Blended finance and female entrepreneurs
Feminine entrepreneurs typically encounter better challenges in securing funding in comparison with their male counterparts (Klapper and Parker 2011, Nanda and Howell, 2020). This disparity may be attributed to numerous components, together with biased mortgage officers (Alesina 2008, Brock and De Haas 2023), restrictive gender norms, and discriminatory authorized preparations. The ensuing frictions might impede the expansion and productiveness of companies run by ladies. A number of nations have subsequently initiated blended finance programmes for feminine entrepreneurs, with the objective of making a extra equitable monetary panorama.
In a typical blended finance programme, a growth finance establishment gives non-public banks with loans containing a use-of-proceeds clause. These banks then pool (‘mix’) this public finance with industrial funding of their very own, and on-lend the mixed funds to the kind of debtors specified within the use-of-proceeds clause. Two different components are frequent. The primary is technical help to banks, akin to for workers coaching and IT upgrading. The second is danger sharing through a partial credit score assure by the event finance establishment or a 3rd occasion.
Latest examples of blended finance applications for feminine entrepreneurs embody the Girls Entrepreneurs Alternative Facility by the Worldwide Finance Company (IFC) (US$4.5 billion); the Banking on Girls programme, additionally by the IFC ($3 billion); the Affirmative Finance Motion for Girls in Africa by the African Growth Financial institution ($1.3 billion); the SheInvest programme by the European Funding Financial institution ($2 billion); and the Girls Entrepreneurship Banking programme by the Inter-American Growth Financial institution ($0.8 billion).
The Girls in Enterprise programme
In a latest paper (Aydin et al. 2024), we purpose to ascertain whether or not and the way blended finance programmes assist focused corporations to borrow and develop. Our focus is on the Girls in Enterprise (WIB) programme for feminine entrepreneurs in Türkiye. This programme was rolled out by way of 5 Turkish banks throughout 2014–2019 with the objective of stimulating these banks to lend extra to women-run small companies. The programme comprised three parts: public credit score strains to 5 banks for a complete of €300 million, a risk-mitigation mechanism within the type of a first-loss danger cowl (FLRC) that assured as much as 10% of every collaborating financial institution’s portfolio, and technical help. The latter concerned tailor-made consultancy packages that included classroom coaching on gender-responsive gross sales, on-line coaching for mortgage officers on gender consciousness and overcoming behavioural constraints, and help in creating new monetary merchandise and procedures that cater to ladies entrepreneurs.
Banks needed to mix the credit score strains with their very own funding and, by the top of 2017, a complete of €417 million had been disbursed to greater than 12,000 female-run small companies. Determine 1 exhibits the district-level market shares of the participant banks as measured by their department presence in 2014.
Determine 1 Pre-programme market share of branches operated by handled banks
Notes: This district-level map of Turkey exhibits for every district the share of financial institution branches which can be operated by handled banks as of end-2014.
As a result of banks obtained the programme funding at totally different time limits, they began to disburse sub-loans at totally different instances as nicely. The vertical purple strains in Determine 2 point out these staggered begin dates, a function that we exploit to measure programme influence. The graph additionally exhibits a gradual and partial closing of the hole between handled banks (these partaking within the blended finance programme) and different (management) banks when it comes to the gender composition of their portfolio of small enterprise loans. That is some first descriptive proof on the bank-level influence of the programme.
Determine 2 Staggered roll-out of the blended finance programme and the share of lending to feminine entrepreneurs
Notes: This determine exhibits complete excellent loans to feminine entrepreneurs as a proportion of the overall excellent inventory of loans to all entrepreneurs for handled (WiB) banks in purple and non-treated (non-WiB) banks in blue. The vertical dashed strains point out when every of the 5 handled banks disbursed their first mortgage as a part of the WiB blended finance program: Could 2015, July 2015, February 2016, June 2016, and April 2017.
Knowledge and methodology
The principle dataset we use is the Turkish credit score registry, which permits us to trace corporations’ borrowing over time and throughout lenders, and gauge their danger profile primarily based on credit score historical past and compensation efficiency. These knowledge are merged with varied firm-level administrative information from the Ministry of Treasury and Finance. Utilizing these knowledge, we purpose to reply three questions. First, can blended finance durably enhance financial institution lending to feminine entrepreneurs? Second, which female-owned companies (if any) achieve higher entry to credit score? Third, what are the real-economic impacts (if any) on these corporations?
To determine programme results, a two-way mounted impact mannequin is constructed across the staggered programme introduction. Due to the by now well-known pitfalls of two-way mounted results estimators when remedy results differ throughout items and time, a ‘stacking’ difference-in variations methodology is used. We additionally apply an artificial difference-in-differences estimator, which creates an artificial management financial institution for every of the 5 banks within the programme.
The influence of the blended finance programme on collaborating banks
Determine 3 exhibits that earlier than banks entered the blended finance programme, to-be-treated banks (auburn line) and management banks (blue line) had been on related trajectories when it comes to the gender composition of their small enterprise loans. As soon as banks bought entry to blended finance, at time 0, they began to allocate extra credit score to female-run corporations (auburn line). Nothing modifications for management banks (blue line).
