Finance
Blended finance and female entrepreneurs
Female entrepreneurs often encounter greater challenges in securing funding compared to their male counterparts (Klapper and Parker 2011, Nanda and Howell, 2020). This disparity can be attributed to various factors, including biased loan officers (Alesina 2008, Brock and De Haas 2023), restrictive gender norms, and discriminatory legal arrangements. The resulting frictions may impede the growth and productivity of businesses run by women. Several countries have therefore initiated blended finance programmes for female entrepreneurs, with the goal of creating a more equitable financial landscape.
In a typical blended finance programme, a development finance institution provides private banks with loans containing a use-of-proceeds clause. These banks then pool (‘blend’) this public finance with commercial funding of their own, and on-lend the combined funds to the type of borrowers specified in the use-of-proceeds clause. Two other elements are common. The first is technical assistance to banks, such as for staff training and IT upgrading. The second is risk sharing via a partial credit guarantee by the development finance institution or a third party.
Recent examples of blended finance programs for female entrepreneurs include the Women Entrepreneurs Opportunity Facility by the International Finance Corporation (IFC) (US$4.5 billion); the Banking on Women programme, also by the IFC ($3 billion); the Affirmative Finance Action for Women in Africa by the African Development Bank ($1.3 billion); the SheInvest programme by the European Investment Bank ($2 billion); and the Women Entrepreneurship Banking programme by the Inter-American Development Bank ($0.8 billion).
The Women in Business programme
In a recent paper (Aydin et al. 2024), we aim to establish whether and how blended finance programmes help targeted firms to borrow and grow. Our focus is on the Women in Business (WIB) programme for female entrepreneurs in Türkiye. This programme was rolled out through five Turkish banks during 2014–2019 with the goal of stimulating these banks to lend more to women-run small businesses. The programme comprised three components: public credit lines to five banks for a total of €300 million, a risk-mitigation mechanism in the form of a first-loss risk cover (FLRC) that guaranteed up to 10% of each participating bank’s portfolio, and technical assistance. The latter involved tailored consultancy packages that included classroom training on gender-responsive sales, online training for loan officers on gender awareness and overcoming behavioural constraints, and support in developing new financial products and procedures that cater to women entrepreneurs.
Banks had to blend the credit lines with their own funding and, by the end of 2017, a total of €417 million had been disbursed to more than 12,000 female-run small businesses. Figure 1 shows the district-level market shares of the participant banks as measured by their branch presence in 2014.
Figure 1 Pre-programme market share of branches operated by treated banks
Notes: This district-level map of Turkey shows for each district the share of bank branches that are operated by treated banks as of end-2014.
Because banks received the programme funding at different points in time, they started to disburse sub-loans at different times as well. The vertical red lines in Figure 2 indicate these staggered start dates, a feature that we exploit to measure programme impact. The graph also shows a gradual and partial closing of the gap between treated banks (those partaking in the blended finance programme) and other (control) banks in terms of the gender composition of their portfolio of small business loans. This is some first descriptive evidence on the bank-level impact of the programme.
Figure 2 Staggered roll-out of the blended finance programme and the share of lending to female entrepreneurs
Notes: This figure shows total outstanding loans to female entrepreneurs as a percentage of the total outstanding stock of loans to all entrepreneurs for treated (WiB) banks in red and non-treated (non-WiB) banks in blue. The vertical dashed lines indicate when each of the five treated banks disbursed their first loan as part of the WiB blended finance program: May 2015, July 2015, February 2016, June 2016, and April 2017.
Data and methodology
The main dataset we use is the Turkish credit registry, which allows us to track firms’ borrowing over time and across lenders, and gauge their risk profile based on credit history and repayment performance. These data are merged with various firm-level administrative records from the Ministry of Treasury and Finance. Using these data, we aim to answer three questions. First, can blended finance durably increase bank lending to female entrepreneurs? Second, which female-owned businesses (if any) gain better access to credit? Third, what are the real-economic impacts (if any) on these firms?
To identify programme effects, a two-way fixed effect model is built around the staggered programme introduction. Because of the by now well-known pitfalls of two-way fixed effects estimators when treatment effects vary across units and time, a ‘stacking’ difference-in differences methodology is used. We also apply a synthetic difference-in-differences estimator, which creates a synthetic control bank for each of the five banks in the programme.
The impact of the blended finance programme on participating banks
Figure 3 shows that before banks entered the blended finance programme, to-be-treated banks (auburn line) and control banks (blue line) were on similar trajectories in terms of the gender composition of their small business loans. Once banks got access to blended finance, at time 0, they started to allocate more credit to female-run firms (auburn line). Nothing changes for control banks (blue line).
