Description
Small and medium sized enterprises (SMEs) form the backbone of a strong market economy. Yet in emerging markets, there is often a dearth of financing options forSMEs, creatinga ‘missing middle’ in the economic structure.
Investing in the Backbone
of Emerging Markets
Small and medium sized enterprises (SMEs) form the back-
bone of a strong market economy. Yet in emerging markets,
there is often a dearth of financing options forSMEs, creating
a ‘missing middle’ in the economic structure. These entrepre-
neurs, so vital for sustainable development, are too large to
qualify for microfinance, but too small
to obtain loans from international
institutions. Investors are now
looking at this issue and
seeking a coherent invest-
ment framework that would
ensure the sustainability of
these enterprises, and the
maturation of investment
in emerging market SMEs.
A Working Paper from Boston College Center for Corporate Citizenship’s
Institute for Responsible Investment
Sustainable SME Investment
While the world of emerging market Small and Medium
Enterprise (SME) finance has long presented chal-
lenges for both the international development com-
munity and interested private investors, it is also
beginning to offer investment opportunities.
A recent meeting of representatives from
SRI investment funds identified the poten-
tial for SMEs to become a viable sector in
institutional investment portfolios, particular-
ly for those investors who seek value in blend-
ing social, environmental, and economic value.
Many of the barriers that have limited financing
for SMEs in emerging markets were acknowl-
edged as legitimate: high transaction and due dili-
gence costs, political and currency risks, the need
for technical assistance, difficulties identifying suit-
able targets for financing, legal and regulatory concerns,
the illiquidity of the SME equity market. Nonetheless, the
investors believe that with careful scrutiny and research, invest-
ment in SMEs present an opportunity to facilitate development
in emerging markets while at the same time realizing sustain-
able financial returns.
This report grew out of a convening of capital aggregators who
invest in sustainable SMEs in emerging markets. It proposes
that the emerging market SME sector presents an opportunity
to create vehicles for sustainable private investment for
investors seeking real returns while at the same time furthering
vital international development goals by supporting an under-
served sector of the economy. Sustainable SME investment
presents an opportunity to develop the ‘missing middle’ of
emerging market economies.
1
Sustainable SMEs are precisely
the sort of entrepreneurial concerns that triple bottom line
investors have learned to support through community lending
and social venture funds in the United States. However, prom-
ising new vehicles for investment in SME businesses in devel-
oping countries have yet to receive the attention necessary for
investors to make SME investment in developing countries a
significant part of their overall portfolios.
The goal of this paper is twofold. First, it probes the reasons for,
and the difficulties associated with, the development of sustain-
able SMEs as a field of investment. Second it proposes four key
areas where coordination and collaborative activity would facili-
tate the development of new financial products and increased
support for investment in sustainable SMEs in emerging mar-
kets.
2
SUSTAI NABLE SME I NVESTMENT
By David Wood, Ph.D.,
Cameron Pratt, and
Belinda Hoff
This Working Paper reflects a May 2006
meeting hosted by the the Institute for
Responsible Investment at Boston College
that brought together a group of capital
aggregators to discuss current impedi-
ments to investing in emerging market
SMEs. This working paper summarizes
the issues that were identified at that
convening.
As part of a project sponsored by the UN
Foundation, the Institute for Responsible
Investment at Boston College is attempt-
ing to identify ways to increase the
financing options available to emerging
market SMEs in order to foster growth
in this vital sector.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 3
WHY SMEs?
new or growing markets for energy efficiency, clean technology,
or fair labor production. In other cases, sustainable SMEs can
offer vehicles that maximize environmental and/or social
impact in underserved communities.
SMEs and Market Failure
Recently, emerging market SMEs have received increased atten-
tion from the development and investor communities. This
interest is due to the SME sector’s obvious potential for growth,
its ability to provide new solutions to important social and envi-
ronmental problems, and the positive development outcomes
associated with a robust SME sector. Investors are particularly
interested in new paths through which to allocate capital, and
new ways to spread risk across SME investment portfolios—in
other words, ways to stimulate an underdeveloped market.
