Leveraging Investment to #BreaktheBias

Jessica Villanueva is MEDA’s Technical Director, Impact Investment and Jennifer Denomy is Technical Director, Gender Equality and Social Inclusion. To mark this year’s International Women’s Day theme of ‘Break the Bias’, they sat down together to talk about how their two technical areas overlap and what this means for MEDA’s work.

Jennifer Denomy & Jessica Villanueva

Jen: Gender lens investing is becoming more and more common. How do you see gender and finance fitting together?

Jessica: Access to finance is the ability to obtain capital to support and stimulate economic growth. But when you integrate gender into the investment decision making process, you are trying to understand how your investment can contribute to gender equality, which means that everyone has access to capital, regardless of gender. Gender lens investing or GLI is important to MEDA’s overall focus of working to empower historically marginalized people, especially women. We do this by encouraging lenders, banks, and other institutions to lend to women entrepreneurs and women-owned or led businesses so they can gain access to markets and finance to achieve their potential. It is about being intentional about expanding our (and their) comfort zone to make more appropriate investment decisions that are looking for specific outcomes. We believe that the journey to achieving these outcomes is equally important.

Gender lens investing involves consideration of gender biases, patterns, power dynamics, opportunities, and risks in investments. At its core, gender lens investment incorporates a gender analysis alongside impact and financial analysis to make better decisions that lead to improved gender equality and economic outcomes.

Jen: It’s well documented that considering gender when making business and financing decisions has a positive impact, and yet there is still a huge gender gap in the capital available for women-run businesses. Why do you think this persists and how can we close the gap?

Jessica: In fact, we have lots of indicators and data on how if you integrate gender, the impact will be greater. For example, the McKinsey & Company “Diversity Wins” 2020 Report found that “companies whose boards are in the top quartile of gender diversity are 28 percent more likely than their peers to outperform financially” and the correlations are statistically significant. But if we already know that, why is the gap still so huge? For me, it’s because the investment industry doesn’t really know how to integrate a gender lens. By nature, most investors identify opportunities and assess risks. Perceptions of risk can be influenced by bias, and perceptions of opportunity can be expressions of privilege. The non-profit think tank, Criterion Institute, talks about how to improve the field of GLI by digging into the dynamics of power and privilege in the investment process. This requires a rethinking of investment best practices, specifically incorporating data from gender and social justice organizations operating in this space. Investors don’t know how to do this or who to engage with to help them in this journey, and they think gender experts do not understand the investment needs. Also, they feel it is too expensive to gather this data and to incorporate it into their decision making.

Jen: So you’re saying that investing with a gender lens requires a change in thinking. But reorienting how an industry thinks is hard and takes time. What are the levers of change and what are some of the areas where change is slow?

Jessica: Right now, the investment industry wants women-run businesses to be the ones to change. Investors don’t want to change. On some of our projects, we are trying to change this thinking and use a different approach. We’re testing a hypothesis that we don’t need to fix the businesses; we need to fix how the capital is provided. However, this is not happening at the speed we have expected. It was so hard to change the policies and procedures of our investment fund partners that we are now back to fixing the businesses. We’re working with the businesses to make changes so that they are eligible for financing while working with investment partners to adjust their processes.

Jen: What made it difficult for that partner to change?

Jessica: It is all about power and privilege. Power is always related to who has the capital and privilege is who has access to that capital. The investors contribute to this challenge. Investors want a portfolio that has certain characteristics in terms of financial returns, which we agree is acceptable. They want a strong pipeline of businesses that are ready for investment. It goes back to who is providing the capital to fund managers and what their level of influence is. Are they asking the fund managers to embrace gender equality considerations or are they accepting the status quo?

When we do ESG work, we generally do it at the level of the companies. For example, we ask whether the companies have different policies in place to hire and retain women and if they have environmental policies. But we don’t ask about whether the investor puts conditions on the capital to drive change. The problem is that in the whole financial value chain, starting with the donors and investors, the level of in-depth analysis doesn’t happen very often. This would require investors to ask how they are using their power to shift who can access to capital.