Figure 3 Change in the share of lending to female entrepreneurs around WIB entry
Notes: This figure shows the average bank-level change in the share of female entrepreneurs in the stock of outstanding loans to all entrepreneurs before and after banks start participating in the programme. For each of the five treated banks, we normalize the month in which the bank disbursed its first loan as part of the programme to 0. For banks that never participated in the program, we use their monthly observations corresponding to the normalized time scale for each participant bank. We then calculate the average share of lending to female entrepreneurs in each month, relative to the start of the program, for participant banks and for non-participant banks separately.
Further analysis of the micro data confirms that the blended finance programme durably increased lending to female entrepreneurs – both in absolute terms and relative to male-owned firms. Participating banks expand new loan issuance to female entrepreneurs much faster than control banks (Figure 4 shows this for each of the five treated banks). More specifically, treated banks increased the share of all business lending allocated to women by 2 percentage points on average. This is an economically meaningful effect (an increase of 22%), given that treated banks allocated only around 9.0% of their total lending to female entrepreneurs in 2014. Over time, programme impacts do not mean revert but settle at a higher steady state for each of the treated banks, although treatment effects are heterogeneous in terms of size and dynamics (as can again be seen in Figure 4).
Figure 4 Blended finance and lending to female entrepreneurs: Event-study estimates based on synthetic difference-in-differences
Notes: This figure shows estimates for each individual WiB bank in an event-study set-up using the synthetic difference-in-differences methodology of Arkhangelsky et al. (2021). The dependent variable is (log) total loan volume to female entrepreneurs. Error bands show 95% confidence intervals.
Who benefited? The data show that the blended finance programme helped banks to lend more to their existing female clients. This accounts for about 50% of the increase in the share of lending allocated to women. The other half reflects lending to new borrowers: 31% of the increased lending is to female borrowers poached from other lenders and 19% is to firms that had never previously borrowed from any bank. In short, the programme expanded credit to existing borrowers that were still credit-constrained (intensive margin) while also crowding in new female borrowers (extensive margin).
Did loan quality suffer?
A comparison of female first-time borrowers who received their first loan from a treated bank with those borrowing for the first time from a control bank reveals no evidence that the blended finance programme undermined credit quality. First-time female borrowers are equally likely to default – either on bank credit or on debts to suppliers – irrespective of whether they borrow from a treated or control bank. They are also as likely to receive a follow-up loan from their first lender or, in contrast, to leave that bank in the medium-term.
The impact of access to blended finance on female-run businesses
An important question is whether the positive credit supply shocks caused by the blended finance programme helped female-owned firms perform better. This turns out to be the case: a 10% increase in the supply of bank credit to a female entrepreneur due to the WIB programme resulted in an increase in investment of 1.3%. Firms also increase their sales and profits by on average 1.3% and 8.2%, respectively, due to this positive credit shock. Combined, these impacts ensure that beneficiary firms are 2.4 percentage points more likely to remain in business one year after the start of the programme. Importantly, not all firms benefited equally from the programme: those that initially had a higher capital productivity borrow and invest more. This suggests that the programme was effective in helping to improve the allocation of capital across small and medium-sized firms.
Conclusions
Blended finance programmes bundle liquidity support, comprehensive training, and risk sharing. The analysis summarised in this column indicates that this can be an effective approach to motivate and enable banks to lend more to underserved business segments.
A large part of the programme impact occurred on the intensive margin. A higher (temporary) first-loss risk cover might help to entice banks to expand their lending to new female borrowers even more. Another option to strengthen programme impact (other than scaling up) would be to introduce performance-based incentives. Participating banks then receive an interest discount on their credit lines that is conditional on achieving specific goals at the portfolio level, such as a higher share of female borrowers among all clients or among all first-time clients. Such high-powered incentives, applied temporarily and phased out over time, may help to further shift bank lending towards underserved target segments in a profitable and durable way.
References
Alesina, A (2008), “Are Women Discriminated Against in Credit Markets in Italy?”, VoxEU.org, 30 September.
Aydın, H, Ç Bircan, and R De Haas (2024), “Blended Finance and Female Entrepreneurship”, CEPR Discussion Paper No. 18763.
Brock, J M and R De Haas (2023), “Discriminatory Lending: Evidence from Bankers in the Lab”, American Economic Journal: Applied Economics 15(2): 31-68.
Klapper, L F and S C Parker (2011), “Gender and the Business Environment for New Firm Creation”, World Bank Research Observer 26(2): 237-257.
Nanda, R and S Howell (2020), “Networking Frictions in Venture Capital and the Gender Gap in Entrepreneurship”, VoxEU.org, 29 February.
