A Guest Post by Johanna Raehalme, Investment Manager, Digital Infrastructure and Solutions at Finnfund. Finnfund is a Finnish development financier and professional impact investor. We build a sustainable world by investing in responsible and profitable businesses in developing countries. Each year we invest 200–250 million euros in 20-30 projects, emphasising renewable energy, sustainable forestry, sustainable agriculture, financial institutions and digital infrastructure and solutions. Today Finnfund’s investments and commitments total about 1,070 billion euros, half of them in Africa. The company has about 90 employees. For more information, please visit www.finnfund.fi
In an ideal world, we would not need the prefix “fem” in femtech. The starting point of all technical innovations would be to serve men and women equally. Today’s reality is still a far cry from that ideal, especially in our target markets where women remain as an underserved consumer group. Internet access is a luxury product and many women can only dream about having access to femtech solutions.
Our investments in digital infrastructure seek to connect the unconnected while we’re at the same time looking at how digital solutions can improve people’s lives. In 2020, Finnfund invested in Kasha, an e-commerce platform improving women’s access to genuine health, hygiene and self-care products in East Africa. The company sells menstrual care products, contraceptives, pharmaceuticals and a range of beauty products via its own platform, accessible through basic phones and a website and delivered to customers confidentially. This is a fine example of where technology can bring a solution to a problem, in this case women not having access to reliable products and information.
Many financiers, including us, are increasingly keen to assess the impact of their investments on gender equality, so companies applying for financing must also pay more attention to their gender strategy. But what if you don’t have one? The good news is we can help with that.
2X criteria leads the way
Female role models are something that I personally find very important: girls around the world need to see that they, too, can become whatever they want. This is especially true in technology industry: At the Generation Equality Forum in July 2021, Finland published its commitments and one of these is to increase the number, participation and leadership roles of women and girls in the fields of science, technology, engineering, and math (STEM sectors). Finnfund is a signatory of these commitments.
When assessing our potential investments, we use the 2X criteria that defines what investing in women actually means. Everyone involved in our investment process has been trained to identify factors that may be affected by gender. During the due diligence, we will ask questions about how the potential investee company can support women as employees, managers and customers. We especially examine structures that enable the equal engagement of women. We highlight best practices and consider matters that still have room for improvement. The criteria for women in leadership roles is for example one that our investee companies quite often fulfil: They either already have women in leadership roles and on the board or intend to include women in these higher positions.
Earlier this year, I was happy to close our 12 million USD investment in Bandwidth and Cloud Services Group (BCS), a telecom infrastructure provider operating in several African countries. During the investment process, we got impressed by BCS’s track record of empowering women for higher positions. The company has women in leadership positions as well as policies in place to empower women in workforce. As the telecom industry tends to be very male dominated, BCS’s approach clearly shows that when you give women the same opportunities as men, they perform equally.
Investing in women strengthens the business
We are convinced that gender lens thinking is good for the business. The most obvious benefit for businesses is easier access to financing, but it is also a question of improved operational efficiency. Women have shown to make good employees and customers. They pay their bills and service their loans. Diversity in management has also proven to be key to financial success: Firms with a high gender diversity on their board of directors are more profitable and larger than firms with low gender diversity. And why would you ignore half of the population as customers?
We are sure that gender lens investing will be mainstream fairly soon. Many investors target the Sustainable Development Goals and gender equality is one of them – SDG 5.
A femtech company ticked all the boxes but not everyone has to do that
Our investment in Kasha promotes gender equality by creating access to health-related products as well as creating employment and leaderships opportunities for women. It was and still is the only investment in our portfolio to actually meet each and every 2X criteria – so yes, it’s possible!
What’s more important though than ticking all the boxes is having the desire for change. During the investment process, we review a company’s current situation but, above all, the company’s target level and ambition regarding the empowerment of women in the company. We seek initiatives that support working women at all stages of life. We pick up best practices from mentoring programmes, recruitment goals, practices regarding employees returning from maternity leave and safety precautions for employees’ journey to and from work, for example.
Also the portfolio companies are being screened against the same criteria, even funds. Some of our portfolio companies have met many of the 2X criteria before it was even created and they definitely stand out as inspirational benchmarks when we assess the gender equality across the portfolio.
Focus on digital infrastructure and solutions narrows the gender gap
According to the United Nations, the gender gap in internet use is growing in Africa and in many low-income countries. This gap stands as a significant hurdle to female empowerment, limiting women’s labour force participation and hurting their income as their access particularly to digital financial services is effectively curtailed. We have chosen digital infrastructure and solutions as one of our focus sectors and we are especially looking into the opportunities that digital technology presents to narrow gender gaps.
Currently, one of our biggest challenges is to find women-owned companies that fit in our company size category. Kasha of course met that criteria, too: The company was founded by women, for women.