"Filling the Finance Gap" The Clinton Global Initiative's Poverty Alleviation Working Group Session

Ana Escalante — Thu, 11 Oct 2007 12:05:08 -0400

How do we get more capital to the people who want to start their own SMEs? It is difficult to make a case for this "missing middle." NextBillion has identified this problem in the past, and it seems like now the issue is beginning to unfold in the development debate: the Clinton Global Initiative is now discussing this very issue.

SMEs are good for the economy - they create wealth, create jobs and usually need financing so they can grow to scale. The financing gap exists for a layer of potentially high-growth SMEs that occupy a space between large MNC projects and micro-entrepreneurs. The World Bank has found a connection between the number of SMEs in a country and a country's growth, and has posited that without SMEs, it’s difficult to sustain economic growth.

The following videocast is of a session entitled "Filling the Finance Gap" at the Clinton Global Initiative's Poverty Alleviation Working Group a couple weeks ago. The speakers: Alan Patricof, Sonal Shah and Hubertus van der Vaart, do an exceptional job of explaining the challenges of investing in entrepreneurs and SMEs in emerging markets; they debate about the financing gap, or the "mesofinance gap."

Watch the videocast here

I find what Patricof says about the companies in the United States very interesting. He mentions Staples as an example of a company that started small and then scaled up to become a big U.S. corporation, thanks to the existing capital structure in the United States. There are similar companies with great potential in a multitude of emerging economies, but most face a consistent challenge: lack of financing tools.

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"Filling the Finance Gap" The Clinton Global Initiative's Poverty Alleviation Working Group Session