ANDE Pushes Investment in Developing Countries

Tuesday, March 24, 2009

LONDON – A group of major philanthropic foundations today announced the launch of a new economic development network that would increase investment and business assistance for entrepreneurs and small and growing businesses in the developing world. Supporters of the new effort said they planned to eventually achieve the same level of lending and support for small and growing businesses that has been generated as a result of microfinance.

Based in Washington, D.C. at the Aspen Institute, the Aspen Network of Development Entrepreneurs includes for-profit and non-profit social venture funds, business assistance providers, international development organizations and philanthropic foundations active in the developing world. Financial backers include the Bill & Melinda Gates Foundation, Citi Foundation,, The Lemelson Foundation, Omidyar Network, The Rockefeller Foundation, Shell Foundation and Skoll Foundation.

“Invention and entrepreneurship drive prosperity,” said Julia Novy-Hildesley, executive director of The Lemelson Foundation. “Funding start-ups and young ventures is more important now than ever before, given the current global economic and environmental crisis. There is no better way to build a middle class from the bottom-up than through small and growing businesses.”

Thirty-five organizations have joined the network, which organizers said would collectively manage more than $750 million during the next five years. The organization was formed to advance small and growing businesses development as a strategy to promote economic progress and prosperity in developing markets. Backers of the new effort pointed to the fact that in prosperous countries small and mid-size businesses account for more than three times as many jobs than those in less-prosperous countries.

“Amid the turmoil of the global economic crisis, the launch of this network offers reason to be optimistic in entrepreneurial quarters of the developing world,” said Peter Reiling, executive vice president of the Aspen Institute. “We believe that by supporting small businesses with high-growth potential we can help influence systemic changes in countries that have for too long faced high rates of poverty.”

Members of the new network rank among the most effective organizations addressing economic development and poverty in the developing world. Most are non-profit organizations that supply financing and business training to entrepreneurs in developing countries.

The creation of the network marked a major step forward in addressing a well-documented disparity between investment in small and growing businesses compared to other business sectors in emerging markets. According to research conducted for the network by Dalberg Global Development Advisors, the volume of loans made in both the microfinance and small-scale private equity sectors were each six times greater than those made within the small and growing business sector.

The research also showed a strong foundation to build on in the future, with 150 players – mostly foundations, development finance institutions and private investors – who have already injected $4 billion in capital and services into small and growing businesses in the developing world.

Those same funders reported more capital readily available for investment, but cited concerns that more than half of the active investment funds were small firms with five to fifty million dollars under management. More than one-third of the firms were less than three years old, which raised concerns among funders about the ability to absorb and mange more money.

“Finding collective solutions to common barriers will be a major focus of our work in the years to come,” said Randall T. Kempner, executive director of the Aspen Network of Development Entrepreneurs. “In the long-term, our goal is to create the real possibility that the next Bill Gates or Steve Jobs could come from a developing country.”

An expert on innovation and economic development Kempner said in the short-term the network would focus on helping social venture funds and business assistance providers expand their ability to grow. Kempner also announced the start of a fund that would annually give $1 million in grants to increase innovation and collaboration within the network. Money to start the fund was donated by the Bill & Melinda Gates Foundation, The Lemelson Foundation and Shell Foundation.

The announcement was made this morning in Oxford during the 2009 Skoll World Forum on Social Entrepreneurship, a gathering of more than 700 leading social entrepreneurs, funders, academics and policymakers from more than 60 countries.

Source: Press Release (link opens in a new window)