• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Dec 2011   wharton msme fund recommendations
 

Dec 2011 wharton msme fund recommendations

on

  • 321 views

 

Statistics

Views

Total Views
321
Views on SlideShare
319
Embed Views
2

Actions

Likes
0
Downloads
1
Comments
0

1 Embed 2

http://www.linkedin.com 2

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Dec 2011   wharton msme fund recommendations Dec 2011 wharton msme fund recommendations Presentation Transcript

    • TOOLKIT FOR DEVELOPMENTOF A SUCCESSFUL MSMEFUND IN AFRICA Team: Melissa Brown Nonya Collier Andrew Deberry Peter Isaacson Margaret Lee Babatunde Ojo December 6, 2011 1
    • STRATEGIC ROADMAPCompetitive Partner Sector FundLandscape Toolkit Analysis Analysis Structure Vision Competitive Landscape Overview & SWOT of MSME Investing Launch a Successful Toolkit Framework to analyze a business MSME Partner Fund in Analysis Tools for Building A Partnership Business Model sub- Sector Analysis Decisions for Investment Sectors Saharan Africa Fund Criteria for Investment Structuring & Structure Performance Measurement 2
    • RECOMMENDATIONSCompetitive Geographic considerations are important, VisionLandscape especially for ease of doing business Toolkit Use a scorecard to vet potential investments Launch a Successful Partner Development finance institutions are ideal Analysis partners MSME Fund in Sector Top sectors include utilities, financial institutions, Analysis retail and tourism sub- Fund Saharan A debt fund structure offers the most advantages Structure Africa 3
    • OVERVIEW & SWOT Competitive Toolkit Partner Sector Fund Landscape Analysis Analysis Structure 4
    • MSME INVESTMENT SPACE MSME Investments Standardized Investment & Risk Metrics Management Skills Industry Organizational Organizations & Structure Association Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 5
    • MSME INVESTING IN AFRICA South Africa, Mauritius, Congo, Equatorial North Africa Guinea, Gabon, Chad Importance of Presence of Oil & Political and Modern Other Natural Resource Financial & Legal Resources Instability Systems Government-ledSenegal, Intensity of Physical Private Sector Kenya Corruption Infrastructure Development Nigeria Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 6
    • FACTS ABOUT SMES IN AFRICA Congo: Congo Smallholder Farms Benin: Benin South Africa 55% of Total Commerice Employment is 50% of SMEs Definition of an SME Morocco: Morocco: 93% of Kenya: Industrial 18% of GDP Firms Nigeria: Nigeria 95% of Mfg ActivitySource: African Development Bank and OECD Development Centre, African Economic Outlook (2004- 2005). Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 7
    • INVESTORS ARE…. Development Actors •Development Finance Institutions •Community Development Finance Institutions Private Investors •Private Wealth Managers •Foundations Institutional Investors •Pension Fund Managers •Boutique Investment Funds •Commercial Banks Corporations Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 8
    • SOCIAL IMPACT INVESTING IN AFRICA 0% 10% 20% 30% 40% 50% 60% 10% Multiple Countries 25%South & Southeastern Asia 7% 43% Africa 5% 2% Other Asia 5% Transition Economies 7% 18% Social Impact Projects Americas 9% FDI Flows 2% Eastern Asia 11% Developed Economies 57% 9 Source: UNCTAD database
    • STRENGTHS & WEAKNESSES Strengths Donor Guaranteed High Transaction Funds Costs Remittances from Performance Abroad Measurement Weaknesses Managing from Abroad Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 10
    • OPPORTUNITIES Under- utilization of Risk Management Tools Demand for Warehouse- Financing Receipt Outstrips Financing Supply Inadequate Financial Facilities The Missing Cluster Middle Associations of SMEs Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 11
    • THREATS Deal Sourcing Due Legal Diligence systems Tax Regimes Access to Bureaucracy Formal Finance Financial High Default Systems Risk Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 12
    • GEOGRAPHIC CONSIDERATIONS: CHALLENGEOF BUSINESS IN SUB-SAHARAN AFRICA VS.BRICS 0 20 Mauritius WB Doing Business 2010 (Rank out of 183 Countries) 40 South Africa Botswana 60 80 China 100 Ghana Kenya 120 Russia Nigeria 140 Brazil India 160 Zimbabwe Angola 180 Most <----------------------------------------------------------------------------> Least Competitive Source: World Bank Note: Ranking Scale of 1 being the most competitive Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 13
