In emerging markets, “small and growing businesses” (SGBs) typically employ 5 to 200 employees and need different kinds of financing of $300,000 to $3 million to grow their companies. SGBs play a significant role in job creation and entrepreneurial activity in emerging markets.
Lack of financing is commonly seen as SGBs’ main barrier to growth. For conventional banks and private equity firms, the SGB segment has often been associated with high risks and low returns, caused by high transaction costs relative to transaction sizes, and high failure rates. As a result, SGBs are often stuck with funding their own growth from limited internally generated cash flow.
The lack of risk capital for SGBs in emerging markets is a significant economic development issue. SGBs represent the global engines that drive:
- The creation of new, quality, long-term jobs, increasing incomes, and improving working conditions;
- Reduced inequalities by providing access to basic necessities, improving education and healthcare, and increasing household incomes;
- Gender equality by enhancing opportunities for women in leadership, creating and improving jobs for women, and providing essential products and services to meet women’s needs; and
- The advent of innovative, affordable ways to address a wide range of environmental and social issues.
Capria supports SGBs in emerging markets by investing in SBFIs (small business financial institutions) run by capable local investment managers who can find, vet, invest in, support and realize solid returns to investors.
Know more about Capria’s thinking on SBFIs
Know more about Capria’s thinking on Missing Middle