Friday, August 3, 2007

Meso Finance: the next area of financing for SME's in Africa

There's been a lot of talk on micro-finance and it's impact with the base of pyramid market (BOP). Dr. Muhammad Yunus's non-profit Grameen bank was the first to commercialize micro-finance in Bangladesh, now everyone from Latin America, India and Africa are copying this model. Micro-finance works well and helps the improvished and especially women sustain a living.

However, there is a flaw is micro-finance. Micro-finance as the name suggest, is about utilizing small amounts of financing usually $50 to $500 or start a small business. But what if your a farmer in rural Mali, Sudan, Zambia, or Kenya who has hundreds of plots of land and you need heavy machinery to till, or sow your land? Where do you get financing to purchase a Kubota, John Deere, or Caterpillar equipment? Micro-financing is simply not the solution in this case, farming equipment on average costs about $30,000 to $500,000.

The type of financing needed in most developing markets is in the small medium enterprise space (SME), another name for this type of financing is called Meso-Financing. Meso finance is above micro-finance and below traditional finance like; bank loans, and venture capital. Meso means middle and most aspiring SME's fall into this category. There is now a small movement under foot to harvest funds to finance and help the SME market.

I belong to the DC chapter of International Private Enterprise Group (IPEG), and we had our monthly event Aug 2 at the World Resource Institute (WRI) about meso financing. Ricardo Teran and Ben Powell spoke about how their non-profit Agora Partnerships helps entreprenuers in Latin America with Meso-financing. They are so successful that entrepreneurs are making money, hiring more workers and changing the mind-set of doing business in Latin America.

I myself, am involved with starting a Meso finance fund for Africa. In the next few months I will give you an update on what the fund will be doing and who I'm working with in establishing this fund.

6 comments:

  1. In South Africa government interventions are focused predominantly on the survivalist entrepreneur, and hence are great at providing micro finance. But there are entrepreneurs who operate at a higher level, but who do not have the assets to satisfy the bank in order to get traditional bank finance. There is a massive gap here. We would be very intersted in this new opportunity here in South Africa.
    Rob Smorfitt
    http://main-spring.blogspot.com

    ReplyDelete
  2. good luck with Africa Fund and keep the updates coming in. let me knwo if you need some ground reports from these sides

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  3. Nii:

    This news should be very welcome to Africa's mid size entrepreneurs. I am anxious for the official announcement.

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