IFC unveils $600-M financing facility for women entrepreneurs

by The Wall Street Journal
March 6, 2014

The International Finance Corporation Building at 2121 Pennsylvania Avenue in Washington DC. Photo - Mr. T in DC

As world leaders seek to revive a fragile global recovery, the World’s Bank’s International Finance Corp. (IFC) sees a vast untapped resource: Women.

The IFC Wednesday unveiled a $600-million financing program for female entrepreneurs in emerging markets it says should help tap that growth potential.

“We cannot afford to exclude half of the world’s population from the rightful role in helping to change the face of the global economy,” said World Bank President Jim Yong Kim.

Simply allowing women to get paid to work would help.

For example, Booz & Co. says raising female labor force participation rates to the same levels as males could boost Egyptian growth by a whopping 34%. Other economists say closing the labor market gender gaps could boost per capita gross domestic product in the Middle East and North Africa by 27% and 23% in South Asia.

Allowing more women to run their own companies would drive growth, too.

In many emerging markets, women often can’t get the financing needed to start or expand businesses. Legal or social barriers prevent them from owning the assets needed to post collateral for loans, or raise the risk premium they have to pay to borrow from banks.

The IFC says that disparity is constraining up to $320 billion in potential lending to women-owned firms in emerging markets.

Microfinance – tiny loans to the poor – has partly filled the credit gap for women entrepreneurs. But the IFC says there’s a need to move beyond microfinance as many women-owned businesses need more varied services and products, and larger loans.

Some developing economies are already facing pressure to confront those long-established barriers as slowing growth forces authorities to make their economies more competitive.

The IFC hopes to fuel a transition to economic equality by offering credit lines to banks in emerging markets exclusively for lending to women who want to start or expand their own companies.

The IFC said it will initially invest $100 million in the program. It hopes a $32-million pledge by Goldman Sachs will help encourage the additional contributions needed to meet the $600-million goal.