Impact investing continues to grow in popularity, but that increased profile masks the underlying issues.
As impact investors use their funds to bridge gaps in development and finance, several groups — especially women in underserved communities — remain excluded from financial markets. For impact investing to generate enough momentum to create lasting change, the parties with capital and clout must give a voice to the women they fund.
Disadvantaged women and impact investing
Many women who have the talent and desire to contribute to their communities cannot do so without breaking the law. According to a report from The World Bank, 2.7 billion women around the world are legally restricted from holding the same jobs as men.
The World Bank also discovered that the average woman has just 75% of the legal rights of the average man. Only six countries received a perfect score in the study, while 56 nations showed no improvement in equality over the last 10 years.
Those disadvantages create situations in which women struggle to succeed financially. When women in developing nations find work, they almost always earn less than men.
In many cases, these women work informal jobs without contracts, increasing the likelihood their employers will take advantage of them while keeping their pay low.
Impact investing has the potential to create better lives for these women, but a massive gap separates the goal from reality so far. Women in developing nations who own their own businesses face a staggering investment gap of nearly $1.5 trillion, to say nothing of the many women who need help and do not build companies.
Some impact investors may wonder about the advantages of investing in women with dire situations who live in areas of limited economic opportunity. But in today's global marketplace, anyone can turn the seed of an idea into a successful enterprise. These women are no different. Given the opportunity to contribute to the economy as much as men, women would add $12 trillion to the global GDP by 2025.
Every investor, impact or otherwise, can appreciate a difference of $12 trillion. Women deserve the opportunity to contribute and grow, and their communities need their help.
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A voice for the voiceless
Women can't seize what they need without a little help from the other side. The impact investing community must focus on the needs of women in developing areas to affect lasting change while realizing substantial financial gains.
The inability to measure an investment's effectiveness often prevents investors from focusing on these groups.
As a pioneer in impact measurement and gender-lens investing for the past decade, IIX is now demonstrating through deeper analytics and insights from over 22,000 data points how investing in women can improve the risk-return impact profile of an investment.
When women who receive impact investing money communicate with the people on the other side, their voices provide clarity and context in a conversation that lacks both. Consider the advantages empowered women can provide to all parties in impact investing:
1. Enterprises and programs. Women who receive investment money and share their experiences can provide transparency on impact creation to key stakeholders. This adds legitimacy to impact enterprises and programs, which in turn helps attract new investors and inspires current investors to increase their funding. A few words from the women on the other side of the money can make a dramatic difference in the success of the program handling the money.
2. Investors and funders. Impact investing contributes to both profit and purpose, but without the human element of real communication, the purpose can get lost in the shuffle. Information from recipients lets investors assess the effectiveness of their investments with greater clarity than numbers alone can provide. Consistent feedback from women in developing countries enables investors to track and verify the sustainability of supply chains, aid the deployment of initiatives, and assess progress toward sustainable development goals.
3. Partners and retailers. Though they play a less obvious role in investment work, retailers and partners contribute greatly to the success or failure of impact investments. Women in developing areas can use their voices to help partners drive marketing through ad campaigns via user-generated social media content and other personable deliverables. Greater fund success can also translate to greater momentum as more retailers and business partners join the cause.
Impact investing has a bright future, but the impact world cannot realize its goals unless the women on the other side of the equation have a voice in the process. The impact economy must move past its current environment, which is filled with niche and fragmented players, to unify and make the most of this opportunity. When investors, partners, and programs bridge the fragmentation and provide women in underserved communities with the resources they need to thrive, everyone will enjoy the rewards.
Durreen Shahnaz is the founder and CEO of Impact Investment Exchange.
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