Investment in small businesses can build resilient emerging economies

  • Readily available SME finance is a requisite of resilient economies. Opening new pathways for small business finance requires a smart mix of international and local institutional capital.
  • Social enterprises face many of the same challenges as traditional small businesses in emerging economies.
  • Innovative and scalable financing vehicles are originating from locally-based capital providers across emerging markets.

Across the globe during the COVID-19 pandemic, governments have sought to support small businesses through credit guarantee and salary support schemes. This focus on SMEs is logical as small businesses create up to 80% of jobs and generate up to 70% of GDP in Africa alone.

The role of social enterprises and SMEs in emerging economies

Social enterprises, while being a relatively small subset of such SMEs, are a segment of increasing importance due to their role in actively developing solutions for the most pressing social challenges. The survival and growth of SMEs and social enterprises should be an ongoing priority.

However, in emerging market economies (EMC) these short-term schemes were not enough to address the existing, intractable structural barriers to raising finance that most of these businesses face. The yawning gap in financing runs into the trillions of dollars.

The pandemic has further demonstrated that local and international, public and private sector organizations can work…

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