Determine 3 Change within the share of lending to feminine entrepreneurs round WIB entry
Notes: This determine exhibits the common bank-level change within the share of feminine entrepreneurs within the inventory of excellent loans to all entrepreneurs earlier than and after banks begin collaborating within the programme. For every of the 5 handled banks, we normalize the month by which the financial institution disbursed its first mortgage as a part of the programme to 0. For banks that by no means participated in this system, we use their month-to-month observations akin to the normalized time scale for every participant financial institution. We then calculate the common share of lending to feminine entrepreneurs in every month, relative to the beginning of this system, for participant banks and for non-participant banks individually.
Additional evaluation of the micro knowledge confirms that the blended finance programme durably elevated lending to feminine entrepreneurs – each in absolute phrases and relative to male-owned corporations. Collaborating banks increase new mortgage issuance to feminine entrepreneurs a lot sooner than management banks (Determine 4 exhibits this for every of the 5 handled banks). Extra particularly, handled banks elevated the share of all enterprise lending allotted to ladies by 2 proportion factors on common. That is an economically significant impact (a rise of twenty-two%), provided that handled banks allotted solely round 9.0% of their complete lending to feminine entrepreneurs in 2014. Over time, programme impacts don’t imply revert however settle at the next regular state for every of the handled banks, though remedy results are heterogeneous when it comes to measurement and dynamics (as can once more be seen in Determine 4).
Determine 4 Blended finance and lending to feminine entrepreneurs: Occasion-study estimates primarily based on artificial difference-in-differences
Notes: This determine exhibits estimates for every particular person WiB financial institution in an event-study set-up utilizing the artificial difference-in-differences methodology of Arkhangelsky et al. (2021). The dependent variable is (log) complete mortgage quantity to feminine entrepreneurs. Error bands present 95% confidence intervals.
Who benefited? The information present that the blended finance programme helped banks to lend extra to their current feminine purchasers. This accounts for about 50% of the rise within the share of lending allotted to ladies. The opposite half displays lending to new debtors: 31% of the elevated lending is to feminine debtors poached from different lenders and 19% is to corporations that had by no means beforehand borrowed from any financial institution. Briefly, the programme expanded credit score to current debtors that had been nonetheless credit-constrained (intensive margin) whereas additionally crowding in new feminine debtors (in depth margin).
Did mortgage high quality undergo?
A comparability of feminine first-time debtors who obtained their first mortgage from a handled financial institution with these borrowing for the primary time from a management financial institution reveals no proof that the blended finance programme undermined credit score high quality. First-time feminine debtors are equally more likely to default – both on financial institution credit score or on money owed to suppliers – regardless of whether or not they borrow from a handled or management financial institution. They’re additionally as more likely to obtain a follow-up mortgage from their first lender or, in distinction, to depart that financial institution within the medium-term.
The influence of entry to blended finance on female-run companies
An essential query is whether or not the optimistic credit score provide shocks attributable to the blended finance programme helped female-owned corporations carry out higher. This seems to be the case: a ten% enhance within the provide of financial institution credit score to a feminine entrepreneur as a result of WIB programme resulted in a rise in funding of 1.3%. Companies additionally enhance their gross sales and earnings by on common 1.3% and eight.2%, respectively, as a result of this optimistic credit score shock. Mixed, these impacts be certain that beneficiary corporations are 2.4 proportion factors extra more likely to stay in enterprise one 12 months after the beginning of the programme. Importantly, not all corporations benefited equally from the programme: those who initially had the next capital productiveness borrow and make investments extra. This means that the programme was efficient in serving to to enhance the allocation of capital throughout small and medium-sized corporations.
Conclusions
Blended finance programmes bundle liquidity help, complete coaching, and danger sharing. The evaluation summarised on this column signifies that this may be an efficient method to inspire and allow banks to lend extra to underserved enterprise segments.
A big a part of the programme influence occurred on the intensive margin. The next (non permanent) first-loss danger cowl may assist to entice banks to increase their lending to new feminine debtors much more. One other choice to strengthen programme influence (aside from scaling up) could be to introduce performance-based incentives. Collaborating banks then obtain an curiosity low cost on their credit score strains that’s conditional on attaining particular objectives on the portfolio stage, akin to the next share of feminine debtors amongst all purchasers or amongst all first-time purchasers. Such high-powered incentives, utilized quickly and phased out over time, might assist to additional shift financial institution lending in direction of underserved goal segments in a worthwhile and sturdy means.
References
Alesina, A (2008), “Are Girls Discriminated In opposition to in Credit score Markets in Italy?”, VoxEU.org, 30 September.
Aydın, H, Ç Bircan, and R De Haas (2024), “Blended Finance and Feminine Entrepreneurship”, CEPR Dialogue Paper No. 18763.
Brock, J M and R De Haas (2023), “Discriminatory Lending: Proof from Bankers within the Lab”, American Financial Journal: Utilized Economics 15(2): 31-68.
Klapper, L F and S C Parker (2011), “Gender and the Enterprise Setting for New Agency Creation”, World Financial institution Analysis Observer 26(2): 237-257.
Nanda, R and S Howell (2020), “Networking Frictions in Enterprise Capital and the Gender Hole in Entrepreneurship”, VoxEU.org, 29 February.