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A consistent but perhaps unsurprising theme of CGD’s September 7 panel discussion, Women Entrepreneurs: What Really Helps Them Start and Grow Businesses? was that neither the challenges nor the solutions are simple. Access to finance—frequently emphasized—is not the only issue. And even within access to finance, it is important to look at both supply and demand, at both debt and equity, and at the behavior and attitudes of loan officers as well as bank managers.

Caren Grown (senior director for gender at the World Bank) debunked some of the conventional wisdom that does not square with the evidence. Women business owners are seen by financial institutions as higher-cost, lower-return clients, but the reality is that they are strong performers—a finding seconded by Rebecca Ruf (vice president at the Global Banking Alliance for Women). Substantial donor resources fund conventional business training to fill women’s skills gaps, but there is little evidence that it is effective. Instead, personal initiative development, partly aimed at helping women overcome their tendency to underestimate their own capacity, has been shown to generate important gains for profits, innovation, and investment.

Caren also highlighted the problem of sectoral segregation in women’s businesses. It is not surprising that profits and productivity are low when women entrepreneurs are crowded into the personal consumer goods and services sector, where barriers to entry are low, but competition fierce. Interestingly but logically, one of the key factors found to be effective in promoting crossover to sectors dominated by men is access to male mentorship. No one would dispute the importance of female role models to women’s empowerment—economic or otherwise. But in some industries, the reality is that men are the only ones positioned to help women through doors now closed to them.

Karen Mathiasen (acting US executive director at the World Bank) underscored the leadership of the World Bank, the United States, Canada, and other founding donors in moving the $1 billion Women’s Entrepreneurship Facility (We-Fi) from concept in April to G20 launch in July of this year—a speed record in multilateral cooperation. (My colleague Cindy Huang and I share some thoughts about We-Fi  here and here.) Karen explained that the governance of We-Fi is set up to vet proposals for the use of funding carefully. A scoresheet is being devised to transparently rank proposals based on objective criteria, such as the amount of leverage of private finance, the degree of focus on poor and fragile states, and quality of impact evaluation. Donors and shareholders are committed to using We-Fi to help fill some of the important data gaps that are impeding progress.

Elizabeth Vazquez (CEO and cofounder of WEConnect) described her organization’s innovative approach to helping large corporations interested in sourcing from women find and incorporate certified women-owned businesses from 100 countries in their value chains. Her members are some of the largest and most inclusive corporations in the world. They purchase about $1 trillion per year from other businesses, but only 1 percent of that comes from women-owned businesses. Increasing that share makes good business sense. Governments are not the only ones that understand the value of women’s economic participation. Corporations have a vested interest in making sure that they source from the world’s best suppliers, not only the usual suspects in supply chains—especially as women play such an important role in household consumption decisions. Her organization finds it critical not only to find women-owned small and medium enterprises (SMEs), but also to convince them to knock on the doors of, and supply, the Marriotts and the Walmarts of the world.

Rebecca Ruf outlined an interesting disconnect between the mindsets of banks and their potential women customers. Banks view themselves as gender neutral and nondiscriminatory. But this attitude conflicts with the need to be customer centric. Evidence from her member banks suggests that women’s service and product needs from banks are not always the same as men’s. Women want, for example, more information and more time for decision-making on loans and other financial products. So it is important for banks to identify nonfinancial services to bundle with financial services to effectively serve women clients. Moreover, banks need to deploy credit scoring methods and loan officer training to avoid systematic bias against creditworthy women. 

Psychometric testing, for example, is a powerful statistical tool to predict loan repayment probability that does not rely on factors that inherently disadvantage women, such as how much collateral they own. The International Finance Corporation and the Inter-American Development Bank are to be commended for helping many banks deploy this methodology. In fact, one could argue that support for such innovations has more long-term market impact than simply providing additional liquidity for lending to women.

Bottom line: SMEs in all economies drive much or most of job creation, so the stakes surrounding efforts to help more women join the ranks of high-growth formal SMEs are very high indeed.