Investing beyond microfinance

CNN Money/FORTUNE took a look at why investors and development should look beyond microfinance and begin investing small or medium-size businesses to spur greater economic development and entrepreneurship. While microfinance is still a key factor in spurring entrepreneurship amongst the world’s extremely poor, the article argues that greater investment in small and medium businesses are critical for development, which are responsible for roughly 15% of GDP and 30% of total employment in developing countries. These businesses “can act as catalysts for sustainable economic development, employment, and the production of affordable goods and services in both developed and developing countries.” Several economic development organizations as well as investors are beginning to focus on how to create better conditions and investment for this category of business.

By helping local entrepreneurs grow their businesses through equity capital — not just debt assistance — businesses can scale and in turn have a multiplier effect on employment and economic activity. This creates wealth of the sort that lifts people sustainably out of poverty.


About CTED

CTED, as part of the New York University Abu Dhabi Research Grant, is a multidisciplinary research lab that focuses on combining economic principles, technological advances, and human-centric design to create innovative solutions for the problems experienced in emerging regions.
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One Response to Investing beyond microfinance

  1. Ali Dausy Massally says:

    This is the most sensible outlook I’ve read in a long time. Microenterprises can and do graduate to become SMEs too. This middle ground is constantly being paid lip service be developing nations and donor partners but nothing is done!! Witnessed by the dearth of policy structures as found in the lower (MFIs) and upper (Commercial & other banks); the middle space is empty. We need clearer policy and regulatory frameworks that would attract investment (other than VCs) to this IMPORTANT sector.

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