Transatlantic Innovations in Affordable Capital for Small- and Medium-Sized Enterprises: Prospects...

8/8/2019 Transatlantic Innovations in Affordable Capital for Small- and Medium-Sized Enterprises: Prospects for Market-Based

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Transatlantic Innovations in Affordable Capital

for Small- and Medium-Sized Enterprises

Prospects for Market-Based Development Finance

G Y Director, Capital Studies T Mk I

D R Senior Researcher T Mk I

J M. W Program Officer T Gm M F U S


2/48

2007 The German Marshall Fund o the United States. All rights reserved.

No part o this publication may be reproduced or transmitted in any orm or by any means without permission

in writing rom the German Marshall Fund o the United States (GMF). Please direct inquiries to:

The German Marshall Fund o the United States

1744 R Street, NW

Washington, DC 20009

T 1 202 745 3950

F 1 202 265 1662

E [email protected]

This publication can be downloaded or ree at http://www.gmus.org/publications/index.cm. Limited print

copies are also available. To request a copy, send an e-mail to [email protected].

GMF Paper Series

The GMF Paper Series presents research on a variety o transatlantic topics by sta, ellows, and partners o the

German Marshall Fund o the United States. The views expressed here are those o the author and do not neces-

sarily represent the view o GMF. Comments rom readers are welcome; reply to the mailing address above or by

e-mail to [email protected].

About GMF

The German Marshall Fund o the United States (GMF) is a non-partisan American public policy and grant-making institution dedicated to promoting greater cooperation and understanding between the United States

and Europe.

GMF does this by supporting individuals and institutions working on transatlantic issues, by convening leaders

to discuss the most pressing transatlantic themes, and by examining ways in which transatlantic cooperation can

address a variety o global policy challenges. In addition, GMF supports a number o initiatives to strengthen

democracies.

Founded in 1972 through a git rom Germany as a permanent memorial to Marshall Plan assistance, GMF

maintains a strong presence on both sides o the Atlantic. In addition to its headquarters in Washington, DC,

GMF has seven ofces in Europe: Berlin, Bratislava, Paris, Brussels, Belgrade, Ankara, and Bucharest.


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I 1

Dg Mg M SME F 4

S S I 13

F Cg Gg A C 3

C 39

Ax 41

ransatlantic Innovations in Aordable Capitalor Small- and Medium-Sized Enterprises

Prospects for Market-Based Development Finance

A joint report by the German Marshall Fund

o the United States and the Milken Institute*

October 2007

G Yg

D, C S

M I

D R

S R

M I

J M W

Pg O

G M F U S

*W g B Z P R M I w K G C ML M I A U GMF


4/48


5/48

ransatlantic Innovations in Aordable Capital

or Small- and Medium-Sized Enterprises1

Most of the

developing

worlds industrial

structure though

suffers from a

missing middle

characterized by

many small, stat

and informal

enterprises on

one end of the

spectrum and a

few large firms o

the other.

J 6 Gg C M H

U g

M P -w E I w

g g

g w

M P g

, ,

I g

g, M P

w , ,

w, , gg

A M P w

- - (SME)

w E

U, g P

g w A 5

$3 ,

qg

g g

SME g w

q g: , x -g

g q, x g

, g, ,

(

) Ag ,

-

g G

- g

SME

w g

w 1

1 M g w A , w gg q - , g Fg - -q W, D C-Fg M D B I R D I- Egg M? D P S 1: E- S, D B, R C, 4

W SME ? SME

g ww, g

g 95 99

g w-

Og

E C- D (OECD)

SME

g , g

, g , g -

, wg x

w , ,

w g g

gg SME

w , , g

g

g

mittelstand G,

- N I J,

- I I, S

V- - U S w

x N SME M w

SME g

x

N, g gw

w

M g w

g g

, ,

w g -

, , , , w g

g, g,

w B

w-, - g

S g E A g- SME , g w

Introduction

1


6/48

he German Marshall Fund o the United States2

This

democratization

of capital helps

bolster the

development of

a vibrant middleclass which, in

turn, can foster

political stability.

