Last week, the Aspen Network of Development Entrepreneurs released its impact report on the state of global business. According to the organisation, one of the biggest factors hindering growth in emerging markets is access to loans and funds.
“We live in a world today in which one of the biggest problems that we face is a lack of jobs. As we think about what’s going in the Middle East and North Africa, and the challenges that we see in Africa, we need to create jobs,” said ANDE Executive Director Randall Kempner, quoted in the Wall Street Journal.
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Kempner argues that millions of jobs could be created in these regions “accelerating” entrepreneurs and small businesses in the region.
The organisation’s network of 181 members include corporations, nonprofit institutions and individual investors who focus on promoting the growth of businesses in emerging markets regions such as: Latin American, Africa, and Asia. ANDE offers loans of US$20 000 to US$2 million, it also offers consulting services to more than 60 000 startups and midsize businesses with total funding of US$1.7-billion since 2009.
Three interesting insights popped out for me in the extensive report:
Startup enterprises struggle the most among small and growing businesses to find investments
According to the report, supporting early-stage businesses is critical to the creation of a healthy SGB ecosystem. It turns out though that startups looking between US$20 000 and US$100 000 of flexible capital are struggling to find funds that will invest the smaller amounts necessary.
“This gap is reflective of the sector: only six percent of SGB funds focus on start-ups. Access to business loans and credit is also a challenge, with 60% of micro, small and medium enterprises in emerging markets underserved by banks,” says the report.
Women-owned businesses face more hurdles than their counterparts
Business it seems still remains a tricky place for women. There are however encouraging signs that this is changing. According to the report the number of women starting their own business has seen significant increase, but women still seem to face more difficulties than their male counterparts.
Although women represent approximately a third of all small businesses in emerging markets, they face systemic barriers to scale, hindering their significant potential and the overall growth of the sector. Female business owners often lack expansive networks and reliable mentors, yet despite these barriers, have the capacity to provide significant employment generation.
Agricultural businesses suffer from lack of market linkages and poor management
For the emerging markets agriculture is crucial, as more than two-billion people in developing countries depend on the sector for their livelihoods. According to the ANDE report, the small businesses that connect them to markets are often “unable to find the skilled managers they need and are hindered by lack of financing”.
65% of ANDE members have focused their efforts on agriculture, and typically success for these businesses have a multiplier effect on the communities as well: higher revenue growth is not only correlated with higher total payments to suppliers, but also higher average payment per supplier. And, there is much more room for expansion: agricultural social lending has the potential to grow from around US$9-billion — US$350-billion of which is provided through social lenders — to US$33-billion with a mix of short — and long-term financing.
ANDE has chapters in Brazil, Central America and Mexico, East Africa, India, South Africa and West Africa, and its members are located in over 150 countries around the world.
