Lender Targets Developing Nations’ Top Entrepreneurs

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Jun 2013
Global, June, 17 2013 - What would happen if business owners in developing countries who lacked access to commercial lending were offered a more generous helping hand – offering credit that exceeded the typical $5,000 microloan?

That question underpins a report released last week by the Aspen Network of Development Entrepreneurs, a project of the Aspen Institute started in 2009.

The short answer, according to ANDE Executive Director Randall Kempner, is that millions of jobs could be created in emerging markets—and in many poor countries—by “accelerating” entrepreneurs caught in this gap.

“We live in a world today in which one of the biggest problems that we face is a lack of jobs. As we think about what’s going in the Middle East and North Africa, and the challenges that we see in Africa, we need to create jobs,” Mr. Kempner said last week in unveiling the report in Washington, D.C.

“According to the International Labor Organization, we need to create 400 million new jobs in the next decade to maintain the level of unemployment that we have today,” said Mr. Kempner. “That level of unemployment isn’t exactly leading to peace and comity in the world.”

ANDE’s network of 181 members range from corporations to nonprofit institutions to individual investors who focus on promoting the growth of businesses in emerging markets located primarily in Latin American, Africa, and Asia. ANDE, whose members include Wal-Mart Stores Inc., eBay Foundation, and JPMorgan Chase, offers loans of $20,000 to $2 million as well as consulting services to more than 60,000 startups and midsize businesses with total funding of $1.7 billion since 2009.

Microfinance institutions lend about $90 billion a year while private equity loans in emerging markets total about $40 billion annually. ANDE’s total lending to businesses last year was $413 million.

Mr. Kempner hopes the other lenders might gradually shift towards ANDE’s approach of stronger support for growing businesses, or so-called impact investing.

“When a business’ needs get up to $50,000 or $100,000, microfinance institutions typically say, ‘We’d have to do more due diligence than we’re comfortable doing in order to make that loan,’” Mr. Kempner said in an interview.

ANDE’s 2012 report targets three areas for improvement: funding for startups, empowering women entrepreneurs, and a renewed focus on agribusiness, a vital economic sector in developing countries.

Startups receive the least funding from ANDE while young, growing companies get the most attention.

ANDE’s efforts have raised wages at its target businesses to levels 478% higher than the national minimum wage and 76% higher than the national average wage in the companies’ countries, and on average small businesses offer higher wages and employ more workers than microfinance enterprises, according to the report.

Ben Powell, CEO of Agora Partnerships, a ANDE founding member, said the organization aims to find “high-potential, early stage entrepreneurs and then provide highly tailored consulting services to them to help them access the knowledge, networks, and capital they need to grow.” He went on to say in an email that “The long-term foundation of impact investing rests on attracting the best entrepreneurs into the field. That means taking risk and working with young, high-growth companies.”



 

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