The International Finance Corporation (IFC) has partnered with the Goldman Sachs Foundation to launch a gender-focused trade finance programme, which it says is the first of its kind.

Unveiled last week during the World Trade Organization’s Aid for Trade Global Review in Geneva,  the Banking on Women-Global Trade Finance Programme (BOW-GTFP) is aimed at encouraging IFC’s Global Trade Finance Programme (GTFP) participating banks to increase trade finance for women importers and exporters.

“Just one in five exporting companies is owned by a woman, and research suggests that they have less access to finance than their male counterparts,” says Philippe Le Houérou, CEO of the IFC. “The BOW-GTFP will help us to understand the finance gaps faced by women entrepreneurs and to better tailor our financial programmes and tools to fill those gaps.”

To learn more about the programme and how it will incentivise and catalyse financial institutions to provide trade finance to female importers and exporters, GTR spoke to Jessica Schnabel, global head of IFC’s banking on women business. She is responsible for building IFC’s global investment and advisory services portfolio with financial institutions in emerging markets, to radically scale-up and improve financial services for women-led SMEs, and has so far led her team to invest over US$2bn to build profitable financial solutions for women customers.


GTR: What is the thinking behind the Banking on Women – Global Trade Finance Programme?

Schnabel: Our goal in the programme is twofold. First, it is to provide and increase trade finance to women-owned SMEs and businesses in emerging markets worldwide. This is in response to a very simple yet difficult challenge: women-owned businesses around the world, not just in developing countries, face more challenges accessing finance than businesses owned by men.

Second, through the programme, we are trying to solve the complete lack of reliable data on trade finance to women-owned businesses in emerging markets. We would like to establish a baseline for trade finance transactions to women-owned businesses. By establishing that baseline, we can begin to work with other international financial institutions, think tanks, international bodies and commercial banks to begin to increase trade finance flows.

This initiative is part of a 10-year partnership with the Goldman Sachs 10,000 Women initiative, that fosters economic growth by providing women business owners around the world with business education, networking, and access to capital. One important part of this programme is called the Women Entrepreneurs Opportunity Facility. As part of that initiative, Goldman Sachs has contributed grant funding to IFC that we use in our Banking on Women business for advisory services, for research and market studies in the countries where very little is known about women’s access to finance, and also as blended finance in some cases.


GTR: How does the programme work?

Schnabel: IFC is operating on a commercial basis through its GTFP, which is the largest of the IFC’s seven trade programmes. We have a network of about 285 banks in that programme. What is different in this programme is the use of the Women Entrepreneurs Opportunity Facility. We will use that funding to provide a small incentive to the bank outside of the commercial transaction with IFC.

Each time those banks bring a confirmed, eligible trade with a woman-owned company that meets all of the programme criteria to IFC, and that bank has an agreement under the GTFP, we will provide a payment to that bank. It is quite conservative, meaning the cashback is not truly an incentive on pricing; it is an incentive for the banks to spend the time and funding on building a better monitoring and tracking system for women-owned companies and their portfolios.

We are working with these 285 banks and any more that may subscribe to the programme to first identify trade with women-owned SMEs, and then provide information to IFC about that trade, such as company names, and the specifics of the trade. We are asking those banks to begin to seek out and then to track and monitor business with those women-owned companies. IFC will begin to collect data from those participating banks which will then help IFC establish a baseline. We are also providing advisory services through the GTFP to the participating banks on how to identify, measure, and track business with women-owned companies. And that is a really important component, because as each of those banks begins to seek out and monitor business with women-owned companies, they then begin to understand their own flows and transactions with women-owned companies.


GTR: How are women-owned companies defined?

Schnabel: We have a standard definition of what a woman-owned enterprise is: one that is 51% or more owned by a woman or by women. That is the simple part of the definition. The second part of the definition that we needed to create, because of different country circumstances and laws as well as historical business ownership is the following: 20% of the company may be owned by a woman or women, but if that is the case, two other things must be true. First, that the company has a president or vice-president or a CEO or a chief operating officer who is a woman. If there is a board or equivalent of the board of directors of the company, then one third of the board must comprise women. The basic idea is that women are taking on both the risks and the rewards of business ownership.


GTR: What kind of trade finance products are covered in the programme?

Schnabel: The trade finance products that are guaranteed and supported through the GTFP are typically letters of credit, trade-related promissory notes, bills of exchange, guarantees and performance bonds. Those are the underlying trade transactions that are supported through IFC’s ordinary business, where the participating banks will send to IFC all the information that it would need to confirm the guarantee on the trade. Now, on top of that, we are asking for confirmed information about the woman-owned nature of the company itself, using the trade transaction.


GTR: What role can banks play in tackling structural barriers to women’s access to trade finance?

Schnabel: Strengthening business networks or access to suppliers is a really important component to strengthening women’s entrepreneurship. The role that I think banks and financial institutions can play here is that they are realising that a financier is not just a provider of money anymore. A financier is a provider of solutions. We are finding a lot of creative ways that banks and other kinds of financial institutions are seeking to solve problems for their clients, such as through business networks and mentorship relationships.


GTR: What can commercial banks learn from this initiative?

Schnabel: One can think about closing the gender finance gap as the end goal. But from the financial institution perspective, acquiring more women customers and serving them better helps the bank achieve its KPIs. For example, women customers contribute to a better risk profile. We know through doing analysis of IFC’s investments that the non-performing loan ratios for women-owned SMEs are lower, for example.

Here is the one thing I would say to commercial banks: there is an abundance of evidence that doing business with women customers is not only advantageous but profitable for them. The second thing we know is that women customers tend to be quite loyal to their financial institutions when they find value. That means that there is a significant first-mover advantage for financial institutions. If they can attract female customers and serve them well, they will grow market share. There is a real opportunity here and this is the right time. If they miss the boat, some other financial institution is going to take it.