In recent years, sustainability-linked finance has demonstrated the power banks can have in promoting and rewarding good business practices for the greater good. Today, as the global economy struggles to right itself in the wake of the Covid-19 pandemic, boosting the participation of women-owned businesses – a vast untapped resource in international trade – has taken on greater urgency. Could gender-linked trade finance be the answer? Eleanor Wragg reports.


The Covid-19 pandemic has exposed a myriad of cracks in supply chains around the world, bringing into sharp focus inefficiencies that threaten the performance of the global economy. As policymakers, exporters and financiers look ahead to an economic recovery post-pandemic, one often overlooked area – gender – merits a second look.

Although they make up half of the world’s population, women own only a fifth of its exporting companies, and these account for less than 1% of the total global procurement spend by large corporations. These figures, uncovered by International Finance Corporation (IFC) research, lay bare the huge gender-based inequality in global trade – one which the world can little afford to allow to continue, says Elizabeth Vazquez, CEO of WeConnect International, a corporate-led non-profit that helps to empower women business owners to succeed in global markets.

“It doesn’t make any sense to have half of your population sit on the sidelines. We can’t afford that, quite frankly. It doesn’t make business sense. It doesn’t make economic sense. It doesn’t make social sense,” she tells GTR.

The issue of gender equality has risen to the top of public debate in many countries of late, representing not only a pressing moral and social issue, but also a critical economic challenge. According to a July 2019 study led by Boston Consulting Group (BCG), if women and men around the world had equal opportunities to participate in the market as entrepreneurs, global GDP could rise by as much as 6%, or an eyewatering US$5tn.

While much of the focus is rightly on labour, social, and other domestic policies as first order tools to improve women’s economic empowerment, boosting women’s participation in trade makes solid economic sense, particularly as the world faces the deepest recession since the second world war.

“We desperately need women to be the engines of growth that they are,” says Vazquez. “We need them to create jobs. We need them to offer solutions to our problems large and small. We all need women to be successful, because when they are successful, not only do they help the people who work for them, but also their families and their communities. They have an important and unique multiplier effect.”


Barriers to equality

The reasons for women-led firms’ comparatively low participation in global trade and supply chains are complex and manifold. Deep-rooted structural gender inequalities result in unequal access to infrastructure, productive resources and procurement opportunities, while discriminatory legal frameworks that inhibit women’s access to credit and financial products and services are shockingly common: according to the World Bank’s Women, Business and the Law database, 115 out of 190 economies have at least one gender-based legal restriction on women’s employment and entrepreneurship.

For those women who do make it into business, lack of access to finance often holds them back from exporting. In its global trade finance gap research, the Asian Development Bank (ADB) found that the average rejection rate for women-owned firms was 44%, markedly higher than the 38% for male-owned firms.

“There are systemic issues here,” says Lisa McAuley, CEO of the Global Trade Professionals Alliance (GTPA), which is dedicated to the development of international standards to harmonise and facilitate inclusive and trusted trade. “Who is approving finance? Particularly in developing countries, it tends to be men who are the ones that are determining who gets the business loans. That can be intimidating for women.”


Sustainable business models

Far from implying that banks are explicitly discriminating against women-owned firms when approving finance, McAuley points to underlying causes, such as comparative lack of experience in presenting a business case for funding, as being the issue.

“Much of this information goes around through social contacts and participation in associations. Women tend to have less time to devote to these kinds of quasi-social activities, so they are less exposed to all of this kind of information than men,” adds Simonetta Zarrilli, chief of trade, gender and development at the United Nations Conference on Trade and Development (UNCTAD).

In a 2017 ADB research paper on gender’s impact on trade finance, Alisa DiCaprio, now head of trade and supply chain at R3, together with her former ADB colleagues Ying Yao and Rebecca Simms, came to the same conclusion, asserting that there is “no evidence that banks are rejecting woman-owned firms because they are owned by women”. Rather, they said, the full effect is the result of the particular characteristics of woman-owned firms.

“Women’s companies tend to be smaller,” says Zarrilli. She tells GTR that in discussions with policymakers, she frequently has to highlight the importance of the “gender dimension” in trade agreements and instruments. “The challenges that women face are often bigger or different from those faced by men,” she adds. “Men and women start up their businesses from a different standpoint and have different roles in society and in the economy.”

This isn’t to say, though, that women-led businesses are less valuable or less profitable. Indeed, the converse may be true. Just to give one example, research carried out by BCG on US-based startups found that those owned and led by women performed better over time, generating 10% more in cumulative revenue over a five-year period compared to their male-run counterparts.

There is also evidence to show that women-led businesses do better in other areas, says WeConnect’s Vazquez. “What we have observed all over the world is that women compared to men tend to be better on ESG metrics. They tend to be better in terms of social and environmental impact – how they build their business model to do no harm, the mission of the organisation, and how they hire and promote.”


