and Ozier 2016, Bernhardt et al. 2019).<sup>19</sup> Offering in-kind grants (Fafchamps et al. 2014, James et al. 2022) or large grants to more successful women entrepreneurs (McKenzie 2017) has been found to be more effective at improving their business performance. The combination of less fungible funds that function as a commitment device (either because they are in-kind or large enough and labeled for the business) and targeting grants to growth-oriented businesses (e.g., to winners of business plan competitions<sup>20</sup> ) can have strong positive effects.

The importance of targeting is confirmed by recent findings that point to significant heterogeneity in the returns on loans. Crépon et al. (2024) show in the Arab Republic of Egypt that the heterogeneity of effects for the same instrument across entrepreneurs is more important than differential effects across instruments (in-kind or cash grants, or loans). Similarly, Bryan et al. (2022) find significant heterogeneity of effects when offering larger loans in Egypt, with large negative effects for the worst performers and large positive effects for the top performers, who were less likely to be women. Finally, Ellis et al. (2022) provide evidence that a distinct set of variables predict loan growth for women than for men. This highlights the relevance of designing effective targeting tools, as discussed above.<sup>21</sup>

# 4.4 Blended finance

Blended finance instruments can help reduce gender gaps in access to finance by rebalancing the riskreturn profile of investing in women-led businesses. These instruments may include performance-based incentives to banks, equity co-investments, partial portfolio guarantees, or a combination of these products (Liaplina and Sierra-Escalante 2022). Additionally, large commercial banks and multilateral development banks are beginning to issue gender bonds with concessional elements. Blended finance instruments show promise in benefitting larger women-led businesses. However, there is a lack of robust impact evaluations for these products.<sup>22</sup> One notable exception is a recent study by Aydin et al. (2023) that used quasi-experimental methods (synthetic difference-in-differences) to analyze the impact of a blended finance program for female entrepreneurs in Türkiye. The program provided credit lines to banks, risk mitigation through a first-loss risk cover, and technical assistance. The study found that participating banks significantly increased lending to female entrepreneurs, and female clients of treated banks experienced positive outcomes such as increased borrowing, investment and business performance.

19 Friedson-Ridenour and Pierotti (2019) demonstrate, based on answers to qualitative surveys, that women in Ghana may choose to conceal income from their husbands and might even prefer to limit their business expansion if it jeopardizes their ability to secure economic support.

20 Several studies indicate that women are less likely than men to participate in competitions; however, they are more likely to enter competitions when they are competing against other women rather than men (Campos et al. 2019). This suggests that designing women-only competitions might significantly increase participation.

21 Cai and Szeidl (2022) found that the positive effects of a loan program in China were offset by negative impacts on competitors that did not receive the loan. This suggests that financial expansion programs should carefully consider possible negative spillover effects on firms that are not program participants.

22 Several large initiatives are focused on channeling funding to women entrepreneurs. Two examples are the Women Entrepreneurs Finance Initiative (We-Fi) and the Women Entrepreneurs Opportunity Facility (WEOF). WeFi invests in the design and evaluation of interventions that increase WSMEs’ access to finance, training, mentorship, networks, and markets, and it works to improve the enabling environment. As of 2022, it has provided $1 billion in direct financing for women entrepreneurs and mobilized $1.9 billion in funding from public and private sources. WEOF is a 10-year facility designed to help expand access to capital for women entrepreneurs and to demonstrate the commercial viability of investing in women. It offers funding for blended finance, advisory services, and market research to catalyze financial services for WSMEs. By 2022, it had reached 144,000 women entrepreneurs.

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