Investing in Women for the Future of Southeast Asia
Capital can empower the voices of equality and enable women to realise their potential as leaders of economic and social development and agents of change in their communities. The disruption ahead is a major shift in recognising the power of women taking charge of their futures, which will unlock significant new value.
Southeast Asia is amongst the fastest growing and most diverse regions in the world. There are significant business opportunities including in sectors where there is a demand-supply mismatch such as healthcare and education, and as yet underdeveloped capacity to leverage supply chains and technology to respond to growing demand for more sustainable choices in food and consumer products.
Women are central to realising this potential, but often left out of the equation due to a complex mix of institutional, cultural, economic, and political factors. The available data paints a clear picture: the biggest challenge is to close gender gap is wage and labour force participation. Yet women control a majority of household buying power directed to food, healthcare, education, childcare, consumer durables, fitness, beauty and apparel, and financial services and represent a majority of the workforce in a number of these sectors.
Leaving no one behind is the central tenet of the United Nations Sustainable Development Goals (SDGs) and their transformative promise to eradicate poverty, discrimination and exclusion. Women are half the population; the cost of leaving them behind is significant. McKinsey Global Institute estimated the economies of Southeast Asia could boost collective gross domestic product (GDP) by US$370 billion a year by 2025 by eliminating gender inequity. That is equivalent to Singapore’s 2019 GDP.
Realising that benefit will require changes in key areas including women’s labour-force participation, proportion of paid work for women and more roles for women in higher-productivity sectors. Investment is a powerful tool for mobilising activity and achieving change. Targeting scalable solutions that drive value through diversity and inclusion requires a fresh approach.
Sasakawa Peace Foundation research found that while women’s entrepreneurship is key to economic stability, GDP growth, sustainable development, and is key to innovation and business strength. However, access to capital remains stubbornly low.
This aligns with our experience. Our investment thesis is that bringing these factors into focus is good investment, good for women and good for society.
We have learned that focusing solely on investing in women entrepreneurs is necessary but not sufficient. Our diversity-driven strategies go broader to include companies led by women; companies operating in sectors with high prevalence of women employees; companies providing products and services that meet the unmet needs and wants of women and girls; and companies operating as role models by demonstrating a clear commitment to gender equality and to equitable workplaces that centre diversity, flexibility and providing quality jobs and working environment for women and other under-represented groups.
We actively look for opportunities where impact is integral to the business model and diversity and gender equality are essential to the enterprise’s leadership, operations and value chains. We work actively with our portfolio enterprises to embed diversity measures alongside financial and other business goals as a performance driver.
Enabling women leaders – providing entrepreneurs with capital and support
Approximately a quarter of small and medium enterprises are owned by women entrepreneurs in Vietnam, Indonesia and the Philippines. Fostering Women’s Entrepreneurship in ASEAN, a United Nations report, finds that across Thailand, Philippines and Malaysia women entrepreneurs hired 17 per cent more women than male counterparts and women use their incomes differently, spending 90 cents of every dollar they earn on their families, including on their children’s education, health and nutrition compared to 30-40 cents devoted by men, creating a strong multiplier effect.
Increasingly more businesses are being founded by women in the region and more new businesses are founded by women than men. In some countries, high rates of informal work result in women becoming entrepreneurs, for example the World Bank Gender Portal for Indonesia indicates rates of informal work in excess of 68% result in a large number of ‘necessity entrepreneurs’. Overall, 60 per cent or 33 million, micro, small and medium enterprises in Indonesia were led by women in 2015.
We also see positive trends in women entrepreneurs re-imagining solutions to address systemic underinvestment in key sectors. In health care for example, we have identified high potential women led enterprises in biotechnology, telehealth, medical devices, and diagnostic medicine as well as medical infrastructure. An example is women-led hospitals addressing community family health needs against a backdrop across the region of limited access, chronic overcrowding and lack of skilled healthcare workers.
Whether starting a business responsive to need or opportunity, our experience is these entrepreneurs need access to capital to grow their businesses. International Finance Corporation data indicates US$900 billion to US$1.1 trillion of SMEs’ capital requirements are unmet in East Asia, with a disproportionate impact on women entrepreneurs. On average, only 5 to 6 per cent of micro-enterprises, 12 to 15 per cent of small firms, and 17 to 21 per cent of medium-enterprises led by women have access to appropriate capital.
Companies with women in key roles drive change
Sectors where women are a significant proportion of the workforce provide a focal point for improving women’s employment opportunities. We look to dimensions of skills development, pay equity, supportive policies and work environments as well as labour and social protection. Our experience is that companies focused on improvement areas such as skills development, pay equity, supportive work environments as well as labour and social protection have an important competitive advantage. This includes access to a wider talent pool, enhanced productivity, and improved staff retention.
Overall, better jobs for women lead to higher income levels and more decision-making influence. An example of a company Sweef Capital has supported is an accounting services provider in the Philippines with a management team comprised mostly of women which has instituted a continuous learning environment for skills development and feedback mechanisms to ensure high rates of retention as well as business continuity for its clients.
Focusing on women’s employment also influences life outside the workplace. Women play multiple roles in society: breadwinner, homemaker; primary carer for children and elderly, overseeing children’s education. This has been a factor in workforce participation in Indonesia and the Philippines. Women’s workforce participation in the Philippines reached an all-time low of 46 per cent in 2018. In Indonesia, only 54 per cent of working-age women are active in the workforce compared to 82 per cent of working-age men. Vietnam leads the way with more than 72 per cent of women in the workforce, above global averages of 50 per cent.