D g g, SME

g W

w SME I g

g w g w

, x,

w g, w

,

g gg

gg

SME g g

g Dg

g, w

w g g

-g w

w,

M E I g , w

w-g , g

B g ,w g ,

g

, g

w

w,

,

g g

gwg

Fg

g g g Nw, g g

(NGO), ,

g S

xg

g

, g ,

g g w 3 Hw, g

g,

g

g SME A

, g

xg w

g g OECD P

D A E g

w NGO, ,

F , - US-M I C

g w

Og S

E A F (US)

g w

SME O gg

w

w

G PC g

w - w g

g wg-

SME JSES Exg S A

xg

g SME x P

xg w

g w SME

S xg w w

(, q, q-q)

/ SME

g SME g

- w -

wg x

3 I NGO - T -g ,g NGO - g


7/48



Creating

incentives for

local banks

and financial

intermediaries

to develop SME

products and

services will also

require new skills

and managemen

practices and

a change in

mindset.

w g

g g, G M

F U S (GMF)

g

, ,

A C SME C

P, F J 11 1 g

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M w ,

A ,

g g SME G

SME

, w , -g g

g g, g

g, g, g, g

gg Cg

SME

w q w

g g A

-

gg SME g w

w

w g

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g

g w,

x g

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g

-g

W x ?

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w ?

W gg

,

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? Hw

w SME w? W w

x SME

g ? W w

? Hw g

g g-

? C

g ,

, NGO,

g

g SME? W

g w xg g g SME?

B xg q, g

US, E g w

wg w SME, g

g ,

g g w g

SME ,

,


8/48

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exercilisl ut

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I SME :

q

; gwg

, g w

g ;

g

gwg g ;

g w SME

g gw

g SME

g q g

g SME

A SME g

gw g

Ex g g

: SME

w- G

D P (GDP) g-

Hw, g w- , SME

GDP

(Fg 1) SME

1 GDP A 4

Hg- -gwg SME, w w-

w, SME Lw-

w SME

g

w

g

I g

SME

W

, SME g

GDP w-

4 A P J E S, S B,MilkenInstitute Review, /5: 9-94; A P JE S,V C D D P P Bg B R: T P S Fg Ag G P, Ag 4, 5

N, SME

- w w

w

g,

g A

,

SME SME SME

g g SME w-

, ,

w , g

Fg g

g

N gg

g g SME Lg

- ,

w q g xg

Hw, SME

g

g

g w

Figure 1: SME Sectors Contribution toEmployment and GDP

High

Income

Middle

Income

Low

Income

Source: Meghana Ayyagari, Thorsten Beck, Asli Demirguc-Kunt,

Small- and Medium-Enterprises across the Globe: A New Database,

World Bank, August 2003.

Employment

GDP

70%

60%

50%

40%

30%

20%

10%

0%

Defining the Missing Middle

in SME Finance2


9/48



In Cameroon,

for example,

the minimum

deposit required

for opening a

checking accoun

in a commercial

bank is over $70

an amount highe

than that country

per capita GDP.

w

g , w

-w g

W ,

SME g w w

1 5 w M

w, w w

5 g (

w 1

g) N w SME

g

, ,

I g g w g

-w g

(Fg 3)

C , ,

SME

g

I g ,

w-w g

g

g g O

, q, ,

q

I C, x,

q g g

$,

g GDP5

Fg ,

w w, ,

S

w

A g

5 W B, A F: M, I P, Research Report, N (g)

Source: Dalberg Global Development Advisors, From Talk to Walk: Ideas to Optimize Development Impact, 2006.

Figure 2: Enterprise Financing Gap


10/48


These business

environment

weaknesses have a

disproportionately

negative impact on

smaller businessesand compound the

problem of limited

access to capital.

SME (Fg 4 6) Lw-

w SME w

g-

(Fg 5) O g SME

wg: - g;

, w -x g;

;

; g x;

g x;

g ;

g w g,

q, q-q, -

w

g

SME

g gw

q g 6

B g SME

W B, g g

(Fg ) Rg SME

gw

g w x , ,

,

6 L K, L L, R R E Rg B EJournal of Financial Economics 8(3): 591-69 (6)

Figure 3: The Missing Middle

Source: Sanders and Wegener, 2006.


11/48

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dolorem nullaor

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ipsusto dolore

feum quiscil iscil

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ad dio eum vel



Figure 4: Cost to Start a Business vs. Number of SMEs

0 50 100 150 200

Cost to start a business (percent of income per capita)

0

20

40

60

80

100

#ofSMEsper1,0

00people

Figure 5: Private Credit vs. Number of SMEs

0 20 40 60 80 100 120

Private credit as a percentage of GDP

0

10

20

30

40

50

60

#ofSMEsper1,0

00people

Figure 6: Private Credit vs Number of SMEs

#ofSM

Esper1,0

00people

0 50 100 150 200 250 300

Private credit as percentage of GDP

0

20

40

60

80

100

High-incomeUpper-middle

Lower-middle

Low-income

Source: IFC, MSME: A Collection of Published Data, 2006.


12/48

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Figure 7: Growth Obstacles Reported by SMEs

Source: Thorsten Beck. Financing Constraints of SMEs in Developing Countries: Evidence, Determinants, and Solutions.

