UK public development finance institution CDC has joined forces with the Shell Foundation charity and African SME finance and development company GroFin to highlight the potential of gr
UK public development finance institution CDC has joined forces with the Shell Foundation charity and African SME finance and development company GroFin to highlight the potential of growth finance to become a multi-billion dollar industry within the next decade.
The growth finance sector provides access to capital and business development support for small and medium-sized enterprises in developing countries.
Growth finance supports SMEs unable to attract capital because they are too big for microfinance and too small for commercial banks and private equity. Growth finance attempts to plug this gap, typically involving sums of between USD10,000 and USD2m, and encourages economic growth and job creation.
Richard Laing, chief executive, CDC, says: ‘The growth finance sector has huge, untapped potential. In the coming decade its impact could be bigger than that of microfinance. 106 million of the world’s poorest families received a microloan in 2007 – growth finance has the potential to reach many, many more.
‘To develop growth finance the industry needs to introduce slick processes to drive the volume of transactions, create standard structures and standard processes. We also need to demonstrate that this asset class can generate good financial returns.’
Chris West, director of the Shell Foundation, adds: ‘The Shell Foundation and GroFin act as venture capitalists in the development space. The problem is not a shortage of entrepreneurs in Africa, it has been to give these people the necessary investment and support to help their business grow. We provide a return on investment by helping SMEs to succeed using an enterprise-based approach. ‘
GroFin was established to support African businesses which require funding worth between USD50,000 and USD1m.