Gender norms have influenced the type of employment, experience in the workplace and opportunities for development and advancement for women. For instance, women and girls have systematically tracked away from science, technology, engineering and maths, limiting their training and options to go into these fields as professionals. In the health sector where there are high rates of women’s participation, there remains gender-based discrimination in earnings, barriers to full-time employment and access to professional development and leadership roles.
These constraints are also opportunities. What we see on the ground reinforces opportunities to mobilise more women into the workforce, move more women from transient and piece work to stable jobs and incomes, opportunities to develop talent and pathways for advancement and invest in relevant care economy solutions and opportunities to enable a more sustainable facilitating environment to thrive. Our approach supports enterprise partners to identify and harness these opportunities in workforce attraction, development and leadership capability to support business growth.
Growth potential in products that meet the needs of women and girls
Sweef Capital sees many women entrepreneurs starting their businesses in response to a perceived need based on their personal experiences. They set out to create the food products, health services or educational options they could not access in the market. These leaders are representative of investment opportunities in businesses focusing on promoting gender equality and/or delivering products or services relating to women’s health; labour-saving technologies or devices; or learning tools to improve the skills and capabilities of women.
In the Philippines, known as a top outsourcing location, enterprises have been founded by women to train and place women in jobs as virtual assistants serving local and international customers. This addresses the time poverty women experience from two perspectives: firstly as a valuable resource for women running their own businesses and secondly as an opportunity for women seeking flexible jobs.
These enterprises have a target market growing in decision-making power and influence. By 2028, Nielson research suggests women are projected to own 75 per cent of discretionary consumer spending, making them the world’s greatest influencers. Young women and girls represent a large, growing and relatively untapped market with significant upside potential. Investment in them gives them the opportunity to reach their full potential and make vibrant local economies possible, as future customers and decision-makers, as untapped markets, as influencers, as employees and suppliers, and as employers and ambassadors.
Building gender and diversity role models in business and investment
There is evidence that companies which commit to both strong internal gender equality efforts and continuous operational improvements are superior business performers. McKinsey’s research indicates “more diverse companies are better able to attract top talent; to improve their customer orientation, employee satisfaction, and decision making; and to secure their license to operate”. Other research has highlighted benefits of diversity ranging from 63 per cent better financial performance of enterprises with all woman teams, 35 per cent higher return on investment and 12 pr cent higher revenue growth for women-led venture backed companies to higher profitability of businesses with 30 per cent or more women executives and heightened collective intelligence of groups including women.
Sweef Capital’s experience suggests that companies can build competitive advantage by adopting policies and practices that support gender diversity throughout the human resources cycle from recruitment and promotion to talent retention and workplace culture. Our impact thesis (Gender ROI™) is that embedding and improving gender equality at enterprise level will: improve the way an enterprise is led and operated to drive value creation; build value through its value chain; and improve outcomes material to women’s economic empowerment and well-being across intersecting domains of resilience, opportunity and inclusion. The Gender ROI™ is a structured framework of key gender data points, to test, track and course correct the direct progress towards gender equality for our investments.
We hold ourselves to the same standard. That puts Sweef Capital at the forefront in changing the narrative on the lack of diversity in private equity and the wider industry; in aggregate, women make up only 11 per cent of senior PE/VC investment professionals in emerging markets. This is despite data that indicates companies with gender-balanced teams deliver up to 20 per cent higher returns; and women partners invested in almost double the number of women-owned companies as their male partners.
The way forward
Driving more private capital into gender lens investing and building on the examples of success and lessons learned will help create track record and encourage increasing investment. Building the evidence base on the links between diversity and performance and value creation and embedding clear comparable data will inform practice and decision-making. Further examining the role that equity can play versus credit as well as the role government institutions can play in blended finance solutions that can act as a mechanism to mobilise private sector investment, including the public sector’s role in providing technical assistance solutions.
A commitment to action starts with being informed. Organisations can engage with the tools, frameworks and data available ranging from United Nations agencies and Oxfam frameworks on women’s economic empowerment to specialist thought leadership on gender-smart approaches from Criterion Institute and GenderSmart and the expert and practitioner forums they convene. GenderSmart is dedicated to unlocking the deployment of strategic, impactful gender-focused capital at scale. This includes through translating gender finance highlights across asset classes, geographies and strategies; convening and connecting investment allocators and influencers; and enhancing the collective field capacity.
All organisations can look at their own performance on diversity and gender equality. Those who see the opportunity from being more proactive will apply these tools and become more fluent in diversity levers and data. Development and multi-lateral organisations are leading the 2x Collaborative and 2X Ignite programmes to increase the number and quality of gender smart fund managers and products in emerging markets. 2X Collaborative is an industry body for gender lens investing representing an opportunity for capital providers to engage in peer learning, develop standards and tools, and co-invest with a gender lens.
The centrality of gender is being reflected in sustainability and reporting standards which are explicitly making gender a cross-cutting requirement for achieving sustainability targets including the sustainable development goals (SDGs) and as a critical factor in climate impacts. For example, the SDG Impact Standards set a best practice benchmark and require private equity, bonds and enterprises to demonstrate how they are managing gender, climate and labor practices irrespective of their industry or impact focus.
The changes are flowing through to private investment markets. The Asset Owner Diversity Charter led out of the United Kingdom already has 17 asset owners representing US$1.5 trillion in assets under management signed up to incorporating diversity questions into manager selection and other processes and monitoring progress. These types of initiatives will create and signal demand and mobilise others more quickly.
We encourage more organisations to join us in making a commitment to diversity and gender inclusion as an integral part of their investment approach in a structured and disciplined way and cultivating a culture and investment philosophy that values the impacts created for women as leaders, in the workforce, through value chains and in our society.
Jennifer Buckley is founder, Rowena Reyes is a director and Rosemary Addis is Chair of the Board of Advisors at Sweef Capital