Banks have had a stellar first quarter. The major U.S. banks raked in nearly $50 billion in profits in the first three months of the year, The Guardian reported.
That was largely due to Wall Street bank traders, who profited from a volatile stock exchange, Reuters showed.
But even without the extra bump from stock trading, banks are doing well when it comes to interest, the same Reuters article found. And some banks could stand to benefit even more from this one potential rule change.
Morgan Stanley thinks it could have a major impact on Citi in particular.
Upcoming changes for banks
To understand why Morgan Stanley thinks things are going to change at Citi, you need to understand some recent bank rule changes.
Banks make money by lending out money, which usually comes from depositors. But people need access to their money and the right to withdraw whenever they want.
So, banks keep a percentage of all money deposited to make sure they can cover what the average person needs.
But what happens if there is a major demand for withdrawals, as we saw during the financial crisis of 2008?
That’s where capital requirements come in. After the financial crisis, major banks like Citi were required by law to hold a higher percentage of money in order to avoid major bank failures.
For years, banks had to put aside billions of dollars. Money that couldn’t be lent out or even returned to shareholders.
Now, that’s all about to change.
Capital change requirements for major banks
Banks that are considered globally systemically important banking organizations (G-SIBs) have a higher capital buffer than community banks as they usually engage in banking activity that is far more complicated than your average market loan.
The list depends on the size of the bank and its underlying activity, according to the Federal Reserve.
Current global systemically important banks
A proposal from U.S. federal banking regulators could drastically reduce the amount that these large banks have to hold in reserve.
Changes would result in the largest U.S. banks holding an average 4.8% less. While that might seem like a small percentage number, for banks of this size, it equates to billions of dollars, according to a Federal Reserve memo.
The proposed changes were a long time coming, Robert Sarama, a financial services leader at PwC, told TheStreet.
“It’s a bit of a recognition that perhaps the pendulum swung a little too far in the higher capital requirement following the financial crisis, making it harder for banks to participate in some markets,” he said.
Natasha Luscri and Luke Miller consider themselves among the lucky ones. The couple recently bought their first home in the northwest suburbs of Melbourne.
It wasn’t something they necessarily expected to be able to do, but some good fortune with an investment in silver bullion and making use of government schemes meant “the stars aligned” to get into the market. Luke used the federal government’s super saver scheme to help build a deposit, and the couple then jumped on the 5 per cent deposit scheme, which they say made all the difference.
“We only started looking because of the government deposit scheme. Basically, we didn’t really think it was possible that we could buy something,” Natasha told Yahoo Finance.
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Last month they settled on their two bedroom unit, which the pair were able to purchase in an off-market sale – something that is becoming increasingly common in the market at the moment.
Rather perfectly, they got it for about $20-30,000 below market rate, Natasha estimated, which meant they were under the $600,000 limit to avoid paying stamp duty under Victoria’s suite of support measures for first home buyers.
“They wanted to sell it quickly. They had no other offers. So we got it for less than what it would have gone for if it had been on market,” Natasha said.
“We didn’t have a lot of cash sitting in an account … I think we just got lucky and made some smart investment decisions which helped.”
It’s a far cry from when the couple couldn’t find a home due to the rental crisis when they were previously living in Adelaide and had to turn to sub-standard options.
“We’ve managed to go from living in a caravan because we were living in Adelaide and we couldn’t find a rental with our dogs … So we’ve gone from living in a caravan, being kind of tertiary homeless essentially because we couldn’t get a rental, to now having been able to purchase our first home,” Natasha explained.
Rate rises beginning to bite for new homeowners
Natasha, 34, and Luke, 45, are among more than 300,000 Australians who have used the 5 per cent deposit scheme to get into the housing market with a much smaller than usual deposit, according to data from Housing Australia at the end of March. However that’s dating back to 2020 when the program first launched, before it was rebranded and significantly expanded in October last year to scrap income or placement caps, along with allowing for higher property price caps.
A year after the US exit from the global health body, WHO officials say finances are secure, for now. But amid donor cuts, rising inflation, and future economic uncertainties, will funding be sufficient to meet its needs?
Earlier this month, senior officials at the World Health Organization (WHO) told journalists in a newly refurbished pressroom at the agency’s headquarters that its finances were “stable”. Following a year that saw its biggest donor withdraw as a member, forcing it to cut 25 per cent of its staff, its financial chief said that 85 per cent of its 2026 and 2027 budget had been financed.
“While we are looking at resource mobilisation, we’re also looking at tightening our belts,” Raul Thomas, assistant director general for business operations and compliance, explained, admitting that the WHO “will have great difficulty mobilising the last 15 per cent”.
