Bridging the Gender Funding Gap: Unlocking the potential of African female entrepreneurs through gender-lens investment

Coalition for Digital Equality
4 min readJan 12, 2021
Photo by Eva Blue on Unsplash

Written by Maeva Yrio

Coalition for Digital Equality (CODE) is a global network working collaboratively to bridge the digital gender divide in Africa. Below we discuss the gender funding gap and the role that gender-lens investment can play in addressing this challenge. Interested in learning more? Join us at the CODE Forum on 20th January to hear from our panel of experts as we discuss how to accelerate gender-lens investment in Africa.

The Gender Funding Gap

Despite their determination and eagerness to succeed, African women are subjected to a significant paradox. Although the number of female entrepreneurs outweighs that of men in Africa — the region where the highest rates of female entrepreneurship have been observed — there is a major barrier to the development and growth of women-headed businesses: the gender funding gap. On average, male-owned businesses can secure up to six times more capital than female-owned businesses according to the World Bank. When it comes to venture capital, global figures indicate that female CEOs only get 3% of venture capital funding, while in Africa, female-led startups receive as little as 2%.

The gender funding gap is driven by complex and interconnected factors. On one hand, we have systemic barriers — such as the fact that African women tend to have lower levels of financial literacy and are less likely to own a bank account — limiting their integration into credit markets. And on another hand, cultural barriers — as our own findings at CODE have shown — limit women’s access to capital. For instance networking circles, which are critical for fundraising, are often developed in informal “male” social grouping activities like golf games and after-work drinks which tend to exclude women. There is also strong evidence that even when women are able to get in front of investors, they encounter gender-biases that result in lower rates and amounts of funding.

On top of these issues, the COVID-19 pandemic threatens to widen the gender funding gap. Already, the pandemic has disproportionately impacted women entrepreneurs worldwide. Funding to female entrepreneurs plummeted — it decreased from 27% compared to 2019 — and small businesses suffered the most. In some sub-Saharan countries, 60% of women-led small businesses have lost their sources of income. This is three times more than for men-led businesses.

How can gender-lens investment help to bridge the gap?

Gender-lens investing has emerged as a promising approach to addressing the gender funding gap. From this perspective, investors deploy capital with the view to promote gender equity, for example, by investing in female-owned/led businesses, building more equitable workplaces and enabling products and services that better serve women and girls. A gender-lens is increasingly being adopted by a growing number of socially-conscious investors who recognise that gender equity is not only good for society as a whole but makes business sense too.

Indeed, the positive relationship between gender diversity and higher returns has been well established. Companies with greater female representation on boards/senior leadership positions and higher proportions of women-led teams are seen to display better financial performance. Moreover, it has been demonstrated that female entrepreneurs can outperform their male counterparts even with less capital.

In Africa, the gender-lens investment movement is growing, led by a number of forward thinking investors and organisations. One of these is Alithea Capital, an impact investing firm which aims at narrowing the gender gap across the value chain in Africa by investing in local, gender-balanced and scalable growth stage SMEs with a positive social impact. Recently, it created a dedicated fund to gender-lens private equity investing, the AlitheiaIDF Fund, which has raised $5bn to date. Other actors, such as WeBloomAfrica, intend to promote gender-lens investing in Africa by developing networks and local ecosystems designed to support the growth and scaling of women-led enterprises through sustainable business models and institutional pairing.

Driving system-level change

While gender-lens investing can contribute to solving some of the issues highlighted previously, it is only one piece of the puzzle. Bridging the gender funding gap requires cross-sectoral collaboration and a holistic approach that is focused on tackling both cultural and systemic barriers. This includes developing more equal gender representation among investment decision-makers, increasing women’s access to skills and networking opportunities in conjunction with greater transparency through gender representation data.

Our goal at CODE is to bring together cross-sector partners to collaborate in addressing the digital gender gap at a system-level. A key area of focus is addressing barriers to women’s entrepreneurship and economic participation within the digital sector. On 20th January we will host the CODE Forum where we will convene stakeholders from Uganda, Ghana, the UK and around the globe to discuss collective approaches to building a more inclusive African digital economy.

Our panel of speakers will feature Africa impact investment experts including Amma Sefa-Dedeh Lartey of Social Enterprise Ghana, Carolyne Kirabo from M-Kyala Ventures, Josie Middleton from International Finance Corporation and Kenneth Legesi, CEO of Ortus Africa Capital. Together they will provide insights on the challenges that still exist for mainstreaming gender-lens investment in Africa and recommendations on how to address them. Learn more and register here to join us.