INVEST Close Up: Catalyzing Private Investment For Women's Economic Empowerment

When women are economically empowered, they invest in their businesses, families, and communities, producing a multiplier effect that spurs economic growth. Unfortunately, pervasive gender gaps and lack of access to financial services often block women from the tools and resources that they need for their families and businesses to thrive.

The U.S. Agency for International Development (USAID) leads the U.S. Government’s international development and humanitarian assistance efforts. USAID’s Office of Gender Equality and Women’s Empowerment aims to harness the potential of blended finance to catalyze commercial investment to empower low-income women. However, because USAID cannot act as a traditional investor and hold equity, it needs innovative approaches.

USAID INVEST, an initiative that collaborates with the global investment community to mobilize investment for development, designed one such innovative approach by structuring the first contract-based, first-loss tranche transaction in the Agency’s history. Through INVEST, USAID will provide $500,000 in first-loss capital to Women’s World Banking Capital Partners Fund II (WWBCP II) upon successful completion of its capital raise. This first-loss contribution becomes “catalytic” because it provides a risk cushion for other investors and mobilizes additional private capital. USAID will couple this financial support with $100,000 in technical assistance.

The WWBCP II fund will invest in emerging market financial service providers that serve lowincome female clients, ensure gender diversity within their staff and management teams, and use innovative solutions to increase customer reach and engagement. As a result, more women will be able to access loans, develop a credit history, build their savings, and purchase insurance, all of which are critical components to breaking the poverty cycle and promoting self-reliance. The fund will primarily focus on sub-Saharan Africa and South Asia, with some investments in Latin America and the Middle East.

In addition to USAID’s catalytic contribution, the Overseas Private Investment Corporation (OPIC) announced its intent to provide $25 million in financing. This collaboration is a preview of how USAID will work with OPIC when it transforms into the U.S. International Development Finance Corporation (USDFC). USAID’s support of the fund is also aligned with the mission of the Women’s Global Development and Prosperity (W-GDP) Initiative, a U.S. Government-wide effort to reach 50 million women in the developing world by 2025. This close-up provides background on the innovative partnership between USAID and Women’s World Banking and the creation of WWBCP II. It explores the potential of using blended finance to expand economic empowerment for low-income women, with a focus on the role of digital financial inclusion. It also details the process of an international development institution piloting a new way to engage with the private sector and, lastly, discusses the implications of the success of that pilot for the development road ahead.

Date 
Wednesday, October 30, 2019 - 3:30pm

Last updated: October 30, 2019