In 2022, the Secretariat of the Women Entrepreneurs Finance Initiative (We-Fi), housed by the World Bank, engaged FSG to accelerate the planning of the Women Entrepreneurs Finance Code (WE Finance Code), a multi-stakeholder data-driven effort to increase financing to women-led micro-, small-, and medium-sized enterprises (MSMEs) globally. Female entrepreneurs face a $1.7 trillion finance gap, limiting their potential to add $5-6 trillion in economic value to the global economy. The WE Finance Code, inspired by the UK Investing in Women Code, will aim to close this financing gap by generating institutional commitment to better serve women-led MSMEs. A critical need is incentivizing the collection and utilization of sex-disaggregated lending data for decision-making by financial institutions, investors, and policymakers, amongst others.
FSG’s task was to translate the ambition of the WE Finance Code into a concrete strategy in tandem with building buy-in and momentum in the development finance ecosystem as part of the planning phase. To help refine the principles, FSG worked with We-Fi to set up an advisory organization (‘The Brain Trust’), including leaders from the World Bank, International Finance Corporation, European Bank for Reconstruction and Development, the Bill and Melinda Gates Foundation, Visa Foundation, Financial Alliance for Women, Asia Development Bank, Africa Development Bank, IDB Invest, and the 2X Collaborative, to consult on main decision points:
- What should the WE Finance Code’s ambition, scope, and strategy be?
- What data collection should the Code request to best enable decision-making and behavior change?
- How should the Code be rolled out and implemented?
The Planning Phase of the Code resulted in three key outcomes:
- Code scope, parameters, and guardrails: FSG worked with the We-Fi Secretariat, the Brain Trust, and other stakeholders to specify the scope of the Code. It was established that the potential signatories of the Code would be financial institutions with lending activities to micro-, small-, and medium-sized enterprises. Eligible accounts must have identifiable enterprise characteristics, such that financing for individuals and households that do not have clear enterprise characteristics will not be included in the core data collected. Signatories will make commitments following a global guideline that could then be adapted for different national contexts, but ultimately still allow for commitments and action to be tracked on an aggregate level.
- Data & reporting mechanism: The financial inclusion ecosystem lacks coherency related to definitions and data, which undermine decision-making with regards to lending. FSG worked with We-Fi to set up a Data & Reporting Working Group of experts from development finance institutions, regulators, financial service providers, industry associations, and other potential participants of the Code to gather insights. The Code will be flexible, allowing financial institutions to use local definitions, in the context of some guardrails. Each signatory will commit to reporting the requested indicators on a sex-disaggregated basis annually. Advanced indicators are encouraged over time. The data should help build a business case on how to profitably serve women-led MSMEs, set goals, and benchmark progress along the financing funnel.
- Implementation method of the Code: The We-Fi Secretariat was open to advice from the development finance ecosystem in terms of the most efficient way of introducing the Code: is one global initiative or several national pilots more appropriate and incentivizing for Financial Institutions to join? Through conducting interviews with various country leaders and by leveraging collective impact principles, we concluded that while a global effort can raise awareness on the issue, country-level efforts can create deeper engagement locally. Thus, pilots in different country contexts will be an essential first step with private, public, and other relevant sectors coming together in partnership with local ecosystem players, such as We-Fi implementing partners in relevant countries.
One of the critical success factors for this work was to bring together and incentivize both the private and public sectors to ignite large scale and sustainable change across the financial ecosystem. With this collaborative mindset in mind, FSG supported the convening and management of a guiding group of leaders from key prospective allies and supporters of the Code, the ‘Brain Trust’ as noted earlier, to help refine the Code’s ambition and design principles and to secure senior stakeholder buy-in from key organizations in the financial ecosystem.
Beyond the Brain Trust, FSG led multiple consultations and working sessions with experts from development finance institutions, regulators, financial service providers, industry associations, and institutional data collection agencies to help develop the design of the Code. Key organizations consulted included OECD, Alliance for Financial Inclusion, Women’s World Banking, CGAP, MIXMarket, ConsumerCentrix, UK Department of Business, Energy & Industrial Strategy, UK Finance, McKinsey, Global FX Code, UNEP FI, and World Benchmarking Alliance. FSG then collated insights and recommendations on how best to design the Code’s parameters, data & reporting mechanism, and governance structure to steward the Code. Finally, the strategy was also vetted with potential signatories of the Code, such as NatWest, Citibank, ABN Amro, Tyme Bank, Bank Al Etihad, BHD Leon, PayPal, JPMorgan, and Ecobank, to better understand how financial service providers might respond to this initiative. FSG’s consultative approach helped the We-Fi Secretariat create a strategy for the Code that is supported across private and public sector financial leaders globally.
The WE Finance Code will serve as a catalyst to accelerate financing for women entrepreneurs and create a permanent structural shift in how women-led businesses around the world are perceived, supported, and financed. Today, the We-Fi Secretariat has approval from its Governing Committee to pilot the WE Finance Code in an initial set of up to 10 countries.
About the Women Entrepreneurs Finance Initiative (We-Fi)
We-Fi, housed by the World Bank, harnesses the public and private sectors to open new doors for women entrepreneurs across the developing world. With initial funding of $354 million from 14 governments, this collaborative partnership among governments, multilateral development banks, and other stakeholders has been designed to unlock financing for women-led/owned businesses in developing countries, including in the most challenging environments.