As the sun sets over Accra’s bustling markets, 38-year-old Adwoa, a trader at Makola Market, counts her daily earnings with determination. She dreams of expanding her business, hiring more women, and securing a better future for her children.
However, like thousands of women entrepreneurs across Ghana, she faces a formidable challenge: limited access to affordable credit. Traditional banks require collateral she does not have while microfinance institutions impose steep interest rates, eroding her profits.
Additionally, the lack of financial literacy training hinders her ability to scale her business effectively.
To address these systemic barriers, the newly elected National Democratic Congress (NDC) government, led by President John Dramani Mahama and Ghana’s first female Vice President, Prof. Naana Jane Opoku-Agyemang, has pledged to establish a Women Development Bank (WDB).
This bank aims to provide financial lifelines to women entrepreneurs through low-interest loans, capacity-building programs, business support services, and financial literacy training.
Funding Challenges and the Case for Gender Bonds
While the WDB initiative is promising, securing sustainable funding remains a critical challenge. Ghana’s total public debt stood at $47.9 billion (GH₵736.9 billion) as of November 2024, representing 72.2% of GDP. This fiscal constraint limits the government’s ability to fund new initiatives, necessitating innovative financing mechanisms such as gender bonds.
Gender bonds are fixed-income financial instruments designed to raise capital exclusively for initiatives that promote gender equality and women’s economic empowerment.
These bonds appeal to impact investors, venture capitalists, development finance institutions, and Environmental, Social, and Governance (ESG) funds. Countries such as Rwanda, Morocco, South Africa, and Japan have successfully issued gender bonds to fund programs that provide financial support for women-led enterprises.
For Ghana, gender bonds present a viable option to finance the WDB without burdening the national budget. Given women’s higher loan repayment rates compared to men, gender bonds can be self-financing.
Ghana must adopt a structured approach
For a successful gender bond initiative, the Ghanaian government must adopt a structured approach:
- Designing the Gender Bond Framework
- Define how bond proceeds will be used (e.g., loans, grants, financial literacy programs).
- Introduce Sustainability-Linked Bonds (SLBs), where interest rates are tied to key performance indicators, such as the number of women receiving loans, allocation of funds to rural businesses, and loan repayment success rates.
- Targeting the Right Investors
- Multilateral Development Banks: Institutions like the African Development Bank (AfDB) and International Finance Corporation (IFC) have previously supported gender bonds.
- Institutional Investors: Pension funds, insurance firms, and sovereign wealth funds with ESG mandates can be potential buyers.
- Private Sector Players: Companies with strong corporate social responsibility (CSR) commitments.
- Philanthropic Organizations: UN Women, Women Entrepreneurs Finance Initiative (We-Fi), and the Orange Bond Initiative.
- Strengthening the Regulatory and Legal Framework
- Align bond issuance with the International Capital Market Association (ICMA) Social Bond Principles to ensure transparency and accountability.
- Collaborate with Ghana’s Ministry of Finance, Bank of Ghana, and Securities and Exchange Commission to secure legal backing for gender bonds.
- Establishing an Independent Monitoring and Evaluation Mechanism
- Form a Gender Bond Oversight Committee comprising government representatives, financial experts, women’s rights organizations, and international development partners.
- Ensure transparent fund allocation and publish regular progress reports to boost investor confidence.
Global Success Stories in Gender Bonds
Several countries have successfully implemented gender bonds, providing valuable lessons for Ghana:
- Rwanda: The Development Bank of Rwanda issued a $24 million gender bond in 2023, increasing loans to women-led businesses by 30%.
- Morocco: Banque Centrale Populaire (BCP) issued a $21 million gender bond in 2021 to fund microfinance initiatives for women entrepreneurs.