Working Paper. World Bank, April 2007.

0.4

0.3

0.2

0.1

0

Fractionofsmall/med

iumf

irms

Costoffinan

ce

Taxrates

Macroeconomicinstabi

lity

Economicpolicyuncertainty

Corruption

Access

to

finan

ce

Anti-competitive/informalpractic

es

Taxadministration

Electric

ity

Crime,

theft,

disorder

Skillsofavailableworkers

Legalsystem

Customsandtraderegulatio

ns

Accesstola

nd

Licensingandoperatingperm

its

Laborregulatio

ns

Transp

ort

Telecommunicatio

ns


13/48

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ipsusto dolore

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Figure 8: Growth Effects of Financing Obstacles Across Firms of Different Sizes

Source: Thorsten Beck. Financing Constraints of SMEs in Developing Countries: Evidence, Determinants, and Solutions.

Working Paper. World Bank, April 2007.

A g

SME, g g ,

I , ,

A SME g q

g x

g w (Fg 8)

g g

g w

g , q,

w, g ,

, g g SME w :

x, g, g-

SME w

g w

g gw

g


14/48


Without sufficient

capital from

banks, venture

capitalists or angel

investors to help

unleash capitalfor business

expansion, young

entrepreneurs

remain cash-

strapped and risk

averse.

Figure 9: Financing Patterns Across Firms of

Different Sizes

InternalFun

ds

Banks

Equity

Leas

ing

TradeCre

dit

DevelopmentFinanc

ing

InformalSources

FractionofFinancing

forNew

Investments(%)

80

60

40

20

0

small (


15/48

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SME gg -

g

g SME9

F, gg

x g

Dg 3 ,

g

, g , ,

g gw

w g g

w w g w

, gw1 Y,

g

g g-

, w

,

F

g g gg

g SME w

g w11

E w

x gw

q

9 O K A G, SIRIF A S R Mg D I, T G Exg SI VgP G: 1, 6

1 G Yg S , Beyond Junk Bonds: Expanding HighYield Markets, Nw Y: Ox U P, 5; J S D Cw (), Te Revolution in Corporate Finance, L-: Bw, 3; W R M S Sw-g (), Te Bridge to a Global Middle Class: Development,rade, and International Finance, M I S F I E Gw, B: KwA P, 3

11 I Ow A A Owgg F, I- A SME Fg Ng: A Rw S M I Eq I S,Journal ofSocial Sciences, 5

1

x (g

q ) gw

,

D

g x

SME

S g

g -g Hw,

g P

g

M ,

I ,

,

g, g

w w

R x gg

gg x

A

w g SME,

w M

g g

q Hw w SME

w? W w

x SME

g ? C

g

, NGO,

g

g SME?

w gg - g

-g gg SME

1 B, A Dg-K, R L, SME, Gw P: C C E,Journal of EconomicGrowth, 1(3), S 5:199-9


16/48

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Table 1: Activities of Selected Organizations*

TA

RkM

Im(..

) Rm

C-RIm

BP

CmD

FC

S

RC N N N N N Y N

BP Y N N N N Y N

KW Y Y N Y N Y N

SEAF Y N N N N Y N

A Y N N N N Y Y

SI Y Y N N N N N

E+C Y N N N N Y N

DRk N Y N N N N N

MFIC N N Y Y N Y N

IE Y Y Y N N N N

TS Y N N N Y N Y

GEXSI Y Y N N N Y Y

A N N N N N Y N

M N N N Y N N Y

Am N Y N N N Y N

JSE Y N N N N N N

OPIC N Y N N N Y N

IFC Y Y Y N Y Y N

BNwk Y N N N Y N N

* N A D F g g SME / - F , IFC SME, SME


17/48

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g w g g g

S -;

;

g;

q

, w

w

S

, ,

g g g

g ( g

g):

Direct investors

S g g

g

w, w g

Agora Partnerships, Root Capital,

KfW, IFC, GEXSIand E+Co g

q w

SME g , q

q-q Aureos, Acumen,

SEAF, and Business Partners of South Africa

g S g

w

A w

SME

Remittance facilitators

g

g

IntEnt g g g

N SME

g I -g

g

gMicrofinance International

Corporation (MFIC) w L g g

U S w

L A

Service providers

g

g B

SME, g

g, g g, g, g

gg, g g,

SME

g

BiD Network

TechnoServe

wg

I ,

w

g g g

Shared Interest

g g g

g w DeRisk g

g

g , ,

OPIC SME

w g

,

g

JSE Securities Exchange South

Africa SME x g

SME- xg

Information providers

O g

gg SME

g

, g

Survey of Selected

Innovators3


18/48


The driving force

in Root Capitals

model is the

consumers

growing interest

in ethical tradeand sustainable

agriculture, and

the rise of a new

breed of socially

responsible

traders, importers,

and retailers.

g g g MicroRate, -g g

(MFI),

SME g g,

g w I

g

g g

g ( 1 MFI

MicroRate

gw

x g

)MFIC

g g ( , , gg ,

)

Selected innovators: A review

Root capital (U.S.)