    • GEOGRAPHIC CONSIDERATIONS Problematic Factors for Doing Business in SS Africa 0% 5% 10% 15% 20% Access to Financing Corruption Inadequate Supply of Infrastructure Inefficient Government Bureaucracy Tax Regulations Tax Rates Inadequately Educated Workforce Poor Work Ethic in National Labor Force Inflation Policy Instability Foreign Currency Regulations Crime and Theft Restrictive Labor Regulations Government Instability / Coups Poor Public Health % of Respondents Source: World Economic Forum Executive Opinion Survey, 2010 Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 14
    • GEOGRAPHIC CONSIDERATIONS Global Corruption Index : sub-Saharan Africa vs.2008 BRICs 2009 Change Botswana 36 37 - Least Mauritius 41 42 - Corrupt South Africa 54 55 - Ghana 67 69 - Brazil 80 75 + China 72 79 - India 85 84 + SSA Average 117 116 + Nigeria 121 130 - Sierra Leone 158 146 + Kenya 147 146 + Most Corrupt Russia 147 146 + Angola 158 162 - Source: Transparency International Note: Ranking shows how one country compares to others included in the index, with 1 being the least corrupt, out of 180 countries Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 15
    • GEOGRAPHIC CONSIDERATIONS 7 Transparency International’s Corruption Index Botswana 5.5 Cape Verde Mauritius Rwanda Seychelles NamibiaScore 4 South Africa Ghana Lesotho Gambia Liberia Swaziland Niger Central African Republic Zambia Cameroon Côte dIvoire Senegal Sierra Leone Guinea-Bissau Malawi Mali Republic of the Congo Eritrea 2.5 Madagascar Mozambique Kenya Djibouti Zimbabwe Chad Ethiopia Comoros D.R. Congo Tanzania Uganda Angola Guinea Equatorial Guinea Gabon Togo Benin Nigeria Sudan São Tomé and Príncipe Mauritania Burkina Faso 1 Somalia 20 50 80 110 140 170 200 Rank The Corruption Perceptions Index ranks countries based on how corrupt their public sector is perceived to be. The score indicates the perceived level of public sector corruption on a scale of 0 - 10, where 0 means highly corrupt. The rank indicates its position relative to the other countries in the index. Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 16
    • FRAMEWORK FOR EVALUATION Microsoft Office Excel 97-2003 WorksheetCompetitive Partner Sector FundLandscape Analysis Analysis Structure Toolkit 17
    • QUALITATIVE FRAMEWORK FOR ASSESSING ABUSINESS •Years of Operation •Education •Number of •Experience Employees •Assets •IT •Contracts Company Management Product Finances •Demand for •Revenues Product •Profits •Joint Venture / •Liquidity Partnerships •Debt •Bank Accounts Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 18
    • USE CASE: REGMIFA Strategy Refinancing Partner Lending Institutions SSA Regional Technical MSME Assistance Investment Fund Increase Development Impact while Mitigating Risk Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 19
    • USE CASE: REGMIFA: SAMPLE MSME FUNDSCORECARDExample modelQualitative and quantitative evaluation metricsNumerical information about funds gathered, aggregated, and sharedSeveral fund segmentations providedUse case in Uganda provided Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 20
    • TOOLS FOR BUILDING APARTNERSHIPBUSINESS MODELCompetitive Toolkit Partner Sector FundLandscape Analysis Analysis Structure 21
    • PARTNERSHIP ANALYSIS Why Partner? Leverage local and industry expertise, and established networks Increased access to funding Access to technical assistance programs for MSMEs Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 22
    • PARTNERSHIP ANALYSIS Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 23
    • CENTER FOR GLOBAL DEVELOPMENT:INVESTMENT TYPOLOGY Ultra-High- Development Foundations Values- & Retail Large Public Net-Worth Finance Faith- Investors Corporations Institutional Individuals Institutions Based / Financial Investors / Networks/ Institutions Sovereign Funds Wealth Funds Primary Goal Application of Achieve High social Diversified Achieve social Support for Deployment of business development impact with portfolio of impact – view corporate social set percentage principles to results without the discipline investments investment as responsibility of capital in philanthropic sacrificing of an consistent akin to a (CSR) programs socially pursuits financial investment with social donation responsible sustainability values manner Risk / Return Moderate to Moderate, need Moderate to Low, may be Low, because Moderate to TBD Expectation high, willing to to preserve high, willing to vehicles available low, not willing take more risk institutional sometimes trade off to retail investors to take for social stablity, but can forgo return for cannot be too inordindate impact, but often « funding return for social risky by law risks outside expect a return of last resort » social impact impact, but core business seeking safe investments Examples Bob Johnson, OPIC, IFC, FMO, Rockefeller, TIAA-CREF, Buyers of / Cisco, CalPERS, John McCall Proparco, DEG Kellogg, Gates, Thrivent, Donors to Calvert Storbrand, Government MacBain, Skoll, Omidyar, MMA Praxis, Community Shell, Chevron, Pension Fund of George Soros Google GuideStone, Investment Starbucks Norway, Abu Amana, Notes, Dhabi Saddleback Microplace, Kiva Investment Authority Source: Acumen Fund Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 24
