wolves in sheepskin. So does he see himself as a messiah for India’s poor? Rai holds no grand illusions. The impact sector isn’t really a “Florence Nightingale” and can— not solve the more complex problems that society faces. “If a child is dying of starvation or a baby girl is killed, what can I do?” he asks. He can only solve problems that lend themselves to a viable business model. Also, he’s in it because this is what he likes doing, not because he can “change the world”.

That more or less confirms my assessment of Rai —that he is grounded. He lives in Mumbai’s west¬ern suburb of Kandivali although lie can easily afford a fancier address iii the city. I also see him asking his driver to call it a day even before we finish dinner because he is concerned it might be too late for him to find trans¬port to get home.

We have been talking over three hours now. As we wind up, I tell him that he appears to be enjoying the perpetual— pressure-cooker work environment. “An entrepreneur should always remain under pressure or he will die,” he says simply. He just hopes many more are left better off at the end of this over—wrought journey.

Women make essential contribution to the development of agriculture and rural economies in emerging countries. On average, women make up 43% of the agricultural labor force in developing countries, ranging from 20% in Latin America to 50% in Eastern Asia and sub-Saharan Africa (SSA). Further, in SSA women contribute 60-80% of the region’s food. Yet despite their importance to the sector, women continue to face specific constraints that limit their productivity. They have lower access to agricultural inputs and farming knowledge, earn lower returns on the inputs used, and face gender-based distortions in the product markets. Similarly, women are also disadvantaged by other gendered norms and practices, which result in fairly rigid and unequal divisions of labor both at the household level and the marketplace. Women’s participation in the sector is thus limited to value chain nodes and crops with lower economic return than men. The resulting gender gaps in agricultural productivity can be substantial, ranging from 13% in Uganda and 16% in Tanzania, to 28% in Malawi.

So what would happen if we closed the gender gap in the sector and women accessed the same productivity resources as men? Research shows that yields could increase by 20-30%. In Rwanda for instance, closing the agricultural gender gap would lead to about a 19% increase in crop production, which would add $419 million to the country’s GDP. Closing the gap could bring 180 million Africans out of hunger, and lift millions of families and communities out of poverty. As such, innovative solutions to the constraints facing women need to be explored. Below, we discuss a number of initiatives that are developing ground-breaking solutions to support the region’s female farmers.

ENHANCING ACCESS TO CREDIT FOR WOMEN IN AGRICULTURE

Women’s access to inputs – fertilizers, pesticides, hybrid seed, wage labour and machinery – is highly influenced by access to credit. But on a general level, the agricultural sector is considered high-risk for most traditional lenders; lending to the sector is thus highly collateralized and follows stringent underwriting processes. Despite the importance of the sector, lending has remained relatively low at only 2.4%, 3.6% and 3.7% of total loan portfolios in Cote d’Ivoire, Ghana and Nigeria, respectively. And this number is significantly less for women, due to their limited ownership of assets and land used as collateral, and to the lack of banking and credit data about female borrowers (only 27% of women in sub-Saharan Africa were estimated to have a financial institution account in 2017). In addition, financial decision-making powers in some countries continue to lie with men as a result of gender-biased and retrogressive regulations and women’s low literacy levels.

Nevertheless, women do undertake various transactions, creating data points that can be leveraged to generate credit scores. To that end, a number of players are already working to digitize women’s transactions. The Aga Khan Foundation, for example, has been working to digitize the operations of women savings groups in Tanzania. TruTrade purchases produce from women farmers in Kenya and Uganda and pays them directly through their mobile phones, which not only helps build a digital profile but also gives them security and control over their finances.

Some companies are even developing financial products customized for women. For example, Cherehani Africa is targeting rural women in Kenya through their “Kilimo (Swahili for agriculture) loans,” which provide subsidized credit to finance high-yield seeds, pesticides, green house kits, high-breed dairy cattle, fisheries and poultry. The company also connects farmers to input suppliers through their online platform.

OPTIMIZING WOMEN FARMERS’ AGRICULTURAL PRODUCTION

Across the agricultural value chain, production is one of the most female-driven stages. However, women not only face the challenge of unequal access to a variety of productive inputs – fertilizer, seed, contemporary farm implements and paid labour – but also achieve unequal returns on those inputs, which limits their output. To help address this, Agrinfo, a female-led aerial drone surveillance enterprise in Tanzania, is working with women in the country to identify their crop cultivation needs and provide solutions that will reduce pest infestation and diseases.

FACILITATING GENDER-RESPONSIVE EXTENSION SERVICES

Knowledge and training in farming techniques is also key to enhancing the productivity of the inputs used – and ultimately boosting the efficiency of the broader sector. Yet women farmers receive less than 10% of agriculture extension services, limiting their ability to apply good agronomic practices – and low literacy levels are considered a major barrier to their use of these services. There are several innovative approaches that aim to address this, however. For instance, Digital Green uses a video-based approach to deliver extension services to women in India and Ethiopia; and the Talking Book audio device (established through a partnership between Amplio, the Mennonite Economic Development Associates and Literacy Bridge Ghana) is enhancing the delivery of practical and easy-to-learn extension services in Ghana.

INCREASING POST-HARVEST VALUE FOR WOMEN FARMERS

Sub-Saharan Africa loses about 30-50% of its total agricultural produce post-harvest, due to poor storage and transportation techniques. In many parts of the continent, women play a significant role in post-harvest activities such as drying, storing, cleaning and processing food. However, efforts to reduce post-harvest losses have tended to focus on technological solutions that women may not have the opportunity or resources to utilize. In response, Claphijo Enterprises in Tanzania is helping women make use of surplus or unsold mangoes by providing cheap communal drying and dehydration facilities. In addition, some of this dried produce is bought from the women and sold under the company’s brand, “Mama’s Flavors.”

CREATING MARKET AND VALUE CHAIN LINKAGES

Agricultural commodity trading has traditionally been male-dominated, with factors such as limited freedom of movement, and low access to infrastructure and information networks preventing women from participating in the marketing of produce, both locally and internationally. Women thus often rely on either their husbands or middlemen, who collect produce from their farms. Further, social norms require women to meet household food needs first before selling the surplus. And women also typically receive lower returns on their produce, because of gender biases in the product markets. All of these factors make it difficult for women to professionalize their farming work. To address these challenges, TruTrade provides information on prices and markets to women farmers in Kenya and Uganda, and directly links them to the buyers. GROOTS Kenya is also providing capacity building for women in Kenya, to help them exploit various market opportunities.

Though the solutions discussed above are exciting, for any sector to thrive, this sort of strengthening should be done at an ecosystem level – including both women farmers and development organizations. That’s the focus of organizations like African Women in Agricultural Research and Development (AWARD), whose Gender in Agribusiness Investments programme incubates innovations and enterprises built with the intention of helping to bridge the gender gap in African agriculture. It’s encouraging to see the emergence of these – and other – innovative organizations focused on supporting women farmers in sub-Saharan Africa. Their work promises to have a major impact on the continent.