R C ( ELg F)

g, w-

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g

g

g w gg , w

, R C

-g

xg

gwg

w g g L

g $5, $5,, g

9 1

x 8 ,

w gg 8 1

Fx- g g- wg

w

R C

- x g

w

W w- ,

w

w W , gw

g R C

gwg

g, w

, ,

B g -

g

w

w qq R C

g , F w

gw ,

, g w

g B g

g-q,

- , g

g

g

( g w ), gg

g , g

R C g w w

, S C C

G M C R, w

w 5

U S E B g

w wg

g , g w

, R C

g g

S , W F, R C W

, wg

;

w , w

g-q 13

13 Iw w W F, A 6,


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,

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A R C

w A (Rw, Ug,

E, Rw, Mq, , Mw,

I C) A (I, E

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C g Cg, D

B, JP Mg C, S F,

D L P F, C

S I F, US Ag

I D (USAID),

M I F IA

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g- w , g

R C , F

6, g g g 5

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KW (K W) G

w g x g

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g , Ewg

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I- Ewgg (DEG),

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g,

g g

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I g

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,

g , q,

g ggg

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E D F I

(EDFI),14 g

g g- , E w

g DEG

w g

14 T E D F I- A, Bg, U Kg-, S, Hg, G, F, N, I,D, Nw, F, Sw, Sw

IFC, EC EDFI

,

DEG g ,

w w -g g

Small Enterprise Assistance Fund (U.S.)

S E A F (SEAF),

Wg- g

1989, gw

g SEAF

g , g

w $

gw

w

g

S gg

w

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S SEAF w w

w g

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, -

(IFI), g g

(NGO), ,

I

gw g I

g 19 -

L A, A,

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SEAF g ,

w- ,

w, x P CEO B

V, SEAF

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15

15 Iw w B V, A ,


21/48


22/48


Entrepreneurs

need investment

and a trusted

partner, not

charity.

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5

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( 85 )

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q

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24/48


25/48

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)

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O

w B Cg, 5

5 I

, 6,3 w w

5 g ; 16 w

5, 15,

w J

1 Iw w K W, A 1,

g, q g

BD Nw

g, w

I

, g

BD Nw

, w g

w O ,

; ,

I g

BD Nw

w US

A g x

L A gg

, W E g

x q

TechnoServe (U.S.)

S g

g ,

, g w

4 g

B P C E

D Pg,

g g

g

,

g, w

g

B P

C w E S, ,

q 15 L A

B L

A , S

I


26/48


27/48

Iriuscidunt verci

tinciduisi. Lis ad

elessi. Um alis

dolor si. Ing eum

dolorem nullaor

tionseq uipsum

ipsusto dolore

feum quiscil iscil

er si et vent amc

ad dio eum vel



U S

gg ,

x x x

w

, MFIC

(, , MFI,

) L A F,

MFIC - -

MFI g

g $5, $5,

Shared Interest (U.S.)

S I SME S A

g g

g , g

, g g

g g

g SME w

15

, g ,

Figure 11: Cost to Transfer Funds Internationally

Source: Thorsten Beck, Asli Demirguc-Kunt and M. Soledad Martinez Peria. Banking Services for Everyone? Barriers to

Bank Access and Use around the World. World Bank Pol icy Research Working Paper 4079, 2006.


28/48

Cumsan hendio

con vullaorem

zzrilit laorting

el do exer si tin

ulputem iure


dolummy nullaor

amconsecte

exercilisl ut

vullandio odo


g B g ww w, S I

S I US

( g)

w

g ,

US ,

S A

S I S A

, I G

F (IGF),

w

g w MFI,

g

IGF w g

, g ,

gg IGF

S I

g

g

wg

C S I g

$86 I , g

1:1 g: g,

$1 S 1994

g 19, w

8, w , D K,

g x S I4

The Global Exchange for Social Investment

(UK/Germany)

G Exg S I

(GEXSI) w 1

w gg g

w

,

GEXSI -

4 Iw w D K, M 9,

w g wg - GEXSI

, , I

w

, , w-

g, , g ,

w g,

GEXSI g

, -

,

x ,

(, , ) I

g w GEXSI

g

, -

g gg

GEXSI -

w ,

- g

- g

g g

g w

w ,

w

R, GEXSI w B

P

g SME Ag

(1,), BOP

IntEnt (Netherlands)

IE (I E)

11 g

g g N

g IE w


29/48



IntEnt is fosterin

the concept of

circular migration

encouraging

immigrants to

reconnect with

their home

countries and

contribute

their savings

to stimulate

economic and

employment

growth.