    • SECTORS FOR INVESTMENTCONSIDERATIONCompetitive Toolkit Partner Sector FundLandscape Analysis Analysis Structure 25
    • FOCUS ON SECTOR VS. GEOGRAPHY Sector- Geographic- specific specific Upside Expertise Diversificationprotection: Business risk mitigation and Partners and political Focus: comparables environment Competitive advantage forStrengths: SMEs are country-distinct SMEsObstacles: Market risk High operational burdenWorks best Specialized staff in Partnerships for sourcing and with: complementing countries tech assistance Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 26
    • PHILOSOPHY ON HIGH POTENTIAL SECTORS Goal Proxy Indicators Many jobs Labor intensive Low capital labor ratio High quality High wages and High wages jobs training Valuable High capital and High demand Output growth rate Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 27
    • SECTOR ANALYSIS OVERVIEW Highest Leverage Lower Potential abundant productivity Sectors resources Employ low- Less skilled skilled workers workers Low dependency on Less infrastructure investment Obstacles Civic Across Sectors infrastructure Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 28
    • SECTORS WITH HIGHEST LABOR DEMAND 35 30 25% of Total Labor Demand 20 15 Low-Skilled High- Skilled 10 Medium- Skilled 5 0 Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 29
    • SECTORS THAT PROMOTE JOB GROWTH Industry Growth rate Capital Labor Ratio Electricity Gas and Water Financial / Business Services, Insurance, Real EstateTop Wholesale and retail Trade Hospitality and Tourism Agriculture: tea, tobacco, sugar, coffee, cotton Manufacturing2nd Health Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 30
    • SECTOR ANALYSIS Financial andElectricity, Gas, Wholesale and Hospitality and Business Agriculture Health Water Retail Trade Tourism Services Growth Driven by Reduced supports Low variable Uses labor at skills, High consumer distribution growth of other costs all levels information need costs industries and innovation Large donor Variety of High wages for High consumer Local wage Abundance of support business skilled jobs need growth commodities protects models fin.downside More diverse High goods Large High skilled Inevitable crop consumer Unskilled labor and transport untapped labor and risk needs costs markets capital needs Slower Seasonal High fixed agricultural Currency risks demand capital needs labor changes Strengths productivity Industry-level High imports Regulatory economies of for equipment/ environment scale supplies Weakness Dependence on infrastructure investment Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 31
    • INVESTMENT STRUCTURING&PERFORMANCE MEASUREMENTCompetitive Toolkit Partner Sector FundLandscape Analysis Analysis Structure 32
    • DEBT FUND STRUCTURE Capacity Business Short •Effective for fundamental term agricultural financing •Very risky Loans <12 •Potential for corruptionCollateral Interest MonthsAsset Debenture Debt Fixed rate @ Inventory Future sales contract Fund inflation + 500bps Long •Better ability for social term impact •Aligned incentives with Loans debtor Character 3–7 •High monitoring cost Management Years quality Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 33
    • EQUITY FUND Advantages Disadvantages Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 34
    • MEZZANINE FUNDStructured Note with Long Term Debt and Percentage of Sales Advantages Disadvantages Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 35
    • PERFORMANCE MEASUREMENT Financial Return • Determined by spread Social Return • Jobs created, retained • Female employment generation • Value creation • Increase in tax revenue • Environmental impact • Reach of economic impact in community • Increased training for entrepreneurs Competitive Landscape Toolkit Partner Analysis Sector Analysis Fund Structure 36