Creating a more inclusive trading ecosystem

Cognisant of the role women-led firms can play in building better, more sustainable and more inclusive business models, organisations around the world are already working on increasing their number in supply chains. The GTPA, for example, is currently putting together practical recommendations on how capacity building and standards setting can facilitate a more inclusive international trading ecosystem, while multilateral organisations including the IFC and ADB are implementing programmes that explicitly focus on trade finance for women-owned firms.

“We have systemically implemented a requirement to look at everything we do through a gender lens,” Steven Beck, head of trade and supply chain finance at the ADB, tells GTR. He adds, however, that promoting gender equality in trade should not be the sole preserve of development finance institutions.

“We need to do a better job when it comes to including women in the economy. It is not just in the interest of half of the population. It is in all of our interest in terms of driving economic growth and jobs and prosperity. This is not necessarily out of moral compulsion: there is a business case here.”

For their part, banks have demonstrated a real desire to do better on gender, Beck says. He describes a recent initiative, in which the ADB offered its network of banks the opportunity to have their human resources policies assessed by gender experts to see if they could be enhanced to attract, promote and retain more women in banking. “It was very well received,” he says. “This really surprised people, because they had thought the banks wouldn’t care and that nobody would volunteer but actually, a lot of them did and a lot more are going to because of the business imperative.”


Incentivising equality through finance

Developments in recent years have proven that trade and supply chain finance has a vital role to play in nudging the world towards a more equitable future. The emergence of sustainability-linked finance, such as the supply chain finance programme set up by HSBC for Walmart, is one such example. This programme, launched last year, uses variable pricing to incentivise suppliers to meet the sustainability targets set by the US retail giant as part of its plans to cut greenhouse gas emissions in its global value chain.

Applying the same concept to performance around gender-related metrics has not yet been done, but as banks begin to publicly acknowledge the need for equality and visibility for women in trade, the possibility is there.

Much as they have already done with sustainability-linked financing programmes, banks can work with clients to map out commitments around areas such as diversity of procurement in order to create a financing programme for them that directly incentivises that behaviour.

And to start moving the needle on equality, those metrics don’t even necessarily have to target women-owned businesses, but instead focus on other areas in which trade could be doing better in gender.

“The question is, what does gender look like in the supply chain? How do we make it quantitative? What are we actually trying to achieve? How do we measure it? What does success look like and how can we take out the qualitative factor?” asks Amanda Satterly, senior gender specialist at the ADB. “We need to start off by making it very simple. It’s about trying to find what we want to call success, and make it easy to measure, easy to roll out, and easy to talk about.”

An obvious starting point could be simply bringing gender into the conversation, she says. For example, approximately 190 million women work in the factories, farms and processing facilities that supply the world’s clothing, goods and food. Linking favourable supplier financing to metrics such as better wages or reducing pay gaps could be one way of promoting greater gender equality throughout these industrial supply chains.

Promoting supplier diversity programmes is also an option, and one that is already used by corporations such as Accenture, which has committed to leveraging the purchasing power of its multi-billion-dollar supply chain to develop and expand relationships with businesses owned by minorities, women, persons with disabilities, members of the LGBT community, and others.


Avoiding gender washing

Much has been made in the sustainability space of ‘greenwashing’, a form of marketing spin by which corporates present themselves as being environmentally friendly while doing little of any real substance. To ensure that they do not inadvertently promote these practices with green financing programmes, several banks have brought in third-party auditors to measure clients’ progress against tightly-defined metrics. This same care must be taken when incentivising good practice in gender, says WeConnect’s Vazquez, who also warns of unintended consequences when linking finance to certain metrics.

“A lot of people and organisations with good intentions assume that a woman-led business is a woman-owned business,” she says. “On paper, a woman might be the president or managing director, but she may not own and control the assets of the company. We need to do a better job of collecting the right data, asking the right questions, and incentivising the right actions so that everyone contributes and benefits.”

Increasing gender equality in trade will benefit everyone, but it will require a concerted effort from all stakeholders if it is to be achieved.

“A lot of our trade clients are wrestling with questions right now around how they are going to transform and what they are going to look like in the future in terms of ESG,” says Natasha Condon, global head of core trade at JP Morgan. “What that is going to look like for every company and every industry is going to be very different depending on what they do, what their supply chain looks like, who their suppliers are and who their customers are. My job is to help them get there and to try to create something that gives a direct financial incentive to get there.”

While banks have a key role to play in helping corporates make the right decisions about their supply chains, they can’t do it on their own. Nonetheless, by leveraging the might of their balance sheets to promote a rethink of the way the world trades, they could go a long way in creating more inclusive, balanced and resilient supply chains for the future.