Rob Katz

Private Sector Finance and SME Development

InfoDev LogoThanks to a commenter?s suggestion from Munyaradzi Musamba, I checked out a new report from InfoDev about the role of private sector finance in small- and medium-sized enterprise development. The report, Scaling Up Innovation and Entrepreneurship in Developing Countries: The Role of Private Sector Finance, contains the preliminary findings of a workshop held last April; I?m still trying to find the summary findings (post-workshop), but this is pretty good reading for now. At only nineteen pages, it’s digestible and very valuable, if a bit technical. An excerpt from the foreword suggests what’s to come:

Despite the success of these efforts, the development community has yet to address effectively and sustainably the challenge of access to capital for SMEs seeking USD $50,000 to $1 million to scale up their businesses and attract private capital markets. For SMEs competing in technology sectors, the challenge of accessing growth capital is particularly acute as these firms possess few tangible assets that can be leveraged as collateral for loans….As part of infoDev’s work program on ICT-enabled innovation, entrepreneurship and growth, we are currently supporting over 60 business incubators in developing countries worldwide. Our work with these incubators and their tenant companies, as well as our analytical work on competitiveness and growth, has reinforced the fact that access to financing for ICT and ICT-enabled SMEs remains a significant impediment to private-sector innovation and economic growth.

The report establishes an excellent analytical framework, which the authors then use to analyze country case studies, including Kenya, India, and Morocco. I like the delineation between first, second, and third-stage funding, and the balanced reporting that weighs both private sector (lack of VC industry, mistrust of SMEs, etc) and public sector (burdensome regulations, lack of infrastructure) failings pretty equally. Thanks again to our anonymous commenter for the referral.