D M Fg A(NCDO) w H,

g D NGO, gw SME

g (G, E, S,

M, Ag, C, )

R, IE w

g

w

IE g

g, gg g

w

g gw g

,

N w

E

g g

w w wg ,

g , g

, gg g

, q 1

, ---

IE g (g LG F) w

g

A, IE g

g w (G

S) g g

SME I

g, w

g ( C g

1 ) g g

4, g 45 w 15

w g

, g,

-gg

, w D, g

g

IE

w C G F g

w g

g S, IE

w g

B 8,

I , IE

g g

g E

, Bx,

E g

g N Mg

: g

, g

, w

gg

MicroRate (U.S.)

I 1996, MR gMFI I g

:

q, g g,

g g ,

Ag MR

SME g g ( MFI,

w, g w

SME), w x

w

MR g

g MFI g I g

, MR g

MFI


30/48

Cumsan hendio

con vullaorem

zzrilit laorting

el do exer si tin

ulputem iure


dolummy nullaor

amconsecte

exercilisl ut

vullandio odo


I

, D Sg,

MR B

g g5

DeRisk Advisory Services Ltd. (UK)

DR A S L (DR)

w

gg SME:

w g ,

, (Fg 1)

W

, Aw G, gg

DR SME g

6 DR g

SME w,

g g g

, w

g q

w g

w -w

5 Iw w D Sg, M 15,

6 Iw w Aw G, A 1,

g g

I, g

g g g

: ,

gg ,

g

DR g g

wg SME gg

C

g ( x

g USAID

D C A) -

, g, -

International Finance Corporation (multilateral)

I F C (IFC),

W B G,

gw g

g ,

g

, g

g IFC

Figure 12: SME Investment Risks

Source: Andrew Gaines (Gaines & Partners), 2006.

EmergingMarket SMEInvestmentPortfolio


31/48



These investmen

combined with th

technical suppor

of IFC partners,

intend to build th

capacity of local

banks and enabl

them to effective

downscale their

operations to

serve SMEs and

microenterprises

F g 1956

g , IFC $56

w g $5

3,5

14 g I

g ,

, g

IFC A M, S, M E

(MSME) g -g q

MSME S-S

A I

wg

g- w g

g g MSME

g

, gg IFC

x w

I g

MSME

wg

SME g w

g

; g SME ,

, -g

; g w , g

, g; g g

g ; g ; g

g U g,

w :

, gw, q,

g, ,

;

, , , q

A g, IFC

$ g

gg

A MSME F C Ag

C Eg E

Q I

g IFC g

g 5 1 A

g ,

w IFC,

w

SME

IFC G B I w

4 w gg g

g

g

x ,

g

-

( , ) w (

, g

g ) A

SME, g g

xg

-- g g

F , G B

I w g

g ,

, ,

x w

g g GBI

g :

4 g

g O 54,339

, $


32/48

Cumsan hendio

con vullaorem

zzrilit laorting

el do exer si tin

ulputem iure


dolummy nullaor

amconsecte

exercilisl ut

vullandio odo


g w, 85 w w-

g-

,

, G B

I w IFC

G B F w

g g g

g, , q-q,

q , w g

g w

G B I w

- (

w g

),

I

g

qg : agribusiness and crafts

g ,

w ;youth and

informal enterprise,

; wg-

g g g network;

access to finance

D g

, x

g

M

, ,

M

, g g

I ,

g g

w g

q-q , w w

x

g-, G

B F w

x g, g

w g q -g

A - g w g w

- , g

w

( ),

g g

g E,

-

g

w w

Overseas Private Investment Corporation (U.S.)

