Friday
June 27
2014

Scott Anderson

ANDE’s State of the SGB Sector: The annual report shifts from making the case for SGBs to digging deeper on progress, challenges

The Aspen Network of Development Entrepreneurs (ANDE) today released its fifth “State of the SGB Sector” report and the theme of the 2013 analysis differs from its predecessors in one telling way.

The association of multilateral impact investment funds, foundations, NGOs and entrepreneurs was created to support small and growing businesses (SGBs) in developing markets. Unlike previous reports, this year’s is less concerned with selling the idea of SGBs (commercially viable businesses with five to 250 employees) as a means of alleviating poverty. Instead, it’s focused on the considerable number of players currently working in the sector, their progress, as well as the challenges on the horizon, notes ANDE Executive Director Randall Kempner in the report’s introduction.

Since 2009, the sector has raised $3 billion in committed capital. But just 1 percent (about $1 billion) of the total overseas development assistance went to SGBs in 2012, the report notes. Still, several bilateral agencies launched new initiatives in 2013, a reason for increased optimism for the sector. And last year, 22 SGB-inclined investment vehicles were launched, with the median target fund size reaching $66.5 million, up 33 percent from 2012.

ANDE also reported that although fewer investment vehicles were launched between 2011 and 2013, the target fund size of those investment vehicles was higher. And, 48 percent focused on seed and start-up stage investments, an increase of 36 percent over vehicles launched from 2005 to 2007.

ANDE also says that 2013 brought a “a surge” in corporations to its membership, more than 50 percent of which is based outside of the U.S. ANDE now consists of over 200 members after launching five years ago with a roster of 34. The association has regional chapters in Brazil, Central America and Mexico, East Africa, India, South Africa, West Africa, and East and Southeast Asia.

The SGB sector manages at least $5 billion in committed capital and ANDE members oversee about one-third of that total. The report shows that Sub-Saharan Africa is the most popular geographic focus for these funds, but during the past five years South Asia has taken away some of that share.

In terms of ANDE members the report revealed:

  • 64 members spent than $147 million in capacity development services provided directly to 46,000 SGBs

  • 16 members invested more than $194 million in 377 deals with SGBs

  • 28 foundation and other grant-making members invested nearly $187 million in the sector in the form of grants directly to SGBs ($84 million), grants to SGB intermediaries ($93 million) and investments into SGB-focused funds ($10 million)

  • On average, members work with a portfolio of 30 SGBs each year and spend roughly $10,000 per SGB to deliver capacity development services

ANDE also provides three key suggestions for broadening sector growth:

1. Improving local entrepreneurial ecosystems, by better engaging banks, local educational institutions, entrepreneurial support organizations and government agencies.

2. Cultivating middle management talent, including better education and training initiatives to develop middle managers.

3. Embracing a “gender lens,” or taking into account how female entrepreneurs are supported by and participate in companies, which ANDE says will create social impact and increase investors’ bottom line.

Click here to download the full report.

Scott Anderson is the managing editor of NextBillion.

Categories
Education, Entrepreneurship, Investing
Tags
ANDE, impact investing, research, small and medium enterprises