November 11, 2020
Microloans that increase women’s income and strengthen their financial independence. Better food security through financing targeted at smallholder farmers. Companies where half of the management are women. Finnfund, a government-owned development financier, has invested recently in companies of this kind in developing countries. The aim is to promote gender equality by investing in profitable projects.
Impact investment has become an increasingly important form of investment in the world and is growing at a quick pace. Finnfund’s impact investments are one channel for Finland’s development cooperation appropriations.
Improving the status of girls and women is a priority in Finland’s development policy and also one of the key goals of Finnfund’s investments.
In 2019, the Ministry for Foreign Affairs granted Finnfund a EUR 105 million loan as a development policy investment to be invested in projects that promote gender equality in 2019–2021. During one and a half years, Finnfund has already committed more than EUR 120 million to projects and investments that strengthen the financial independence of women in developing countries or provide important services for girls and women. The goal set for the government loan was achieved ahead of time.
Ville Skinnari, Minister for Development Cooperation and Foreign Trade, considers investment in equality and companies in the developing countries important.
”Investing in girls and women is always wise and useful because gender equality is a precondition for sustainable development in society. It is especially important now as the coronavirus pandemic especially hits women-dominated sectors in the developing countries. Promoting gender equality through business investments is also an internationally growing phenomenon, and Finland is strongly involved in it,” Skinnari says.
Women in management and as customers
Investing in gender equality is important because there are major differences in the status of men and women and their opportunities to participate especially in the developing countries. Women perform a lot of work that remains hidden, their employment relationships are often unofficial and their working conditions and wage levels vary. Women are often under-represented in official workplaces, especially in supervisory and board positions.
In addition, limited ownership rights make it difficult for women in many countries to make use of financial services or decide on the use of natural resources, for example.
”Finnfund assesses each of its investments before making a decision, taking into account whether the investment can be expected to promote gender equality,” says Kaisa Alavuotunki, head of Finnfund’s development impact team.
”The equality investments we make increase the appreciation and role of female leadership, strengthen the financial influence of women and improve the availability of products and services intended for women.”
Finnfund has invested in, for example, Kasha, an e-commerce platform in Ruanda and Kenya that improves women’s access to health, hygiene and self-care products in East Africa. Kasha also aims to be a trusted source of information especially around stigmatised products.
In Myanmar, Finnfund invests in Proximity Finance, Myanmar’s first farmer-focused finance institution. More than 60 per cent of its customers are women. Over half of its managers are women, including the managing director and the chief financial officer.
Annapurna Finance in India offers microloans and related financial literacy education to poor women in rural India. Annapurna has approximately 1.4 million active loan customers. The loans are mainly group loans that allow people to engage in a trade.
These are just a few examples of investments promoting equality.
International criteria for gender equality investments
How can investments be determined in such a way that they are guaranteed to promote gender equality? Finnfund classifies its investments using 2X criteria, which have been defined by 2X Challenge, an international investment initiative to promote financing for women.
”Shared criteria help us follow the gender equality investment field and compare investments. However, we are more interested in the types of change and impact that can be generated through our investments,” says Kaisa Alavuotunki.
”We also look at the activeness and ambition of the project company in equality matters. The keywords are ‘quality’ and ‘commitment’.”
The gender equality viewpoint is addressed at Finnfund not only in considering investment decisions but also in monitoring and assessing them. The personnel have been trained to identify factors that may be affected by gender.
”Climate risks, for instance, often affect women and other vulnerable groups in a different way,” says Alavuotunki.
Gender equality is increasingly important for financiers
The 2X Challenge initiative and the Gender Finance Collaborative accelerates development in gender investments. The 2X Challenge, for example, has mobilised approximately EUR 3.8 billion for investments supporting the financial empowerment of women in two years.
Gender equality has thus become an important criterion in business financing and to which companies must pay attention.
”Financiers are increasingly keen to assess the impact of their investments on gender equality, so companies applying for financing must also pay more attention to their gender strategy,” says Alavuotunki.
Originally published on Ministry for Foreign Affairs website on November 11th 2020