How to Invest in Women in Value Chains?
When we think of value chains, perhaps the last thing that comes to mind is women. However, women are a fundamental pillar for the proper functioning of these chains. In tourism, for example, women account for 60% of the employed persons in the region. In Mexico, they account for less than one third of the persons employed in the manufacturing industry, while in the coffee industry they play a key role in the bean quality selection process.
Women and their businesses are highly invisible in the value chains of several industries. These companies are not characterized as female businesses by anchor companies. Large companies do not collect data to promote a gender-based value chain. And, when they do, they do not necessarily use it to understand the difficulties faced by these businesses or the advantages of having greater gender diversity. This can only happen if women are able to join the chain— quite a challenging endeavor in itself.
In agriculture, for example, women producers are on average 20% to 30% less productive than their male counterparts, making their inclusion in the sector more difficult. In general, women-led businesses tend to be smaller and have lower levels of technology adoption, as they are unable to gain access to the same capital and financing lines as their men-led peers. This creates a difficult environment for their inclusion in value chains.
Integrating and promoting women in value chains is in everyone’s interest. On the one hand, investment in female businesses, particularly in women, has proven to have a positive impact on family health and education. On the other hand, by integrating women-owned businesses, companies diversify their value chains. This provides them with greater resilience and access to a wider variety of goods and services, increasing the number of available options and enhancing access to innovation. In addition, companies with a higher adoption rate of supplier diversity and inclusion programs achieve a 33% higher return on their procurement costs than average, improving their profitability, according to UN Women estimates.
The COVID-19 crisis makes the inclusion of women-owned businesses more urgent than ever, as these companies have been disproportionately affected, with much higher levels of closure than men. For this reason, IDB Invest has been continuously supporting its clients in integrating a higher number of women-led businesses into their value chains, thus contributing to a more inclusive economic recovery.
1. Knowing and addressing the needs of women-led businesses
When working with women-led businesses, it is essential to understand their needs. One success case is IDB Invest's work with CMI Alimentos in Guatemala. As part of the financing package, an opportunity was identified to work with related microfranchises, called La Casa de Pollo Rey, 70% of which are run by women. To understand the needs and growth challenges of these microentrepreneurs, IDB Invest and CMI Alimentos conducted a survey of 200 microfranchisees (75% women) and 100 female clients.
Through this work, we were able to characterize the microentrepreneurs: they are 37 years old on average, most of them have had a previous business of their own (63%), and they have a bank account (70%) and at least one employee (67%). Fifty-seven percent of respondents stated that they had never received any business management training. Among the areas of interest to increase their knowledge, marketing, accounting, customer service, and business plan preparation were mentioned. As part of this joint work, a virtual training project was carried out to strengthen the female microentrepreneurs' business management skills, as well as their soft skills and empowerment.
2. Building capacity for anchor companies to have more inclusive procurement processes
No value chain strengthening can be truly effective unless large companies are serious about integrating women-owned businesses. Capacity starts by developing an updated procurement and training system to identify, characterize and manage suppliers, including women. IDB Invest can offer advice for this type of program.
To get its clients to take measures to integrate women-owned businesses into their chains, IDB Invest uses innovative instruments, such as blended finance, which seeks to offer borrowers positive incentives to meet their pre-agreed goals and achieve inclusive results. For example, IDB Invest, with funds from the Women Entrepreneurs Finance Initiative (We-Fi) program, is working with the Honduran textile company Elcatex to expand the access of women suppliers to the value chain.
3. Tapping the market opportunity of women-led businesses
One of the barriers that women-led businesses face is access to financing. With Mainter, a client in the agricultural sector in Bolivia, IDB Invest worked on revising its credit manual, ensuring that a gender lens was incorporated in the financing process.
With Agripac, a leading agricultural input company in Ecuador, and through the funds from the We-Fi program, IDB Invest will offer a system of financial incentives for meeting goals related to increasing the number of women-led SMEs in its client portfolio.
In Women’s Month, we are aware of the importance of women-led companies in promoting business diversity and dynamism. But there is still a long way to go. Only by taking tangible incentive-based measures, is it possible to open markets for women-led businesses and gradually increase their participation in the productive sector.
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