ANDE on Entrepreneurship Development in Emerging Markets


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On Monday, May 30th 2011, ICCO and the Aspen Network of Development Entrepreneurs (ANDE) held its meeting on 'Entrepreneurship Development in Emerging Markets' and ANDE presented the findings of the its recent published 2010 Impact Report, which included important trends for the sector, as well as key learning’s with regards to the impact achieved in the projects of the ANDE members.

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ANDE on Entrepreneurship Development in Emerging Markets

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  2. 2. Only by letting millions of entrepreneurs try new ideas, to innovate, to create businesses that put those ideas to work in a competitive and open way, only by doing those things are we going to be able to tackle the world’s big problems. - Angel Cabrera, Chair, World Economic Forum Council on Entrepreneurship2
  3. 3. SGB SGB SGB SGB SGBSGB Small and growing businesses (SGBs) are commercially viable businesses, typically from 5 to 250 employees, that have strong potential for growth -- and thus for creating economic, social and environmental benefits3
  4. 4. Despite potential benefits, formal small business sectors in low income countries are much less developed Share of total Employment (%) Contribution 5/30/11 5/30/11 to GDP (%) 100 100 5/30/11 5/30/11 80 80 5/30/11 5/30/11 5/30/11 5/30/11 60 60 40 40 5/30/11 5/30/11 57 51 20 20 18 16 0 0 5/30/111 5/30/111 5/30/111 5/30/111 Other Sectors Informal Sector Formal SME Sector4 1. Contribution percents are median values for income group Source: Ayyagari, Beck and Demirguc-Kunt, “Small and Medium Enterprises across the Globe: A New Database”, World Bank 2003; Dalberg analysis
  5. 5. The Promise of SGBs Impacts •Job Growth •Wage Growth SGBs •Revenue Growth •Net Income Growth •New Products •Customers Served •Suppliers Supported Leading To: Economic Social Environmental Benefits Benefits Benefits Steady jobs Social goods (glasses) Reduce deforestation Increased incomes Social infrastructure (toilets) Improve air quality Wealth creation (LPG)5
  6. 6. Financial Flow Schematic of SGB Sector Private Traditional private Medium Equity equity provider businesses Commercial Capital only provider $2m investment Blended capital investment SGB Capital and capacity Small and growing businesses Sector Social impact building provider investment Grants for capacity Capacity building building only provider $25k Microfinance Microfinance Microfinance provider clients6
  7. 7. The State of the SGB Sector7 7
  8. 8. New SGB investment funds by year 30 31 Consider SGB Investments (“SGB Inclusive”) Primarily focused on SGB Investments 26 22 23 28 18 9 15 8 7 7 6 5/30/11 5/30/11 5/30/11 5/30/11 5/30/11 5/30/11 5/30/11 5/30/11 5/30/11 2010 (1H) Note: Only includes funds with known vintage years. Some funds may no longer be in existence. Source: Dalberg and ANDE analysis. Data is from public announcements.8
  9. 9. Number of SGB Focused Fund Began fundraising in reference year 5/30/11 28 5/30/11 22 15 5/30/11 5/30/11 5/30/11 Source: Dalberg Analysis9
  10. 10. Target funds considering SGB sector remain relatively small compared to overall EM PE and Microfinance Investment Size Target Total EM PE target fundraising 2001- $5/30/11 bn 1H2010 $2 mn $10.5 bn Total SGB Focused fundraising 2001- 1H2010* $20K Microfinanc e** $5/30/11 bn Gross Loan Portfolio 2009 Source: Emerging Market Private Equity Association, Mix-market, Dalberg Analysis * Figure is cumulative fundraising amount from 2001-1H2010 performed by funds that consider investments in SGB sector. Actual amounts raised will vary and will be lower than announced target fund size. ** Microfinance data from 2009 Total Global Gross Loan Portfolio10
  11. 11. After slowdown since 2008, there is new momentum in fundraising for SGB focused funds % SGB Focused 6% 11% Total: $22.6 bn Fundraising amounts among SGB focused funds outpaced growth of non-SGB fundraising $5/30/11.3 bn 5/30/11 Total: $5/30/11.2 bn In 2009, 6% of all EM PE fundraising amounts were SGB focused while 1H2010 11% of fundraising amounts $9.7 bn are SGB focused $5/30/11.3 5/30/11 bn $5/30/11.5 bn 5/30/11 5/30/11 Source: Emerging Markets Private Equity Association, Dalberg Analysis11
  12. 12. Geographic Focus of SGB Funds 2001-1H2010 10% 8% 13% 11% 15% 43% Latin America Middle East South and South East Asia Africa Central & Eastern Europe East Asia Note: N=217, does not include 3 funds with unknown investment regions. 9 funds investing in multiple regions are counted once for each region.12 Data includes funds launched and publicly know to be fundraising between 2008-2010 Source: Dalberg analysis (2001-1H2010)