The goal, of course, is to provide funding that leads to the
growth of self-sustaining enterprises and a vibrant local busi-
ness market in the developing world. Why, then, should we not
depend on the finance market to allocate capital to the most
promising small businesses, and let them grow? As skeptics are
quick to point out, subsidies such as below-market-rate loans
and loan guarantees can distort local credit markets, making it
hard to develop self-sustaining businesses. In the same vein,
subsidies for risk mitigation can encourage moral hazard, and
can also lead to situations where macroeconomic and political
changes can swamp even the best SMEs, but leave their foreign
investors untouched.
In response to this skepticism, capital aggregators who work in
the SME market identify various points of market failure.
3
The
problems for SME financing are intimately linked to the inter-
sections of local and global finance markets and their relation-
ship to development institutions. Despite their intimate knowl-
edge of local market conditions, local banks and other sources
of credit typically lack the experience of supporting SMEs—
especially those incorporating new technologies or innovative
business plans—and are reluctant to take on the risks associat-
ed with such ventures. Consequently, their risk mitigation
strategies—in part because of the weakness in domestic savings
—do not allow for the sort of credit terms that allow promising
young companies the time and capital to grow.
Private equity financing presents its own problems. Regulatory
issues can play an important role here: poor information disclo-
sure, weak corporate governance, and the lack of strong private
property rights can all raise the cost of capital. Low levels of sav-
ings, combined with the preference of local angel investors to
move their capital abroad, also leave a gap in the private equity
markets.
Why SMEs?
• Growth potential through reaching underserved markets
• Contribute to international development goals
• Strengthen climate for business and civil society in
emerging markets
• Maximize positive influence regarding environmental
impacts
Despite the barriers associated with investing in SMEs, financ-
ing the SME sector in emerging markets remains an important
factor in meeting vital development goals—such as the UN
Millennium Development Goals. Though definitions of SMEs
vary, rough estimates suggest that businesses with 10-200
employees account for 90 percent of firms and 50-60 percent of
employment worldwide.
2
The SME sector offers significant
opportunities for economic growth and its related benefits, as
well as a fundamental link in the chain from microenterprise to
large companies. SMEs can reach underserved markets, espe-
cially in rural communities and impoverished urban areas that
lack the infrastructure necessary to support larger scale public
or business activity. In addition, a more developed SME sector
can provide support for the overall business and civil society cli-
mate, increasing the overall health of emerging markets.
Investors with an interest in the development impacts of their
investments should view emerging market SMEs as a crucial
part of the overall development portfolio. The sector offers real
potential to contribute to poverty alleviation, achieve productiv-
ity gains through the infusion of new technologies and business
practices, and develop local supply chains that feed into the
world’s globalized markets. Similarly, investors concerned with
the triple bottom line impacts of their investments can find
important opportunities in emerging market SMEs committed
to sustainable business practices.
The underdeveloped market for developing world SMEs offers
a clear potential for social and environmental as well as eco-
nomic impacts. Investment in SMEs has the potential for posi-
tive externalities that offer substantial benefits beyond their
immediate financial returns to investors. In some cases, sus-
tainable SMEs could enhance financial return through access to
Though definitions of SMEs vary, rough
estimates suggest that businesses with
10-200 employees account for 90% of firms
and 50-60% of employment worldwide.
Emerging Markets 4
SUSTAI NABLE SME I NVESTI NG
Offshore investors face a range of difficulties that further hinder
SME capital markets. Political and macroeconomic risks, which
are difficult to both measure and hedge against, raise
risk/return ratios to often unacceptable levels. Most emerging
market SMEs require money in the $10,000 to $1 million
range, with $3 million to $5 million as the upper limit—these
relatively small amounts coupled with high transaction costs
make SMEs unattractive to lenders.
4
In addition, because of
underdeveloped local business skills and climates, technical
assistance for emerging market SMEs can increase transaction
costs even further. Illiquid equity markets with few exit oppor-
tunities make SME financing that much more intractable, and
debt financing is also stifled by high due diligence costs in
uncertain risk environments.
It is important to remember that many of these problems, to
some extent, are also associated with SME finance in the devel-
oped world. The United States uses government support from
the Small Business Administration, and in particular the Small
Business Investment Companies [SBIC] program, to support
activity in the small business sector, driven in no small part by
the fact that small businesses created 60 to 80 percent of net
new jobs annually over the last decade.
5
While regulatory struc-
tures, lending and private equity fields are substantially more
robust in the richest countries, financing small business
remains an important and risky venture throughout the world.
