"Do you know how many great business ideas die in the bank parking lot?" a Colorado woman asked then-First Lady Hillary Clinton 20 years ago. The aspiring entrepreneur had just been turned down, again, for a credit line critical to her technology startup.
Today, women still struggle to access the capital they need to spur economic development. While women entrepreneurs are now understood to be an accelerator of global growth, their difficulty accessing capital is a pernicious global brake.
The opportunity cost is profound, given that women’s economic impact is magnified by a "multiplier effect"; women are more likely than men to plough earnings back into their communities, fostering prosperity and stability.
But despite their systemic disadvantage, women are launching businesses at an impressive rate: If women business owners in the U.S. formed a country, its GDP would rank fifth globally. In emerging markets alone, the eight to 10 million small- and medium-sized enterprises (SMEs) with full or partial female ownership represent more than 30% of all formal SMEs.
A recent International Monetary Fund (IMF) study, "Women, Work, and the Economy," states that if obstacles to women’s full participation were removed, women could become a driver of global growth. For countries, that would mean increased GDP and greater stability. For companies, it promises the "shared value" of driving the bottom line while creating social good.
As a result, both public and private sector actors are increasingly focused on how to employ a "global women’s strategy."
For companies, purchasing goods and services from women entrepreneurs is a logical first step. A hospitality business, such as Marriott, could source its in-room toiletries from a women-run enterprise. Large retailers could stock their shelves with products from women artisans and entrepreneurs, giving them unprecedented access to markets.
By sourcing from women entrepreneurs, companies can use their vast purchasing power and supply chains to help level the playing field for women, benefiting their own bottom line while creating social value.
In September 2013 at the Clinton Global Initiative, Hillary Clinton announced a significant commitment by companies, non-profits, and the U.S. State Department to encourage spending more than $1.5 billion outside the U.S. on women-owned businesses over five years.
Walmart alone has committed to sourcing more than $20 billion dollars from women-owned businesses for its U.S. business by 2016 through its Women’s Economic Empowerment Initiative.
As more and more large companies seek to source from women entrepreneurs, they too recognize the critical role women’s access to capital can play: A well-timed injection of capital can grow a micro-business into a full-fledged enterprise.
But discrimination, including laws and customs that limit women’s property ownership, hinder access, since banks often require collateral for a loan. Lack of financial education and business networks are also often cited as impediments to access.
Multilateral institutions like the International Finance Corporation (IFC) are now partnering with the private sector to find creative solutions: The IFC’s recent $100 million initiative with Coca-Cola aims to help 5 million female entrepreneurs in the company’s Eurasian and African value chain through regional banking institutions, providing access to finance and training.
In November 2012, the IFC raised $165 million by issuing "women’s bonds." This money is to be distributed to banks in the developing world, which will in turn lend exclusively to businesses owned or run by women.
More recently, Goldman Sachs partnered with the IFC to launch a global fund to increase female entrepreneurs’ access to finance in developing and emerging markets.
The mobile phone and financial services industries are also partnering in a way that changes women’s ability to access capital. Visa and MasterCard have created mobile payment systems that give women in developing countries greater access at the touch of a button.
The GSMA, the association of mobile operators, found that mobile payment systems provide women who are unable to access financial services with a new channel to manage their savings and insurance, make payments, and obtain credit. This is critical, as research by ExxonMobil and the UN Foundation shows that women entrepreneurs with access to savings accounts invested 45% more in their businesses.
Banks are also leveraging their assets to help businesswomen access capital by offering a counterweight to the subtle and overt gender biases that characterize traditional lending patterns.
In collaboration with the Tory Burch Foundation, Bank of America recently helped launch Elizabeth Street Capital with $10 million in capital, operational funds, and training for women business owners across the U.S.
Bank of America also invested $10 million in the Calvert Foundation’s access to capital program, which serves women in developing countries throughout Latin America, Asia, Africa, and Eastern Europe. Furthermore, while many loans are still collateralized with property, innovative programs are exploring "flexible collateral," such as receivables or purchase agreements to better help women access capital.
Accessing credit is a first step: Women lag even further in equity financing. Crowdfunding and women angel investors have begun to make a dent. Now, multilateral institutions are looking to partner with private equity funds to increase equity funding for women.
The IFC, for example, is considering a fund focused on women-run SMEs in India and Africa, and women-run mid-cap companies in Southeast Asia. The goal is to encourage more private equity funds to invest in women-run businesses from a purely economic perspective.
Since the Seneca Falls Convention more than 165 years ago, forward-looking women and men have sought women’s equal participation. We have arrived at an inflection point where entrepreneurial women can be a critical accelerator of economic and social progress.
Capital is often the oxygen that lets women’s businesses thrive and grow. As more leaders with vision help women access capital, fewer opportunities will be laid to rest in the parking lot graveyard.
—Ambassador Melanne Verveer is executive director of Georgetown University’s Institute for Women, Peace and Security and partner at Seneca Point Global, a global women strategy firm. Kim K. Azzarelli is a partner at Seneca Point Global.
[Image: Flickr user Georgie Pauwels]