  13. 13. Increase in Focus on SGB Financing “ “ …history shows that countries thrive when they invest in their people and infrastructure; when they promote multiple export industries, develop a skilled workforce, and create space for small and medium-sized businesses that create jobs President Obama, Ghana Speech July 2009 • IFC Road Map 2009-2011 identifies strengthening SMEs and agribusiness as the SMEs/SGBs New Focus first pillar in creating sustainable growth Area for Development among multilaterals • FAO identified SMEs as critical to food and health security through enhancing the food value chain • US: President Obama in Cairo June 2009 dedicated to investing in businesses Bilateral donors as and technology at the Entrepreneurship Summit; Food security policy places drivers of new SME emphasis on supporting SMEs Funds • G20 has launched the SME Finance Challenge to catalyze finance and financial services for SMEs • Emerging market SMEs as a channel to access the growing BoP market SMEs New Focus for Financial Opportunity • HSBC has reported that emerging market small businesses are the most confident going into 2010 Sources: IFC Road Map, FY09-11 Creating Opportunity: Doing Our Part for an Inclusive and Sustainable World, March 27, 2008; HSBC Small Business Confidence Monitor 2010; On the Frontiers of13 Finance: Scaling Up Investment in Sustainable Small and Medium Enterprises in Developing Countries, World Resources Institute, 2009; OPIC; IFC;
  14. 14. Who is ANDE?14
  15. 15. Aspen: a non-partisan organization whose mission is to bring together people who should be collaborating on societal challenges but would not do so ordinarily. Network: an interconnected group or system Development: improving the economic, social and environmental welfare Entrepreneurs: individuals whose passion leads them to organize available resources in new and more valuable ways15
  16. 16. The ANDE VisionVision Significantly increased prosperity for the people of the developing world as measured by increased incomes, higher quality of life and social and environmental advances Long-term Outcome A thriving local SGB Community that addresses the finance, human (15 yr) capital, market access, and enabling challenges faced by SGBsMid-term Successful SGBs that demonstrate an Successful local entrepreneurs toOutcome attractive market and stimulate the serve as angel investors and growth of local finance and demand an improved business(10 yr) service providers environmentNear-term A well functioning, growing and global SGB Sector that is creatingOutcome and building successful SGBs at increasing rates in developing(5yr) countries16
  17. 17. Impact of ANDE member support of SGBs to date 0 ,77 es4 508 oye l Emp $902 million dollars of capital deployed1 11,100 SGBs 678,325 Supported3 Suppliers5 $ 176.8 million dollars of SGBCD services provided2 57 Co ,633, nsu 335 me rs6 1. n=57 member funds cumulative to date 2. n=28 members reported over 2009-2010 3. n= 71 members cumulative to date 4. n=37 members as of the latest reporting period 5. n=18 members cumulative to date 6. n=19 members cumulative to date Source: ANDE member data17
  18. 18. ANDE Member Target IRR Ranges 7% 3% 6% 13% 47% 14% 0-5% 5-20% Above 20% Target return range Note: N=63, does not include 3 ANDE member funds that have not provided target IRR range Source: ANDE member data18
  19. 19. Capacity Development Services Provided to SGBs by ANDE Members Business Plan Development 65% Establishing Market Linkages 63% Entrepreneur/Basic Business Training 63% One-on-one mentorship 53% Direct Consulting Services 47% Impact/Evaluation Services 35% Business Plan Competitions 33% Acceleration 32% Incubation 28% 10 20 30 40 Number of Members19 Note: Respondents could select more than one answer. N=57 Technical assistance and Investor members who provide TA
  20. 20. Where in the World is ANDE? Percent of ANDE members supporting SGBs by region, percent by HQ location and locations of ANDE Regional Chapters 2010 32% in Europe, 10% HQ 59% HQ in North America 59% in Asia and SE Asia, 25% in Middle East/ 4% HQ North Africa, 1% HQ 5% in Oceania 57% in Latin America, 17% HQ 61% in Sub-Saharan Africa, 9.5% HQ Middle East and North Latin America Africa Oceania ANDE Regional Chapter Sub-Saharan Africa Central & Eastern Europe Asia and Southeast Asia Note: Funds investing in multiple regions are counted once for each region; Source: ANDE member data, n = 93 members20
  21. 21. ANDE Members 21 Research, Academic and Corporate Institutions 35 Investors 18 Foundations 4 Other* 45 Capacity Development Providers *Includes individual and strategic partner members21
  22. 22. What ANDE Will Do: 2011 Activities Knowledge Creation/ • Launch at least 2 additional Regional Hubs • Develop & begin implementation of research agenda Sharing • 2011 Annual Conference (4Q 2011) • Leadership Training (4Q 2010, 1Q 2011) Training • Investment Officer Training - Mexico and India • Orientation Training • Promote Adoption of ANDE Core Metrics and IRIS Metrics and Evaluation • Metrics Conference (2Q 2011) • Robust Metrics Working Group Capacity Development • Replenish CDF Funds (1H 2011) Fund • Third RFP: Select Recipients (3Q 2011) • Launch Policy Working Group Education/Advocacy • Strengthen Partnerships with Dev Agencies • Develop advocacy strategy for European DFIs22
  23. 23. Thank You