In 1976, Muhammad Yunus discovered that incredibly small loans given to the poorest of poor could make a radical difference in their economic stability. Within a few years, he had established the Grameen Bank to pioneer the process of micro-lending and micro-finance. Within a few years, the Grameen Bank was issuing 97% of its loans specifically to women. Decades of research since then has shown what Yunus discovered early on. If you want to make the best investment, invest in women.
Investing in women leads to a better ROI
Research showed that when women are given the same amount of land as a man, they produce 10% more crop yield and when 10% more girls go to school in a country, the GDP increases by 3%. In addition, Yunus found that when given a loan, men would often squander money on themselves and on luxury items. Not only did women not squander the money they were loaned, but also invested heavily in their families and their communities. Therefore, women did not just pull themselves out of poverty, they took their entire community with them. In the US, while women only account for around 5% of money managers, that small handful of female money managers outperform men in almost every single category.
Women are better investors
Not only do women provide a better ROI, but they also display more favorable traits of the best investors. Some of this may actually be biological due to the lack of testosterone which may drive some investment behaviors in men. In addition, however, Warren Buffet – arguably one of the most successful investors of all times – displays many of the same traits that are most often found in women.
Women are a better risk
At traditional commercial banks where the primary borrowers are men, repayment rates hover around 70% or less. Yunus’ Grameen Bank had a steady and consistent repayment rate of 97%, in spite of having no system of collateral or secured loans. Between 2011 and 2013, approximately $1.5 Billion in investment capital was granted to companies led by a female CEO. Around 34 times that amount was offered to companies with a male CEO. Conversely, however, female tech entrepreneurs tend to deliver a 35% higher ROI than their male counterparts.
In spite of all the facts, numbers and statistics going back decades, women still receive less capital and funding than men and women-owned businesses are 20% less likely to receive a loan than male-owned businesses. Part of this is due to the way in which investors make decisions about how to invest in the first place. While investors love to believe that they make their decisions based on hard, cold facts, an actual analyses by Wharton’s Laura Huang showed that when data conflicted with an investor’s gut instinct, they went with their gut every time.
The problem is that when a woman pitches to an investor, they are looking for “familiar” clues that will tell them whether this is a good investment or not. Since women do not think, act, speak or invest like men, they are not going to give investors the “familiar” feeling they look for when deciding when to invest in something or not. While all of their numbers may be right on target, investors that “go with their gut” are rarely ever going to go with women.