Financial Inclusion for SGBs

Small-growing businesses (SGBs) represent a key component in lifting individuals out of poverty in emerging economies. According to the World Bank, 4 out of 5 new jobs in emerging markets are created by small to medium sized enterprises. However, over 50% of these businesses are unable to obtain access to credit, which they need to grow. This is mainly because they are not big enough to apply for bank loans. In a response to this problem, development agencies have created micro-credit lending, which mainly target start-up companies. Small-growing businesses have therefore become defined as the missing middle, businesses that are too large to qualify for micro-financing and yet too small to access commercial banks. With an estimated 600 million jobs needing to be created in the next 15 years to match a growing workforce, especially in Asia and Sub-Saharan Africa, ensuring that SGBs have access to the credit they need to prosper is essential for sustainable development in these regions.

In an effort to bridge the gap in finance, Vision Fund and World Vision Canada have recently expanded their micro-financing programs to include loans to small-growing businesses in Sri Lanka, Ghana and Mexico. Further expansion into several other countries in Africa, Asia and Latin America is planned in coming years. Their goal is for SGBs to use these funds to invest in increasing productivity and ultimately access commercial lending. However, the tools available to both maximize the impact of their loans, and be able to report this impact in detail to the program donors are limited.

Limestone Analytics, in collaboration with the Queen’s University Economics Department, has been hired to develop a practical and academically sound method for quantifying and monetizing the benefits of SGB loans programs in various geographical contexts. The tools developed for this analysis will also be used to help loan officers identify businesses that will produce the highest social impact using the funds.