O P I C

(OPIC) US g g

US 15 gg

g g

: ,

, q ,

O g 31-

, OPIC $138

3, , gg

$1 -g

668, -

OPIC g SME

g F,

SME PC

SME g

wg w

S, OPIC

g g w SME

g -g g, wg

g w SME

, OPIC g w

q A gg

/

L,

g

g g

, g g


33/48



Rgg , OPIC w

q A,

w g g w

A S D F

q gg -

w

g q

g I w g

w / g

g--w w g

g

w-g A w g

; ,

, SME , w

, , , g,

g

Ag , OPIC w g

w

;, g , w

g ;

SME OPIC

3 5

g

g

x

,

g--w

Business Partners of South Africa

B P S A (BP)

w g

g gg

SME g w Cg --

OPIC A S D F A, A3,

g w q q-q , BP

g

q Mg K w

IFC, g

BP g ,

w x g I

g w $5, $1

q-q w

w x

w w w g

BP , Hw, J

Sw, gg BP,

w q g

N g

w w g w ,

Sw8 BP

w

, w -g BP

w g g

;

w -g g g

g I , BP /

/q ,

g q 5 35

g

BP g

g I

S A, w

-

,

g g

8 Iw w J Sw, A 1,


34/48


AltX effectively

helps bridge the

missing middle

in SME finance

by offering small

enterprises capitaland management

training to entities

that are not yet

able to list on the

JSE main board.

, Sw Hw,BP 8

S A 9

B S A, BP

w S-S

A: $1 Mg

g

(IFI) IFC,

N (Nwg ), CDC

( B ), E

I B, D DOEN,

A R O, $14 K

, w

, C L E A

D B USAID g $

Ag

w w ,

- x

g S

A E, BP I

A Mq

Ng w

g

JSE Securities Exchange South Africa

E 188 w

Jg S Exg (JSE), JSE

A g g

g, g

w g q,

g

I 3,

w S A g D

I (DI), JSE AX

A xg -

- gwg I

g -gwg , -

9 I

, -w , B EEw , -g

,

AX g g

SME g

g g

JSE

AX xg,

q SME C

q JSE ( g,

g,

), w g q A

R q

-gg

-

W B S

w g g

g, DI

g -g

AX

g AX SME g g-

q

-g q,

g ,

g g ,

,

xg g g

gw

JSE g

$5 w

AX gg $3 $5


35/48

Iriuscidunt verci

tinciduisi. Lis ad

elessi. Um alis

dolor si. Ing eum

dolorem nullaor

tionseq uipsum

ipsusto dolore

feum quiscil iscil

er si et vent amc

ad dio eum vel



Table 2: Overview of Direct Investors in SMEs

SME Size Loan Range Type of Finaning Target IndustriesGeographial

Fous

E+C

>5

>$15

$5,$5,

D (58 )85%

Q-q 15%

C gA, A,

L A

SEAF< $

$1,$5

DEq

Q-qA

E E,L A, A

R C1

$5,$5,

S (81 ) 8%

Lg (5 ) %

CN

BC

Mx C A

Ag51

$5,$5,

Eq 5%D +

5%A C A

AL

$5,$15

D 5%Eq 5%

A

I, P,, K,

S A, Ug Eg

B

P SA N/A

$5,

$1

D+

D++q

A, x

g

S A

Mq

A N/AAg

$3$4 Eq

Q-qA

C A,A, S E A

KWL

1

,5,

EqD

Mg

AA, A, LA, E

C E

IFC (GBI) N/A$5,$35,

G, ,q, q-

q

g

AA, A, LA, E

C E

GEXSI N/A1,5,

D Eq

Hg, ,g,,

w g,

A, A L A


36/48


Although there

is a strong

correlation

between the size

of the SME sector

and economicgrowth, whether

SMEs cause

growth or the

conditions where

SMEs thrive helps

drive growth is

debated.

Is direct SME financing an effective tool toalleviate poverty?

SME

g g g

g g SME Hw,

w g g

g SME g

gw w

Ag g

w SME

gw, w SME gw

w SME gw 3 P SME

I

w g w,

g

w g gw,

Ag g

, g

g

g g S

, g,

g

A q, w, w

w g

W : g

SME E+C,

Ag, R C, KW,

SME gw g g ggg

-

B P, SEAF, A, A? A

g w

, SEAF 31

g

g (g ggg) , ,

B g , SEAF

3 B, A Dg-K R L, SME, Gw P: C-C E,Journal of Economic Growth,1:3 (5): 199-9

31 SEAF, D I S M E-: L L SEAF I, F 4

Ag, R C w g

w

x

w

Can MFIs help with financing SMEs from the

bottom up?

