The challenge

The final toll of Covid-19 remains hard to predict. Nonetheless, one thing has remained constant: regardless of a country’s overall wealth, the effects of the pandemic have hit hardest in areas where inequality is greatest. Populations that already face discrimination in terms of government support or access to key services are least able to weather the toll of Covid-19, on health or finances.

Even so, the long-term trend for development has been positive, and despite the current set-backs, will continue to be so. Developing countries account for an increasingly large share of the global economy, with higher rates of growth reducing the gap in income. Demographic shifts also mean an unprecedented surge in young people graduating now and in the next few years. The potential is even greater among parts of the population to whom the public and private sector have historically not given much thought: women, youth, and those in rural areas. New technologies and business models offer a potential revolution in addressing inequality and opening new markets.

Our impact

In the next decade, women, rural and young populations will profoundly reshape their environments.

Equal markets.

Since 2003, responsAbility has focused on investing solely in developing economies. Not only are these markets poorer, but they also attract a much smaller proportion of global investment flows. 100% of our activities are, and will continue to be, aimed at reducing the gap between the developed and developing world.

Equal incomes.

Most of our portfolio companies aim to reduce poverty and improve the quality of life for low-income households. For example, microfinance institutions aim to resolve financial exclusion, a problem primarily affecting the bottom 60% of income-earners in developing markets. Equally, our agricultural portfolio companies primarily source from smallholder farmers with holdings of three hectares or less.

Equal opportunities.

Job creation will be essential to ensure that a demographic surge becomes an asset instead of a source of poverty and unrest. Most of the financial institutions that we finance support small businesses, a key engine for job creation in the developing world. Furthermore, our portfolio companies support thousands of youth customers across emerging markets.

Equal genders.

For a significant proportion of our investee companies, most or all of their customers are women. These women are thus better placed to access their own bank account, start their own business, buy their own property and many other vital services. Continued support will provide long-term benefits to the quality of life of these customers and their households.

Equal regions.

responsAbility tackles high levels of poverty in rural areas by supporting agricultural companies that source from smallholder farmers, employ local workers and protect the local environment. In the long-term, this support will strengthen agricultural value chains, to the benefit of local economies. We also finance companies providing off-grid energy solutions to homes and businesses in remote rural areas with limited or no access to electricity.

Empowering Women in Uganda

Fed by melting glaciers from the Rwenzori Mountains, the Nyamwamba river safeguards water for over 1 million people. The river sustains the main economic activity in the area: growing coffee, harvested by mostly female smallholder farmers.

The land here has been heavily eroded, and yields are limited due to fragile soils and old farming techniques. So through its Technical Assistance Facility, responsAbility and WWF Uganda are supporting a restoration project focusing on protecting important water catchments for socio-economic development as well as biodiversity conservation. The project uses a Payment for Watershed Services approach, that encourages private and public sector agencies to actively engage in financing ecosystem conservation. And most importantly for the female smallholders, it mobilizes landowners for Sustainable Land Management interventions to increase farm productivity, and improve community livelihoods upstream, while at the same time ensuring sustainable water supply to the many users downstream. Finally, this initiative also supports the Ugandan government’s effort to increase wealth at the household level, targeting SDG 1: end poverty.

Working Together in a Crisis

At the beginning of the Covid-19 pandemic, a collective of lenders in the microfinance industry came together to act as the foundation of the sector’s response to challenges which financial institutions around the world faced. These lenders signed a Memorandum of Understanding (MoU), which was crucial as these lenders manage more than USD 15 bn of funds invested, setting the precedent for these standards to be taken up by many more lenders.

Why is this important? Measures taken locally to reduce the spread and impact of COVID-19 were directly affecting clients, operations and the liquidity of microfinance and SME finance institutions. This resulted in an increased need for the rescheduling of loans that funds provided to these financial institutions. The MoU, then, established a common approach among lenders to deal with such rescheduling requests and established trust amongst the lenders’ community.

After Covid-19, microentrepreneurs and SMEs will form a vital basis for social and economic recovery. Continued access to finance should help them through this difficult liquidity situation so they will be ready to support their clients once the economy picks up once again.

2XChallenge: Invest in Women

The G7 and other Development Finance Institutions (DFIs) have agreed to join together for the 2X Challenge: collectively mobilizing USD 3 billion in commitments that provide women in developing countries with access to leadership opportunities, quality employment, finance, enterprise support and products and services that enhance economic participation and access. Two years after it launched, the initiative has more than exceeded expectations, already mobilizing over USD 4.5 billion in Gender-Smart Investments.

One of our climate funds, that targets universal access to clean power, recently qualified as 2X compliant, with over 50% of the portfolio companies in the fund actively improving and providing quality employment for women. The fund is supported by the Dutch Development Bank (FMO) and the European Investment Bank (EIB), both of which have been active in the 2X Challenge since its inception.

responsAbility worked with technical assistance from Power Africa, and with support from leading impact and gender advisors Sagana and Catalyst at Large in order to pilot a gender smart investing framework for the climate fund.