Development impact of SMEs
Around four billion people living in developing and emerging economies require better access to low cost, adequate and high quality products and services to cover their basic requirements. There is a huge unmet demand for such products and services, and thus a huge growth potential for small and medium-sized enterprises (SMEs) that venture into these Bottom of the Pyramid (BoP) markets. Such enterprises are processors and/or service providers in pro-poor agricultural and rural value chains, renewable energy solutions, health care, vocational skills training, education, information and communications technology, and so forth. They are the key drivers of pro-poor income and employment generation that impact on the livelihood of poor people in their functions as small producers, labourers, and consumers.
However, SMEs often lack access to finance as they fall into the “missing middle” of being too small for commercial banks and too big for microfinance institutions. Therefore, apart from building inclusive financial sectors that cater to the financing needs of SMEs as well, SDC is facilitating direct SME finance in partnership with responsAbility Social Investments AG through technical assistance to SMEs. SMEs with a significant development impact potential in BoP markets are eligible for technical advice, market research, and other support services aiming at managing growth and replicating their business model.
Technical Assistance for SMEs
SDC supported responsAbility in creating a technical assistance facility in 2010 - transformed into the Technical Assistance Facility Association (TAFA) in July 2011 - that is linked to The Fund, a BoP investment fund established by responsAbility in Switzerland in December 2010. The TAFA is funded by SDC and SECO. It allows SMEs to develop their managerial, operational, financial and corporate governance systems and expertise in order to ensure their sustainable business growth in BoP markets during the pre- and post-investment phase in line with the following eligibility criteria:
- Fulfil responsAbility's investment criteria (below);
- Identified gap in a specific, business relevant area;
- Clear strengthening of development impact of SMEs in the BoP markets; and
- Agreement with the recipient regarding cost-sharing mechanism.
Upon assessing the technical assistance application, responsAbility is submitting the application for approval by the TAFA Committee, which is composed by representatives of SDC, SECO, and an independent member.
click here for the Technical Assistance Facility Policy.
The current TAFA projects are as follows:
- Market survey for banking services for a company running cash tellers in rural areas of the Philippines
- Sector analysis to identify suitable business models in renewable energy in East Africa
- Strengthening of the retail and procurement framework of Por Ti Familia, a company which offers affordable health care services to low and middle income families in semi-urban areas of Lima, Peru
- Strengthening the supply chain of Guayusa tea in Ecuador for Runa, a tea company which commercialises Guayusa tea from the Amazonas
Access for SMEs to The Fund
The Fund offers financing to support SMEs in their early growth or expansion stage in the form of equity, debt, or hybrid instruments. Amounts typically range from USD 0,5 to 2 million. responsAbility applies the following investment eligibility criteria:
- Innovative and scalable business model contributing to value creation at the base of the pyramid in emerging and developing markets.
- Proven concept, able to demonstrate sales traction.
- Business model with attractive growth prospects.
- Strong management team.
- Transparent ownership and governance structure.
- Ability to deliver quarterly financial reports, annual financial audits and annual environmental, social and governance (ESG) reports.
- Focus sectors are renewable energy, agricultural value chains, and information and communication technologies. Other sectors, such as health care, vocational skills training, and education, are also eligible.
- Developing economies and emerging markets with priorities given to South and Southeast Asia, East Africa, and Latin America.
For more information on TAFA please contact Rochus Mommartz (++41-44-2543255; Rochus.Mommartz@responsAbility.com) and on The Fund contact Fred Werneck (++41-44-2543265; Fred.Werneck@responsAbility.com).
