Rwanda Journal: Funds for East Africa's SMEs

Courtland Walker — Tue, 30 Jan 2007 09:00:00 -0500

Editor's note: NextBillion staff writer Courtland Walker recently returned from a 10-day trip to Rwanda. Over the next week, he will post reflections on his trip as part of the Rwanda Journal series. This is the third post in the series; read the first two here and here.

In high-income countries, the SME sector has been estimated to contribute more than 50% to gross GDP, not to mention being the engine of new job creation and a source of as much as half of the innovation in these economies. In low-income countries, however, the contribution of the SME sector to gross GDP has been estimated at 16% and, in most African countries the SME sector has been estimated at less than 10%.

I read the above quote, over a year ago, in "Venture Capital for Development," a paper by Alan Patricof and Julie E. Sunderland.

While the growth of the SME sector is crucial to the future of developing country economies, there are tremendous difficulties inherent in fully private sector investments in smaller firms. While there are a handful of groups - namely SEAF, GroFin, and Aureos - that are operating fully private sector SME-targeted funds, many, including Patricof and Sunderland have called for the participation of the development institutions to help mitigate the risk faced by the private sector.

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Rwanda Journal: Funds for East Africa's SMEs