2X Challenge: Mobilizing the world’s great untapped resource
In May 2019, FMO joined the 2X Challenge. Launched by the Development Finance Institutions (DFIs) of the G7 in 2018, the 2X Challenge calls for DFIs across the world to work together to mobilize US$3 billion in commitments by 2020 to give women in developing markets improved access to leadership opportunities, quality employment, finance, enterprise support and products & services. In short, to give them access to economic participation.
World’s #1 emerging market
By investing in women, we are recognizing not just the injustice of the existing credit gap they face, but also the huge economic opportunities women represent. Female SMEs worldwide face a US$320 billion shortfall in access to credit. According to a McKinsey study, closing the gender labor gap could add US$28 trillion (26%!) to global GDP in 2025. On the demand side, the female economy is also the world’s largest emerging market: by 2028, female consumers will control some US$15 trillion of global consumer spending. That is twice the size of the markets of India and China combined.
However, this global economic and social impulse will not happen on its own. Indeed, in its 2018 Global Gender Gap Report, the World Economic Forum estimated that if we continue to move at the same pace as today, it will take 202 years to close the economic participation and opportunity gender gap. Change has to be driven, and the ‘2X’ in 2X Challenge refers to the multiplier effect of investing in women.
As FMO, we have been active in female financing for some years, during which time we have developed a pipeline of gender lens financing. It is our policy to proactively seek investments that support women as entrepreneurs, reach women as end-users of goods & services, and include women in the labor market. In 2019, we made €140 million in new commitments with a gender component.
The 2X Challenge offers us the opportunity to leverage those efforts, by collaborating with peers to identify and support gender finance opportunities in our markets. The 2X Challenge has also developed a set of comprehensive but clear criteria defining exactly what it means for them to invest in women. Using these criteria, as DFIs we can better align our efforts against this global standard, which represents a major step towards a common language for investors worldwide.
Glimpse of the future
If that all sounds rather theoretical, the projects supported through the 2X Challenge could not be more concrete, with demonstrable impacts for women. A good example is our US$5 million investment in 2019 in the Kashf Foundation.
Founded and led by women, and serving mostly female customers, Kashf was Pakistan’s first specialist microfinance institution and today offers a variety of innovative products & services to low-income households. It provides appraisal-backed individual lending and non-financial services that can have a transformative impact at a household level. Kashf’s main focus is on financial services, insurance and safety nets, capacity-building training, and social advocacy.
The Kashf Foundation has over 500,000 active clients, of which 58% are women-led businesses. It drives gender equality not only through its programs, but also by example: 50% of staff at all levels of the organization are women.
At the time of writing, US$2.47 billion out of the US$3 billion that the 2X Challenge called for by 2020, has already been committed. By supporting organizations like Kashf, who will accelerate women’s access to the economy, we and other DFIs will help drive a quiet but fundamental economic revolution.
A commitment by 14 DFIs
The founding members of the 2X Challenge are DFIs from Canada (FinDev Canada), France (Proparco), Germany (DEG), Italy (Cassa Depositi e Prestiti – CDP), Japan (JBIC and JICA), the United Kingdom (CDC) and the United States (Overseas Private Investment Corporation - OPIC). In May 2019, the 2X founding group welcomed 4 new DFIs from the Netherlands (FMO), Sweden (Swedfund), Finland (Finnfund) and Denmark (IFU). In October, the Swiss Investment Fund for Emerging Markets (SIFEM) joined the 2X Challenge Group and the European Investment Bank (EIB) committed to endorse the 2X Challenge criteria.