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March 6, 2020

It pays to invest in women

Ulla Huotari

It makes me extremely happy to see gender investing gaining momentum as impact investing and development finance community is committing more funds to UNSDG#5: Achieve gender equality and empower all women and girls. Gender lens investing clearly is the next big thing in impact investing. Investors are mobilising finance for businesses which promote gender equality within their own operations and through products and services they sell.

It is easy to see why impact investors are getting excited about gender investing. Giving women a bigger say in business generates lasting impact and superior financial performance. But why should business owners and leaders get excited? What’s in it for the core business? A lot, actually. Let me explain.

Investor interest, operational efficiency and better customers

The most obvious benefit for businesses is easier access to financing. I know from my own experience that a growing number of investors are keen to work with companies that meet global gender investing criteria, such those of the 2X Challenge. Finnfund, for one, has earmarked over USD 100 million for gender investments to be committed by end of 2021. So, any business willing to work towards those criteria are likely to have a lot of investors knocking on their door.

It is also a question of improved operational efficiency. Research shows that women make good employees and customers. Women pay their bills and service their loans.

Ulla_IntiaI have had the privilege of working with microfinance institutions mainly targeting women entrepreneurs in developing countries. Through our due diligence process and monitoring of our investees, I have witnessed that women conscientiously take care of their obligations and appreciate opportunities to earn more money and contribute to their households. In turn, this positively influences women’s decision making power and overall socio-economic status. Therefore, it is extremely important to provide capital for all those brave women and girls that have had courage to start a business. Also, did you know that women’s non-performing loans are 53 % lower than men’s?

Since women statistically are more reliable and hardworking employees than men – no offence to anyone, this is just a fact – then it obviously makes sense to hire more women, also for professional and leadership positions. We want to have more women on corporate boards, C-suites, middle management, and workforce, because it simply is good for business to have diversity at work. It will show also in the financial performance. For businesses, it makes sense to attract the best talent available. If your business gains reputation as a good workplace for women, you are likely to get better candidates for various job openings. For the good work they do, women also deserve equal pay with men which is not the case today anywhere in the world.

Diversity means success

Diversity in management has also proven to be key to financial success: Firms with a high gender diversity on their board of directors were more profitable and larger than firms with low gender diversity. Companies with more women on their boards outperform companies with fewer or no women directors. The Credit Suisse Research Institute found that net income growth over the past six years averaged 14 per cent for companies with women directors as opposed to 10 per cent for those with no female board members.

Look at the Radisson Blu Upper Hill hotel, for example. It is known to be one of the best employers for women in Nairobi. Currently, 36 % of the hotel staff and 40 % of senior management are women and the staff turnover is exceptionally low for the industry. The hotel is currently ranked first out of 36 Radisson hotels in Africa and fourth in EMEA on guest satisfaction score so both employees and customers are happy – which is undeniably a recipe for success.

Good reputation is probably not bad for sales either. If your business is known to treat employees well and attract good talent, clients know they can expect quality service and products. Women are still very much an untapped market, although women are the ones often making purchase decisions in households.

So, is it cumbersome and expensive to qualify for a gender investment? Not really. It is the intent of an investee and willingness to work on gender that matters most. The issues that impact investors like Finnfund are looking at are good for the business in the longer term. Professional impact investors can help by providing advise on company policies and strategy.

After visiting our investee companies and potential future investments, I remember why I do this work: I strongly believe that one day we have a gender equal and, thus, a better world. The most exciting part of my work is to meet all those entrepreneurs and founders of businesses that are working towards a more equal world. I would like to thank all of our current and potential investees for sharing their inspiring stories and trusting Finnfund to be among your partners. This is just the beginning – it is through partnerships that we will change the world for better – let’s keep pushing together!

Ulla Huotari
Investment Manager

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