Blended Finance and Gender Equity

Article: Blended Finance as a Strategy to Reduce Gender Disparities in Access to Capital

Liane Freire and Sergio Marcondes

Introduction

Gender financial disparities—commonly referred to as the Gender Financing Gap—are among the main barriers to women’s economic autonomy and the construction of a more inclusive economy. In Brazil and around the world, women face structural barriers that limit their access to credit, investment, and other financial instruments, which in turn restricts their ability to start businesses, pursue education, accumulate assets, and fully participate in the formal economy. In this context, Blended Finance emerges as an innovative strategy to help mitigate this inequality by combining different sources of capital—commercial, concessional, and philanthropic—to enable credit for women and investments in women-led businesses while reducing the perceived risk for investors. But in what ways can this approach effectively contribute to gender equity?

The Gender Financing Gap and Its Dimensions

The Gender Financing Gap can be understood across four interconnected dimensions: income disparity, inequality in asset accumulation, underrepresentation in positions of power, and limited access to capital.

In terms of income, women still earn, on average, less than men. Globally, this wage gap is around 23%, according to the International Labour Organization (ILO), and in Brazil, men earn on average 27% more than women, with even greater disparities for Black women. This inequality directly impacts women’s ability to save and invest, perpetuating a cycle of financial exclusion.

The asset gap is also significant: fewer women own assets such as real estate, investments, and bank accounts compared to men. In many countries, less than 20% of women own land, while they hold on average 40% less in savings and investments. Asset ownership is a key factor in obtaining credit, as many financial transactions require collateral.

Regarding representation, women hold only 28.5% of senior management positions globally and make up 24.9% of parliamentarians. This underrepresentation means that key economic and political decisions are largely made without female perspectives, reinforcing systemic inequalities.

Access to Capital as a Key Strategy to Reduce Disparities

Access to capital is a foundational pillar in tackling economic gender disparities. In Brazil, data shows that women are more likely to become entrepreneurs out of necessity rather than opportunity and face greater challenges in obtaining credit. In 2022, only 33% of the credit granted to micro and small enterprises was directed to women-led businesses, and the average interest rates for female entrepreneurs were 3% higher than those for men.

This limited access to credit undermines the scalability of women-led businesses and reinforces a cycle of inequality. Since women accumulate fewer assets, they have a lower capacity to provide loan collateral, making them less attractive to traditional financial institutions. This systemic effect perpetuates economic exclusion, limiting women’s ability to fully realize their potential.

Gender Bias in Credit and the Vicious Cycle of Financial Exclusion

Women’s difficulties in accessing capital stem from both subjective factors—such as unconscious bias and gender stereotypes—and structural barriers.

Financial institutions and capital providers often perceive women-led businesses as riskier, even though female default rates may be lower than male default rates in certain contexts. Additionally, the fact that women have lower incomes and fewer assets limits their ability to access capital, reinforcing a vicious cycle: fewer assets lead to less credit, which reduces growth opportunities and perpetuates economic inequality.

Blended Finance as a Structural Solution

Capital provision structures—whether for credit or investment—are shaped by factors that establish a paradigm of higher perceived risk for women as capital recipients. This phenomenon occurs both in lending to individuals and companies, and in attracting investment for women-led enterprises.

In this scenario, Blended Finance solutions emerge as essential tools to address this perceived risk premium, attracting commercial capital to operations that, over time, can validate their economic assumptions and dismantle the high-risk paradigm associated with women.

Key approaches in the context of Blended Finance include:

• Tiered investment structures, where different classes of investors assume varying levels of return expectations and risk tolerance.

• Guarantee mechanisms, which reduce the financial risk associated with women-led businesses, enabling more efficient mobilization of private capital.

• Technical assistance, with funding to strengthen the ecosystem and create enabling conditions.

The adoption of these strategies can expand financing for women, correct market failures, and ensure greater financial inclusion.

Strategic Aspects for an Effective Blended Finance Approach to Gender Equity

Effective implementation of Blended Finance to promote gender equity must consider the nature and economic behavior of the financed assets.

In the case of credit for women in Brazil, for instance, the main challenge does not lie in achieving market-compatible returns, as the country’s high interest rates allow for credit to be granted at below-market rates without significantly affecting investor profitability. Although there is both room and relevance for strategies aimed at lowering interest rates, we highlight three essential strategic aspects:

1. Expanding access to credit for borrowers with insufficient collateral, through collateral guarantees and partial risk coverage mechanisms.

2. Reducing perceived default risk, using strategies such as temporary coverage for critical periods and technical assistance to improve financial management in women-led businesses.

3. Lowering customer acquisition costs, since the number of women with credit-ready profiles is still relatively low, requiring effective strategies to build a robust pipeline of female borrowers.

Thus, the most effective Blended Finance approaches involve the development of customized financial instruments that enhance the de-risking effect with the lowest possible share of concessional resources. This ensures that private capital is efficiently leveraged, amplifying the strategy’s impact without compromising its financial sustainability.

Conclusion

Gender inequality in access to capital is both a matter of social justice and a driver of sustainable economic growth. Innovative financial models like Blended Finance have the potential to transform this reality by channeling capital to women and women-led businesses and fostering structural changes in the financial sector.

This is a critical moment for taking effective action to address gender inequalities. It is essential to act with urgency and scale to achieve concrete short-term results, ensuring immediate access to capital for women while laying the groundwork for continuous structural transformation. This requires the coordinated mobilization of investors, financial market players, and institutions to structure innovative and sustainable mechanisms that dismantle historical barriers and consolidate a new paradigm of financial equity.