In emerging markets, the SME sector remains a niche market,
rather than a developed finance arena. While the microfinance
movement has begun the impressive development of the small-
est finance markets, and international development funds and
institutional investors have made advances in emerging market
public equities and sovereign debt, SMEs remain to a large
extent the “missing middle.” For structural reasons, local invest-
ment communities find it hard to raise the capital to fund the
SME sector; foreign investors find the costs and risks too great.
How to develop this difficult market? Fully subsidizing emerg-
ing market SMEs could defeat the purpose of developing a sta-
ble, growing group of businesses; depending on private
investors to develop the finance market in so risky a sector with-
out intervention is a virtual guarantee of paralysis. Collaborative
action that brings the tools of market discipline, backed by
smart public and philanthropic subsidy, is perhaps the most
likely path forward.
Sustainable SME Investing – A Target
Market for Developing the Field
In the case of microfinance, growth depended on pioneers who
developed effective models, distribution techniques, and
fundraising sources to create the potential for a sustainable
finance market that serves the lowest end of the spectrum. This
market grew in large part because those pioneers believed that
the tools of finance – including the introduction of sound busi-
ness and accounting practices, the possibility of sustainable
credit, and a more robust equity market – offered an alternative
to top-down development models that often failed to meet spe-
cific needs. Philanthropic support provided the fundamental
underpinnings for market growth.
The microfinance market thus grew as a result of investors who
utilized the tools of private finance, but sought impacts beyond
immediate financial returns. While bringing that market to
scale remains a difficult task, pioneering work has at least made
the scalability of microfinance a viable topic of discussion.
This example suggests that market development should lever-
age the work of public and private investors who seek to apply
private finance for public purpose, with the long-term goal of
Collaborative action that brings the tools of
market discipline, backed by smart public
and philanthropic subsidy, is perhaps the
most likely path forward.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 5
FI ELD DEVELOPMENT
cultivating sustainable, commercially viable
enterprises and finance markets. The key
here is the notion of “blended value,” in
which financing mechanisms yield
social and/or environmental returns as
well as a range of financial returns on
investment. Blended value investors
who support sustainable SME invest-
ments in emerging markets, in this view,
may also be supporting research and devel-
opment into the best practices for financing the
field more generally.
In many emerging markets, the case for, say,
poverty alleviation, is an easy one to make—in
some cases, the entire market of SMEs would fit the
guidelines for what developed markets call “communi-
ty investment.” The impact of SMEs that create jobs, support
supply chains, and pay taxes can yield benefits well beyond the
return on investment. Where market failures have occurred,
external public/private financing mechanisms can offer impor-
tant avenues to support small business growth. Indeed, as
“Bottom of the Pyramid” investment strategies receive more
attention, SMEs offer an attractive opportunity to develop a sec-
tor that serves the vast population of underserved people in the
world market. Crucially, SMEs can offer vital support for formal
economies, creating enterprises that pay taxes and so support
the public infrastructure that allows communities and
economies to thrive.
Similarly, sustainable SMEs offer valuable opportunities for
realizing environmental goals. SMEs can be key resources for
biodiversity, for instance, by combining sustainable biodiversity
conservation and management with employment opportunities
for those who might otherwise be drawn to less environmental-
ly sustainable practices. Sustainable SMEs can be especially
good vehicles for providing clean energy services and technolo-
gies to rural communities, and in the process reducing the
labor-intensive and environmentally damaging use of charcoal.
Support for local cooperatives with good environmental and
labor practices can help embed corporate social responsibility
(CSR) in the business community at large.
In some cases, these social and environmental benefits offer
significant potential for enhancing financial returns – whether
through improved risk management, as proxies for good gover-
nance, or through entry into new markets such as carbon
finance. In other cases, the positive externalities associated with
these investments may justify subsidies for technical assistance,
political and currency risk mitigation, and below-market return
on investment.
Developing these markets, however, requires
careful attention to the potential costs of
s ubs i di zi ng s mal l bus i nes s es .
Enterprises that cannot become eco-
nomically sustainable do not offer
good long term bets for sustainable
development. Subsidized protec-
tion of investors from risk and
loss brings the threat of moral
hazard. One key question that
remains to be answered is how to
best organize the public/private
partnerships that can grow the
field without foreclosing the devel-
opment of sustainable commercial
finance markets in the future.
