One of the ongoing issues that appears to be hindering development in countries like India is the lack of equity based funding for small and medium sized businesses. These entities, which usually are too large to be benefited from a microloan but too small to have the necessary financials to secure corporate debt or private equity backing, are often left to fend on their own.
No more, as Google.org along with two other foundations has announced a fund to help finance such ventures.
From pluGGd.in by ashish
Google.org, Soros Economic Development Fund (SEDF) and Omidyar Network have announced a $17 million Small to Medium Enterprise Investment Company for India to create job opportunities and spur greater economic participation for a larger segment of the population.
This joint Investment Company will provide capital to small and medium businesses in undeserved markets.
SMEs are considered by many as the critical component for poverty alleviation, job creation and the eventual development of a nation as their scalable nature gives them the chance to become a major Fortune 500 player down the road.
Google.org’s website highlights the foundation’s objectives regarding funding such businesses:
We want to show that SMEs can be profitable investments. We will do this by focusing on lowering transaction costs, deepening capital markets to increase liquidity, and catalyzing capital for investment.
Lower Transaction Costs: Investing in SMEs in the developing world can be risky and expensive because of the difficulty in assessing entrepreneurs and the lack of standardized information. We will work on developing tools and systems to make it easier for growth capital to flow to these firms.
Deepen Capital Markets: Since there are few opportunities to exit successful SME investments to recoup the upside returns, as well as weak accounting systems and lack of transparency, investors are less likely to make equity investments in the first place. We will invest in information tools and investment mechanisms to increase liquidity in the market for risk capital.
Catalyze Capital: For the reasons listed above, investors are hesitant to invest in SMEs in the developing world. Google.org will invest in funds, partner with financial institutions, and directly support these firms to help make the business case for this sector and help make the market for new financial products and instruments.
At this juncture unsolicited proposals will not be accepted, but they are looking for ideas in the following key areas —
- Tools for better identifying high-potential entrepreneurs
- Systems or methods for lowering financial transaction costs
- Technology tools to standardize financial information
Contact Google.org here.
- Job creation
- social entrepreneurship
- financial products
- Omidyar Network
- Private equity
- Economic development
- job opportunities
- Social Venture Capital
- equity investment
- Developing World
- poverty alleviation
- transaction costs
- Soros Economic Development Fund
- Soros Economic Development Fund (SEDF)