Jen: What does MEDA bring in this space that is different or innovative? What have you seen in our work that is exciting?

Jessica: ‘On the ground’ teams and MEDA’s partners have deep knowledge of how markets work, including the ways that investment can address the barriers within these markets. This knowledge translates into an ability to analyze gender equality and environmental issues in markets and identify how they hinder market potential and fuel inequities, and how the power of investment can support the shifts needed to make the market work. We are using the power of this knowledge to start pushing how the fund managers are assessing the companies and providing capital that is responding to their needs. We press them to consider who is making the investment decisions and who is part of the investment committees. Typically, these committees are made up of men, often based in the West, and we are encouraging fund managers to have more diversity – include more women, for example, especially when we are making decisions that affect women-run businesses.

Expanding your comfort zone is critical to fostering participatory investment decision making spaces with diverse members to inform financing, especially for the selection partner process and proposed investment structure. For example, a woman entrepreneur or a women organization could contribute a better understanding of the finance-gender nexus including market risks, community vulnerabilities, etc. MEDA is advocating for these “other” stakeholders to be more involved in investment decision-making.

Jen: So, you’re saying that there are problems at lots of levels of the financial and business ecosystem, for example, that women are not present at the decision-making level, in investment committees. But also in businesses, women may be doing invisible work that is not seen or recognized. Can you talk more about how this invisibility relates to women’s access to financing?

Jessica: In many sectors, women’s work is invisible. In the coffee and cocoa sectors, for example, women play a critical role. But because their husbands lead the business, there is no recognition of the added value they bring to the table. I’m not talking about paying them for their work, though that’s also important. But in coffee, there are different stages in the process where you can take advantage of alternative businesses that women may do alongside coffee processing. For example, they use the biproducts to add value. In our project in Nicaragua, we are supporting a group of women for whom coffee is their main business. They are also producing these other side products like skin exfoliants and other personal care products. Sometimes these side products are part of the business’s balance sheet, but other times they are informal and part of the family income. These are the kind of roles that organizations like MEDA can reference when they highlight women’s contributions.

Jen: How does this invisibility translate into women’s ability to attract financing?

Jessica: What’s happening among investors is that they are fighting for a pipeline. They are fighting to invest in the same businesses but leaving out all these other investments that may be profitable and good, but not as visible. Part of the problem is this invisible work that women are doing may not even appear on the company’s balance sheet. Proportionally, women-run businesses are underrepresented in investment. But investors do not think it’s worth seeking out or assessing businesses that are less attractive.

Jen: It seems that there are many issues that contribute to this problem – land rights, property, inheritance, occupational segregation (women who are in business are more likely to be necessity entrepreneurs and gravitate to sectors that are less profitable, such as service sectors). From a systemic perspective, these all contribute to there being fewer women-run businesses that are obviously investible. From a gender perspective, what do we need to do?

Jessica: Yes, there are definitely systemic problems. But there is also individual responsibility. There are so many points in the process where decisions can be made to intentionally be more inclusive. Different individuals and organizations have a responsibility to think about this – to be aware of the impact of their choices. To understand where they can be inclusive, and by extension, where they are not. At MEDA, we are trying to influence the ecosystem, to understand who is holding power and to make it easier for them to be inclusive. But also to be more conscious of the decisions different stakeholders in the ecosystem are making.

To read more about the intersection of gender and finance, click here and for more information about MEDA’s GLI work, click here.



  • Jessica Villanueva

    Jessica Villanueva is MEDA’s Senior Director of Technical Areas of Practice with more than 20 years of management experience, focusing on agri-food market systems, financial inclusion, impact investment, and gender and climate lens investment projects in Latin America, Africa, and Asia.

    View all posts
  • Jennifer Denomy

    MEDA's former Technical Director for Gender Equality and Social Inclusion

    View all posts

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