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Recent data shows that less than 2% of investments go to women-founded businesses in Africa. In this blog, we’ll explore why ramping up investments in women is critical and how we can work to close the funding gap. Are you a female founder looking for investment opportunities? Apply to Renew Venture Lab 2.
Africa's Investment Paradox: The Untapped Power of Women Entrepreneurs
By Margaret Mandeya | Fri Mar 29 2024
Why it Matters and How to Close the Funding Gap
While there has been some progress, the business world still has a long way to go when it comes to investing in women-led enterprises. Recent data shows that only 1.9% of investment in 2023 went to women-founded businesses in Africa and globally, there is a $1.7T funding gap for women-owned small and medium-sized enterprises.
This disparity is not only unfair, but it’s also holding back the economy as a whole as research shows that women-founded businesses generate outsized social and financial returns, unlock innovation and drive economic growth.
Alt Text: As of 2023, only 1.9% of funding went to women-founded businesses in Africa.
Why is it important to invest in women-founded businesses?
Investing in women-founded businesses in Africa makes sense for several practical reasons, beyond just the important aspect of promoting gender equality. Here's a straightforward look at why it's crucial:
- Diversity: Investing in women-founded businesses is a win-win for everyone. When women have equal access to funding, it leads to more diverse ideas, perspectives, and innovation that can benefit society as a whole.
- Economic Development and Job Creation: Women entrepreneurs are significant contributors to the economy. In Africa alone, women make up 58% of Africa’s self-employed population, contributing around 13% of Africa’s total GDP. Investing in female entrepreneurs will help create more jobs and stimulate economic growth.
- Empowerment and Gender Equality: By investing in women, we are empowering them to achieve their full potential and helping to close the gender gap in business ownership. This can lead to more women in leadership positions and a more equitable business landscape.
How can we close the funding gap?
Addressing the funding gap for women-owned businesses in Africa is a multifaceted challenge that requires a comprehensive approach.
Awareness is the first step. Investors need to understand the unique value and potential of women-led businesses. This goes beyond just doing the right thing. It's about recognizing the economic and innovative benefits these enterprises bring to the table.
Support is just as critical. Providing additional resources and support to women-led enterprises, such as mentorship, training, and networking opportunities, can significantly enhance their chances of success.
Addressing systemic issues is also essential. This includes challenging and changing any inherent biases in the investment process that disproportionately affect women.
At Renew Capital, we are committed to empowering women entrepreneurs in Africa through targeted initiatives. The Isua Network for women entrepreneurs provides tailored support and resources to fuel their growth and success. Additionally, we collaborate with key partners, such as USAID and 2X Global, to develop impactful tools like the SG2X playbook that equips fund managers and entrepreneurs with invaluable strategies for building gender-smart portfolios.
Bridging the investment gap for women entrepreneurs is not only a step toward equity but a strategic economic move. By empowering women-led businesses, we unlock a reservoir of innovation and growth. The question then is, how will you contribute to nurturing this transformative potential and fostering a more inclusive, prosperous future in Africa's business landscape?
