Inclusive financing approaches to scale Women-Led businesses

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Startups founded or co-founded by women continue to raise less money globally, despite generating more revenue as compared to those founded by men.  In fact, since the beginning of 2016, companies with women founders have received less than 3% of investment deals in Africa in 2022, despite the data showing that investors are better off investing in women.1,2. 

There is a body of research indicating that traditional financing is biased against female founders and that some alternative forms of investment can make a big difference in the gender gap.  Financing vehicles such as debt are lower risk, and women-led businesses tend to raise twice as much debt as their male counterparts, especially after acceleration support.2  Revenue-based investing approaches have seemed to close the gender gap without even trying, and those investors are seeing much more diverse portfolios.3 Early indicators indicate that the algorithm-based data sets used to evaluate investments do not have the same bias – because numbers do not lie.4  Lastly, some blended finance models have seen success when blending commercial with philanthropic capital.

The current traditional forms of financing for women may not reduce the gender gap at the desired pace and there is need for a dynamic change in financing approaches. The VISA Foundation sponsored session at the 10th Sankalp Africa Summit explored innovative financing structures that could change the game for women-led businesses.

Role of accelerator programs in accessing finance

Accelerator programs play a crucial role in nurturing and supporting businesses to grow. However, male founded businesses have dominated these programs.  In order to increase diversity and inclusion of more women founded businesses, there has been a recent shift towards women-only cohorts in accelerator programs. These programs provide tailored support, mentorship, and networking opportunities that cater to the unique challenges faced by women entrepreneurs. Andia Chakava, Investment Director at Graca Machel Trust notes, “women entrepreneurs are not homogeneous and have different needs. Enterprise development programs are necessary to coach entrepreneurs, and networks play a vital role in funding at the early stage.” However, the programs have not been as successful in having more women owned businesses access finance. They need to provide additional support in preparing the women led businesses to become more investor ready and linking them to the right investors. Including funding in their models is another way to encourage more people to invest in the businesses they work with. They should also create support communities to help de-risk the businesses through recommendations and fundraising support. According to Esther Ndeti, Investment Principal at Unconventional Capital, “As for revenue-based investments in enterprises, the beauty lies in the abundant portfolio support it offers, where investors join the ride, empathizing with the challenges faced and enduring the ride’s bumps alongside the enterprise. Promoters can relinquish ownership and repurchase it later.

Funding structures

According to Elizabeth Howard, Founder at Lelapa & African Crowdfunding Association, “More needs to be done with regards to gender diversity in funding to put more capital behind women-led businesses.” Funding structures need to be more accommodative of women owned businesses. 


1 Africa Investment Report 2022, Briter Bridges: Link
2 Why Women-Owned Startups Are a Better Bet, BCG: Link
3 Venture Capital and the Gender Financing Gap: The Role of Accelerators, We-Fi, Village Capital, and IFC: Link
4 Why are revenue-based VCs investing in so many women and underrepresented founders? TechCrunch: Link

An increase in blended financing for women-led businesses is one of the innovations in the space that is increasing financing to women led businesses. Women entrepreneurs tend to prefer debt to equity, as there is often a knowledge gap in understanding the intricacies of capital markets and equity structures. To address their concerns with equity financing, there is an increase in blended finance structures by women-focused funders to make it more attractive. 

The perceived risk of investing in women owned businesses is high but philanthropic funding has helped de-risk and increase the flow of capital to these businesses. Betty Metto from the Africa Guarantee Fund mentions that through the AFAWA programme, Africa Guarantee Fund provides a risk coverage ratio of 75% compared to the usual 50% for women financing.  To reach more women founders, funders need to expand further into small, no-asset businesses and early-stage startups that are not yet at the point of scaling which is where a significant number of women owned businesses are. For this kind of businesses, there is a need for alternative credit assessment tools to include them in access to finance. VISA foundation has supported Grace Machel to create an alternative credit assessment tool to assess founders who do not have collateral but have a decent track record in the industry.

Sensitization and awareness creation for investors

Angel investors play a crucial role in providing funding for early-stage startups, however, few angel investment networks focus on women entrepreneurs. According to Sakina Mandanda, Director Financial Products at AgFinance, “There is now more focus on funding female entrepreneurs and businesses, with some investors deliberately seeking out female-led ventures. The market has become more specific, with investors looking for women in various sectors like manufacturing, construction, infrastructure, and technology.” In order to offer more suitable financial investment options, more angel investors need to be informed and educated on the market needs of women entrepreneurs. For example, women founders are more interested in revenue-based investments, that is, equity with revenue-based payback. This is because they have an option to buy back and can negotiate the percentage of revenue that is used for payback. Understanding the needs of women entrepreneurs will in turn increase suitable and favorable investment options. In order to offer more backing and comfort to angel investors to adjust and accommodate more women entrepreneurs, fund managers also need to invest alongside the angel investors to illustrate confidence in the investment. 

The rise of women-led businesses is a positive development in the entrepreneurial space. However, women entrepreneurs still face significant challenges in accessing funding. To overcome these challenges, there is need for a shift towards women-only cohorts, an increase in philanthropic funding for women-led businesses, blended finance structures, niche funding mandates, and support communities within accelerator programs. Additionally, angel investors need to focus more on women entrepreneurs, and fund managers need to invest alongside them. By implementing these strategies, women-led businesses can overcome funding challenges and continue to grow and scale, contributing to the economic growth of their communities.

Nicole Moraa, Stella Kimani and Michael Omega

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