A New Effort to Boost Small Businesses in Emerging Markets

Friday, April 3, 2009

Microfinance has improved the quality of life for millions of people at the bottom of the world’s economic pyramid, yet studies have not shown much of an impact on the economies of developing (or declining) nations. Microfinance, whether delivered via Grameen Bank-style rural distribution systems or direct loan operations like Kiva, just isn’t enough of a job creator. That’s why a number of economic development organizations are focusing on the next tier up—small but growing companies. The theory is that if these outfits get their hands on capital, they’ll hire employees and the economic growth snowball will start rolling.

The latest effort to get the ball rolling is the Aspen Network of Development Entrepreneurs. It’s an offshoot of the Aspen Institute and has about 35 members, including such stand-out organizations as Root Capital, Endeavor, Acumen Fund, and TechnoServe. Altogether, they have some $750 million they plan on investing in entrepreneurs and economic development projects over the next five years. ANDE is funded by a bunch of heavyweight philanthropies, of both the new and old schools. The nouveau riche: Gates Foundation, Skoll Foundation, Google.org, and Omidyar Network. The older money: Rockefeller, Shell, and Citi. “If you care about the global economy, this is where you’d put your stimulus money,” says Walter Isaacson, CEO of Aspen Institute.

ANDE will have a small staff that will work with people from the member organizations to develop tools and training designed to improve the flow of capital to potentially fast-growing businesses in developing nations, and also to provide entrepreneurs with management training and business advice. The focus is on entrepreneurs, rather than social entrepreneurs, says Randall Kempner, ANDE’s executive director. “Our ultimate goal is not to create more jobs for the TechnoServes of the world. It’s to create thriving business sectors. If we succeed, NGOs can leave these countries,” he says. The organization’s sweet spot is companies with between five and 250 employees. The investments contemplated range from $25,000 to $2 million.

Source: BusinessWeek (link opens in a new window)

business development