Bgg g

gg , q

w

P

g w g

, MFI g

W g-

SME,

SME

g gw

w, g

B

1998 4 (Fg 13),

MFI M

gg MFI wg gg , $1,

$5, g, g SME

A x, P C,

F Ng, M B P, B

S B w g

I w g

g w g

g g (

gg , g

) Fg 14

BS g

S g

$1, $5,

g Ag ,

g

Ex

Future Challenges to Generating

Affordable Capital4


37/48



Microfinance ha

dispelled the my

that unsecured

loans cannot be

profitable.

g w B C P,

B C, B Mx S

g

MFI C, D B,

ABN A, S B C

g

g

M

, Ax S,

Ox C C R A

, x, g

gg3

M w w g

g g

g g

( ,

, , ) g

3 Iw w Ax S, M 1,

g w

g Nw g g

M g

C

,

g q,

g, ,

w

I ,

w MFI

x Ag

MFI NGO

, A

I g ( /

C D F I

g U S,

w- w)33

33 G Yg, B Z B S, Cg C, J W Egg D M: F -g Lw-I C, M I,J 3

Figure 13: Interest Rates on Microfinance Loans in Bolivia 19982004

Year

Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05

30%

28%

26%

24%

22%

20%

AnnualEffective

InterestRate

Source: Elisabeth Rhyne and Maria Otero,Microfinance Through the Next Decade: Visioning the Who, What, Where,

When and How. Accin International. Global Microcredit Summit, 2006.


38/48

Cumsan hendio

con vullaorem

zzrilit laorting

el do exer si tin

ulputem iure


dolummy nullaor

amconsecte

exercilisl ut

vullandio odo


Is technical assistance a key to success or awaste of resources?

V g

g

,

gw , g g

,

I g

, g

, g

w g g

Ag P, w g

x

Ng,

g,

B P S A Hw, w g

F x, M K,

F P S D

W B I F

C,

xg

E

q w x

, K I w w,

w

34 S , , g

D Sg MR,

w H g g MFI

-199, g

34 I

Figure 14: BancoSol Diversified Product Offerings (19972006)

Source: Elisabeth Rhyne and Maria Otero,Microfinance Through the Next Decade: Visioning the Who, What, Where,

When and How. Accin International. Global Microcredit Summit, 2006.


39/48



The conclusion

reached by many

institutions was

that technical

assistance was

not needed. If it

were, clients wou

have been willing

to pay for it.

g q Ag

MFI w g

,

g

w

w I w, w

wg , Sg35

H g ,

w x

, g,

O g ,

g g

g SME SME

How can the full capital spectrum be utilized?

D g g gg

SME,

- xg

w

(Fg 15)

x

E

SME g g w :

35 Iw w D Sg, M 15,

Gg g g

( )

w g,

g ;

D g g-

(PRI),36 , g

, q-g ,

, g;

P q g /

g g, -- g,x g, gg,

w;

A g g

q, g , ,

g, , --

- 3

I w

SME,

A x

q w ( 3) B g

g

36 Pg- w x

3 A D P C, (Ex C)

Spectrum of Investors

TraditionalInstitutional

Capital(Banks,

Mutual Funds,Pension

Funds, Etc.)

SociallyResponsibleInvestment

Funds

AngelInvestors

andSocial

VentureCapital

CommunityDevelopment

Equity/ VC

CommunityDebt

Financing

VenturePhilanthropy

TraditionalPhilanthropy

Social Equity Investors Private Equity Investors

Source: Jed Emerson (Generation Investment Management) and Shari Berenbach (Calvert Foundation), 2006.

Figure 15: Spectrum of Investors


40/48

Cumsan hendio

con vullaorem

zzrilit laorting

el do exer si tin

ulputem iure


dolummy nullaor

amconsecte

exercilisl ut

vullandio odo


, , q

q-q

, w g g

g , g

M,

g g g g

q g g

Hw, w q g

g x :

w x

q SME w g

, x, w

gg w

g- g 38

C, g ,

w g w, , x

x w A

SME g E B

R D (EBRD)

gg E E w

w

$5 39 A, q-q

38 J L A S, P Eq DgW: T D S, NBER W-g P, 5 S gw -f g N I Economics in Peacemaking:Lessons from Northern Ireland, T P , M

39 A P J S, V C D-, D P, P Bg BR: P S Fg Ag GP, Ag 4, 5; A P J S, S B,Milken Institute Review, /5:9-94

q SME gg

4

xg SME q

g

: g g (g

Sw), g (g

A C

L), (g SIDBI V C

L)

g SME

g q q-

q $, (A I MV

C F) $5 (A

C L) M g q-q, q,

w g, ,

--, G

x

g

Should commercial rates prevail?

g U

N M D G (MDG)

g

$1 15 P , ,

g

g SME g

F x

4 I

Table 3: The Capital Spectrum from Equity to Debt: Quasi-Equity Instruments

C S D:1. A w

R F:2. A g

L-Tm D w W:3. A g- w

g


41/48



According to

Matthew Gamser

IFCs SME progra

manager, the vas

majority of small

businesses aroun

the world simply

need plain bank

lending.

