The Soros Economic Development Fund (SEDF), Omidyar Network, and Google.org announced a new $17 million Small to Medium Enterprise Investment Company for India to create job opportunities and spur greater economic participation for a large segment of the population. This joint company will provide capital to small and medium businesses in underserved markets.
"With this investment, we will meet the huge demand to serve smaller businesses in India that have little access to finance. Long ignored by commercial capital markets, small and medium businesses are an attractive investment opportunity as well as an engine for economic growth for India." said Neal DeLaurentis, Vice President of Soros Economic Development Fund.
Many small to medium Indian businesses lack formal funding options because of a market gap between the micro loans offered by microfinance institutions and the larger investments of commercial banks and private equity funders. Most of the existing Small to Medium Enterprise funds makes investments in the $3-$5 million range, leaving out a significant portion of this market. The Investment Company will target this "missing middle" with equity investments between $500,000 and $3.5 million.
"We have seen what micro loans can do at the individual level and are excited about bringing that same opportunity to small and medium businesses. A new generation of entrepreneurs and their families will benefit economically and socially, and as their enterprises grow, these benefits can be shared with employees and their families, as well as the community at large," said Jim Bunch, Director of Investments at Omidyar Network.
"While small to medium enterprises (SMEs) in rich countries represent half of GDP, they account for a much lower portion in developing economies like India, partly because SMEs don't have access to the same type of financing. Our goal is to increase the flow of capital to SMEs in India. This is an important step in helping to attract commercial capital and reduce dependency on philanthropy or soft capital to fund this industry." said Sonal Shah of Google.org.