Ideas for Collaborative Action for
Developing the Field
Where are there opportunities to develop this missing middle?
The argument for developing the field of SME investment is
two-fold:
• SMEs are a crucial component of the overall economies of
emerging markets, with high impacts across the economy.
• Public support and private finance, both local and global,
have failed to provide the level of investment and support to
match the opportunities and need.
What is needed is a model of financial innovation and smart
subsidy brought to scale. A successful model would also help
manage risk for investors but provides the opportunities and
business practices necessary for the sector’s development. We
believe the field is most likely to develop through the initiative
of triple bottom line investors in collaboration with capital
aggregators who focus on sustainable SMEs. The experience
developed over the past decades in sustainable SME finance
may offer the seeds for a sustainable SME sector writ large.
We see four key areas in which coordination and collaborative
activity can help better support the field of SME investment:
• New financing mechanisms and technical assistance part-
nerships that capitalize on public/private financing.
• A more coherent definition of the sustainable SME field.
• Development of more cohesive investment assessment
methodologies to reduce investors’ due diligence costs in
evaluating the social, environmental, and economic impacts
of their investments.
• The integration of sustainable SME financing with corpo-
rate social responsibility and supply chain management.
Emerging Markets 6
FI ELD DEVELOPMENT
1. New financing mechanisms and technical assistance
partnerships that capitalize on the potential for
public/private financing.
Given the underdeveloped state of the field, and the extensive
risks and transaction costs endemic to emerging market SME
investment, it is unreasonable to suppose that a vibrant market
for private finance can exist without some form of smart sub-
sidy. As noted before, this is the case in developed markets,
including the United States. The question is: how best to struc-
ture the range of investments in sustainable SMEs so as to
enable the maturation of the market?
One way to answer this question is to expand the range of
investment opportunities— from full subsidy to reasonable rate
of return—that make up the field of sustainable SME invest-
ment. Some investments, in high risk areas with high impact
potential, may require public or philanthropic funding. This
method of funding can nonetheless be considered an invest-
ment in the field if it supports the development of small enter-
prises and offers lessons for identifying viable opportunities for
smart subsidy. At the other end of the spectrum would be larg-
er investments, for instance in medium-sized enterprises in
more developed markets. These investments offer commercial
rates of return on investment, however, for reasons of market
failure in local and global lending institutions they require
investment from a specialized intermediary.
These extremes help define what is possible in sustainable SME
financing. Innovative financing packages that identify smart
subsidies from the public sector to support patient capital from
private finance may help bridge the funding gap now seen in
emerging market SMEs. A clear definition of the range of vehi-
cles available may help match investors to their appropriate
place along the spectrum. Here again, there is a key role to be
played by triple bottom line investors, for whom the benefits of
blended value creation form a core part of their asset allocation
strategies. There is also substantial room for the development of
local/international partnerships to mitigate currency and trans-
action cost risks, with capital aggregators partnering, for
instance, with local pension funds or banks who cannot (or are
unlikely to) invest in SMEs without offshore partners.
For technical assistance, there are opportunities for horizontal
integration across the sustainable SME field. Opportunities
exist especially in the standardization of business training tools,
where technical assistance in support of SME financing has the
potential to be standardized through collaborative action among
capital aggregators, investors, and other interested parties,
reducing the transaction costs for individual deals. Similarly,
pipeline development for various forms of sustainable develop-
ment may best be performed by specialized organizations who
receive public or philanthropic subsidy.
2. A more coherent definition of the sustainable SME field,
focusing on the shared potential of disparate sustainable
SME projects.
At present, the world of sustainable SME financing consists of
disparate capital aggregators and other special purpose interme-
diaries that link capital to SMEs – these aggregators often have
specific goals, such as poverty alleviation, biodiversity and land
conservation, clean energy production, support for high-growth
potential businesses, and so on. Development agencies, mis-
sion-based institutional investors, and philanthropists jointly
fund many of these “niche” projects, but to date there is no gen-
eral place for sustainable SMEs in their investment portfolios.