/ ,

w, g

g I

g g

w

w,

Sg O

g x w

41

g M K Ig

g ,

A

; , K ,

4

E w x ,

q

D DOEN

F, x, x g

gg , q

- w

Can commercial banks be wooed

to go downstream?

Ag Mw G, IFC SME g

g,

w

g43 E g w

wg x

g

; w g

x g

g

41 Iw w D Sg, M 15,

4 Iw w M K, A 3,

43 Iw w Mw G, A 16,

g 44

I Bg, x, q SME

GDP

, q w

, w, IFI, NGO

g

g SME

w

SME

x

Lw g

, g -w , -g

, , w

, g

g,

, w

SME

g45

B II q

w SME

g g 46

Ag K, W

B Dg B

g g

g g

4 15

g I g

,

, g ,

, w

gg , g

g

44 B, A Dg-K M S M PBg S E? B B A U A W, W B, Wg P, D6

45 I

46 S G-J & S S, 3 B II Dg C: D P E,L S E, FMG D P 43,F M G

4 Iw w M K, A 3,


42/48


This is above

all an institution

building challenge:

how to build

the loan officer

skills and theorganizational

structures to take

decentralized

risk-based credit

decisions.

w Ag K, NGO

g g

w

O g g

,

w PC

Hg, , SME

g w g

gg g g,

w g

g g:w

g

- , H Ax,

gg PC 48 A w

g (g

),

( g), g

q g ,

( gg

), (gg

)

x w SME

Can credit scoring improve the access to

capital?

Rg g, ,

g

g g

g

w g w

B ,

g

I g , ,

-,

48 Iw w H Ax, M 8,

49

g g

g , g

g -g , g

(, )

g A -

g ,

w 5

C g g

w g

Hw,

g g g -g F x,

MFIC w

g U S

g g

w g (g, g,

I g, PDA g) w

M g q

g

q

g g g

w x

g

49 M B, g Dw O P: Lg SEx-Lg I O, B D-: T P P P, I FC F A E C,6; A G, C, C M: T N D I Sg Exg, CM M M S (), T H NwI E, Nw, M: Kw A, 5

5 M F, I G L C M- F, B D: P P P, I F C F A E C, 6


43/48

Iriuscidunt verci

tinciduisi. Lis ad

elessi. Um alis

dolor si. Ing eum

dolorem nullaor

tionseq uipsum

ipsusto dolore

feum quiscil iscil

er si et vent amc

ad dio eum vel



- SME

g M, ,

w g

, g SME

Hw, w -

g SME g

US E w g

w g SME

, ,

wg

xg w ,

, N-S w q

g

, g,

, g , I ,

g, g g

g w

Lgg

g -

x

g, ,

wg -g g SME

Conclusion

5


44/48


45/48

Iriuscidunt verci

tinciduisi. Lis ad

elessi. Um alis

dolor si. Ing eum

dolorem nullaor

tionseq uipsum

ipsusto dolore

feum quiscil iscil

er si et vent amc

ad dio eum vel



List of Interviewees

H Ax

Mgg D

ProCredit

C B

C M A

Acumen

S C

S Mg Sg

JSE Securities Exchange South Africa

C E-Sg

D Ex D

E+Co

W F

P

Root Capital

Aw G

Mgg P

DeRisk

Mw GSME Pg Mg

International Finance Corporation (IFC)

P G

Mg SME-F

BIO

S G

Mgg P

BTS Investment Advisors Limited

R J

Fw

Skoll Foundation

D K

Fg Ex D

Shared Interest

M K

V P F

P S D

IFC/World Bank

A M

G Mg

Deutsche Bank

M M

P A

Acumen Fund

B MN

P CEO

TechnoServe

A P

Mgg D

Greycroft, LLC

B Pw

Mgg P

Agora Partnerships

P R

F, S E F C

Institute for Financial Management and Research

A R

H, D I S

GEXSI

K S

Ex V P COO

Microfinance International Corporation (MFIC)

Appendix


46/48

Cumsan hendio

con vullaorem

zzrilit laorting

el do exer si tin

ulputem iure


dolummy nullaor

amconsecte

exercilisl ut

vullandio odo


J SwMgg D

Business Partners South Africa

K S

E A O

United Nations

Ax S

P F

OmtrixINC

J S

F DDOEN Foundation

N S

Pg Mg

IntEnt

S MP A

d.o.b. Foundation

B V

P CEO

SEAF

D Sg

F P

MicroRate

K W

DBusiness in Development Network/NCDO

E W

D C F S

KfW


47/48


48/48

O F F I c E S

W B B P

Transatlantic Innovations in Affordable Capital for Small- and Medium-Sized Enterprises: Prospects...

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