Sitting at the centre of the press podium, surrounded by his deputies, Tedros Adhanom Ghebreyesus, WHO director general, backed up Thomas’s outlook. “We are stable now and moving forward”, since the retreat of the United States from the health body, he said. The Ethiopian noted that the WHO’s financial reform, allowing for incremental increases in state member fees, has been a big plus.
Mandatory contributions have historically accounted for only a quarter of the organisation’s total funding. States have agreed to raise their contributions by 20 per cent twice, in 2023 and in 2025. Further increments are scheduled to be negotiated in 2027, 2029 and 2031 to bring mandatory funding up to par with voluntary donations that the agency relies on. The WHO also reduced its biennial budget for 2026 and 2027 from $5.3 billion to $4.2bn.
“Our financing actually is better,” Tedros emphasised. “Without the reform, it would have been a problem.”
Read more: Nations agree to raise their WHO fees in wake of US retreat
Nonetheless, the director general, now in his final year at the UN agency, warned that member states should not assume that the financial road ahead will be clear. “The future of WHO will also be defined by how successful we are in terms of the assessed contribution increases or the financial reform in general.”
As west retreats, others step in
Suerie Moon, co-director of the Global Health Centre at the Geneva Graduate Institute, explains that every year at the WHO, there’s “a non-stop effort” to ensure funding. She says a continued reliance on non-flexible, voluntary funding earmarked for specific projects, as well as donors withholding contributions – sometimes for political leverage – complicates the organisation’s financial plans. Meanwhile, ongoing cuts and predictions of a global economic downturn stemming from the war in the Middle East may further aggravate the situation, as costs rise and member states focus on national spending needs.
Soaring prices driven by the conflict and supply chain disruptions have already affected the WHO’s procurement of emergency health kits for crises, officials at the global health body said. “We are continuing to negotiate at least from a procurement standpoint on how we can bring down a little bit the prices or reduce the increases, but we are seeing it across the board,” said Thomas.
Altaf Musani, WHO director of health emergencies, meanwhile, said aid cuts have already deprived roughly 53 million people in crisis situations of access to healthcare.
Last month, Thomas told the Association of Accredited Correspondents at the UN at the end of April that the agency is looking at non-traditional, or non-western, donors for funding to close the biennial 15 per cent funding gap. “It’s not that we won’t go to the traditional donors, but we’re expanding that donor base.”
Since the dramatic drop in funding from the US, formerly the WHO’s biggest contributor, Moon highlights that there hadn’t been a “sudden jump by non-traditional states to compensate for the US”. Last May, at the World Health Assembly, China pledged $500 million in voluntary funding until 2030, a sharp rise from the $2.5m it contributed over 2024 and 2025.
The WHO did not respond to questions from Geneva Solutions about how much of the pledged amount had been disbursed. China’s mission in Geneva did not respond to questions raised about the funding.
Other countries, particularly Gulf states, have meanwhile been increasing their voluntary contributions to the organisation in recent years. Similarly to “western liberal democracies have in the past”, Moon explains that they may be seeking “to raise their profile and prioritise health as one of the issues that they would like to be known for”. She noted that the shift in the UN agency’s list of top donors may affect how it manages the money.
‘Sustainable’ spending
Amid these financial uncertainties, WHO executives say the organisation is also reviewing its expenditure through “sustainability plans”. This includes working more closely with collaborating centres, including universities and research institutes that support WHO programmes and are independently funded. On influenza, for example, the WHO works with dozens of national centres around the world, including the Centers for Disease Control and Prevention in the US,
When asked about any plans for further job cuts, Thomas denied that these were part of the WHO’s current strategies, but could not rule them out entirely as a future possibility. Instead, he said, the organisation was “looking at ways to use funding that may have been for activities to cover salaries in the most important areas”.
Meanwhile, WHO data shows that the number of consultants employed by the agency by the end of 2025 decreased by 23 per cent, slightly less than the staff reductions. Global heath reporter Elaine Fletcher explained to Geneva Solutions that consultants continue to represent a significant proportion of the agency’s workforce, at 5,844 – including an overwhelming number hired in Africa and Southeast Asia – compared with regular staff numbering 8,569 in December.
Upcoming donor politics
The upcoming change in leadership will also be a strategic moment for the organisation to boost its coffers. Moon says the race for the top job at the organisation may attract funding from candidates’ home countries, which could be seen as a strategic opportunity.
Given the relatively small size of the WHO budget, compared to some government or agency accounts, “you don’t have to be the richest country in the world to dangle a few 100 million dollars, which could go a long way in their budget,” the expert notes.
The biggest ongoing challenge, however, will be whether major donors will announce further aid cuts. In the medium and longer term, “countries will have to agree on the step up every two years, and there’s always drama around that.”
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