Women-owned SMEs in developing countries face an estimated credit deficit of nearly $1.5 trillion per current estimates. Women entrepreneurs are more likely to face higher interest rates, be required to collateralize a higher share of the loan, and have shorter-term loans. Lack of networks, knowledge, and links to high value markets further limit female entrepreneurship.
Green finance approaches could help unlock the potential of women to participate more in the global economy and mitigate some of the gender-specific risks from climate change impacts. It is estimated that there are about 8 to 10 million formal SMEs with at least one women owner in developing countries and access to green finance is especially difficult for them. In particular, microfinance has been a powerful catalyst for empowering poorer women in rural areas. But as women entrepreneurs grow, they need financial products and services that go beyond their ability to access finance.
Gender considerations also need to be integrated into the design and operationalization of dedicated green finance mechanisms. This can be done by explicitly introducing gender criteria in performance objectives and measurement frameworks which can drive empowerment and gender equality. A number of important financing vehicles now include gender perspectives, such as the Green Climate Fund and the Global Environment Facility.