InvestHER: Pioneering Gender-Responsive Climate Finance

By now, it is well-known that the climate crisis disproportionately affects women, as existing gender inequalities threaten their livelihoods, health and safety. Women smallholder farmers are particularly impacted and in need of climate resilience solutions. In response, agricultural small and medium-sized enterprises (agSMEs) in many countries are developing promising products to support climate resilience. However, most face challenges in accessing financing to grow their businesses. Rural women in low- and middle-income countries who lead agSMEs and MSMEs have an especially hard time, as women-led SMEs face a credit gap estimated at around $1.7 trillion. 

Introducing a new Climate Resilience Bond focused on women smallholder farmers

To tackle the investment shortfall faced by women-powered MSMEs (i.e. those in which women have decision-making power) and growth-stage agSMEs that support women smallholder farmers, Grameen designed the InvestHER Climate Resilience Bond (InvestHER CRB) and its accompanying technical assistance facility. InvestHER CRB aims to transform systems to bring about greater availability of climate-smart agricultural products for women smallholder farmers. This initiative was chosen as the inaugural project under the agriculture and food systems category by the Global Innovation Lab for Climate Finance in 2024 (the Lab), and was endorsed by the Lab as a go-to-market financial instrument in 2025. 

Initially designed as a $25 million issuance with a five-year tenor, this bond will lend to two streams of enterprises: 

1. Growth-stage agSMEs: Approximately 70 to 80% of the capital will be lent to agSMEs that are in a growth stage and do not have affordable access to finance. The goal of the loans would be to help them scale up their climate-smart agricultural services to deepen reach to women smallholder farmers. They might borrow in order to strengthen their on-ground agent force to further reach rural women, or deep-dive into a product from their current operations that can be tailored for women.
    
2. Women-powered MSMEs: The remaining capital will be lent to women-powered MSMEs who do not have access to capital and who are mostly invisible to formal financial institutions. 

These clients would pay back, with interest, the financial service provider (FSP) who issued the bond. The FSP would, in turn, use these repayments to service the bond and repay the bondholders (the investors).

To reduce the risk of lending to these under-capitalized but high-impact enterprises, the bond is designed such that it would be supported by a first-loss guarantee facility. This facility would absorb initial losses in case of defaults, making the bond more attractive to commercial investors. Concessional investors will also form an important set of investors for the bond, accepting lower returns in order to de-risk the structure and crowd in private capital. 

Integrating a technical assistance facility into the structure of the bond

Throughout the ongoing development of the InvestHER CRB, it became clear that all key stakeholders involved - including the FSPs and, most importantly, the pipeline of agSMEs and MSMEs - would require technical assistance to grow and adapt. Technical assistance needs include:

• For FSPs:
  • Support to create loan products that consider agricultural seasonality and other specific needs of the enterprises.
  • Monitoring, evaluation and learning (MEL) support to track and report on their impact to investors.
• For agSMEs and MSMEs:
  • Pre-investment assistance to become investment-ready and qualify for inclusion within the pipeline.
  • Post-investment support to enhance their gender inclusion strategies, develop climate risk mitigation business plans, and create capacity development plans to ensure loan repayment.

To address these multifaceted goals, we have established a technical assistance facility that supports the FSP lenders and the borrowing agSMEs and MSMEs to strengthen and sustain their businesses for the entire duration of the bond and beyond. The InvestHER CRB and Technical Assistance Facility function as complementary components that drive transformation through targeted climate and gender financing. Without the InvestHER Technical Assistance Facility as an integral adjunct, the bond would lack meaningful impact and risk becoming just another standard financial instrument.

Exploring issuance options in East Africa

For issuing the bond, our initial plan was to launch in East Africa, in either Uganda or Tanzania. We considered two potential pathways: a domestic issuance or an offshore issuance via a special purpose vehicle. 

Due to underdeveloped capital markets, a domestic issuance proved challenging. It would require the FSP to be rated in the market, leading to extensive due diligence and strict compliance with international ‘green’ and ‘gender’ bond standards. FSPs aligned with a vision for climate financing for women, capable of absorbing the entire amount and willing to take on the associated risks are difficult to find. However, like-minded partnerships are the cornerstone of successful blended financial instruments such as InvestHER CRB, so we couldn’t launch it without the right partner FSP.

Testing the second option revealed similar challenges; the in-country FSP requested substantially lower-than-market interest rates that the offshore bond arranger could not meet, rendering the instrument financially unfeasible. While the guarantee facility we included in the initial design could have potentially helped accommodate this request, we were ultimately unable to bring forward the guarantees due to the complexity of all the different stakeholders’ requirements, including an immediate launch timeline. Additionally, the FSP involved was reluctant to pass market-level rates on to its borrowers. Instead, it hoped to leverage its existing in-country loan portfolio for the bond, which it did not believe fully aligned with international green and gender criteria.

Preparing a feasibility study for launching the bond in the Philippines and India

Given the challenges we encountered in East Africa, we are now considering launching the InvestHER CRB and Technical Assistance Facility in the Philippines and India instead. Grameen has established roots, partnerships and teams in these countries, and we believe that their markets and infrastructure may be better equipped to work with this innovative type of financing than they currently are in Tanzania and Uganda. 

To get started on this proposal, we would need to generate a new feasibility study for these geographies, as was conducted in 2024 in Uganda. The study will provide valuable insights from specific stakeholders in the Philippines and India, such as local FSPs, cooperatives, agSMEs, MSMEs and others who would use the proceeds of the bond. The study would allow for a thorough examination of the capital markets landscape within these countries, the risk appetite of FSPs, and their capacity - as well as that of the agSMEs’ and MSMEs’ - to absorb investment. This exploration would enable us to build a robust pipeline of agSMEs and MSMEs focused on climate solutions that can enhance the livelihoods of smallholder farmers.

Shifting the narrative 

Grameen Foundation has long acknowledged the growth possibilities that arise from investing in women. However, most commercial investors still see agSMEs and women-owned MSMEs as too risky to prioritize. To confront this systemic issue, we need to shift the narrative and demonstrate that these businesses are not inherently risky, enabling investors to recognize their potential. At the same time, the growing climate crisis makes the need for climate resilience solutions all the more urgent, especially for women smallholder farmers. 

The InvestHER CRB and accompanying Technical Assistance Facility provide a holistic investment pathway for addressing both of these challenges. If successful, this initiative could pave the way for broader adoption of gender-responsive climate finance, helping to build more resilient agricultural communities and advancing both climate and gender equity on a global scale.