A more coherent, consensus-based definition of the field (per-
haps with the development of a corresponding trade association
or related institution) would facilitate a more integrated
approach to the field. A collaborative focus might consolidate
the shared characteristics of sustainable SMEs: their share of
the overall business market, their geographical and social reach,
their contributions to the formal economy, and their role in
establishing emerging markets’ overall business climate. In this
way, investors might be encouraged to view the field of SME
investment itself as an important asset allocation possibility,
rather than to assess each investment as a boutique project. Key
to defining such a field will be consideration of the links that
SMEs play across the entire chain of business enterprises in the
global market.
The impact of SMEs that create jobs, support
supply chains, and pay taxes can yield bene-
fits well beyond the return on investment...
Crucially, SMEs can offer vital support
for formal economies, creating enterprises
that pay taxes and so support the public
infrastructure that allows communities
and economies to thrive.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 7
FI ELD DEVELOPMENT
ble reporting system for impacts, would offer a significant
impetus for investors to approach sustainable SMEs as a field of
investment. A consensus reporting framework would also
reduce the reporting burden on capital aggregators, who now
must devise their own system for external reporting.
The development of the field definition and assessment
methodologies will require collaborative activity from both
investors and the capital aggregators who will place their money
in sustainable SMEs. Both are crucial steps in the development
of the field.
4. The integration of sustainable SME financing with
strategically-designed corporate social responsibility
and supply chain management practices.
The corporate community is a relatively untapped resource for
the development of emerging-market SME financing, and
offers significant opportunities for collaborative action. As cor-
porations become more attuned to the strategic alignment of
corporate social responsibility and supply chain management
practices, opportunities for corporate involvement in smart sub-
sidy become increasingly available.
There are already good examples, for instance of coffee distrib-
utors supporting coffee-growing cooperatives in an effort to
assure the continued production of high-quality environmental-
ly sustainable coffee. This model might transfer to any number
of supply-chain management practices, and may also, for
instance through climate change and political risk initiatives,
become part of larger corporate risk mitigation strategies.
Corporations also have the potential to develop reputa-
tion-enhancing, strategically aligned CSR initiatives
in the SME sector. The finance industry has obvious
reasons to support CSR activity that develops and
helps stabilize potential markets in the developing
world. Technology companies have the potential to
aid technical assistance programs, and in the
process help grow a potential market for their
products in the future. Similarly, accounting firms
might develop triple bottom line disclosure frame-
works for sustainable SMEs, in the process devel-
oping tools that can be adapted to new auditing sys-
tems. Again, these models are potentially transfer-
able to a number of CSR programs.
The key here is to involve corporations in the field devel-
opment process from the beginning, as partners in a multi-
sector effort to grow the field of SME investment.
3. Development of more cohesive assessment methodologies
to reduce investors’ costs in evaluating the social, environ-
mental, and economic impacts of their investments.
Triple bottom line investors need the tools to assess investment
impacts in order to justify their asset allocation strategies. A
crucial part of field definition is the coordination of a vocabulary
to describe and assess the social, environmental, and economic
profile of sustainable SME investments, and tools to make dis-
parate finance vehicles comparable in the eyes of their financial
backers.
What is needed is not a simple scoring system that places bio-
diversity conservation projects against “Bottom of the Pyramid”
investments. Instead, investors would benefit from a consen-
sus-based evaluation system that places an investment within a
range of criteria for impact assessment. SME finance cannot be
reduced to a single metric that captures the potential environ-
mental, social, and economic effects associated with successful
investments. Nevertheless, an assessment methodology that
addressed specific issues, including the risk/return profile of
the investment, the intended environmental or social impacts
of the investment, the governance systems in place to assure
the project’s best performance, and a comprehensive, compara-
Emerging Markets 8
NEXT STEPS
Next Steps
It is important, in conclusion, to acknowledge that many efforts
are already underway in this field. Development agencies have
given SMEs—and sustainable SMEs in particular—a more
prominent role in their overall agendas. Many national govern-
ments are also focused on this problem. A few foundations are
also extending microfinance strategies to SMEs working in
developing countries. Organizations such as the UN
Foundation, the sponsor of this convening report, are working
on new strategies to help pool capital, mitigate risk, and facili-
tate public-private partnerships that help define and grow the
SME investment sector.
In the field of SME finance, there is an important niche market
of capital aggregators, many of whom were represented at this
meeting, who offer innovative financing and technical assistance
to sustainable SMEs, in the process bringing a great deal of
research and development to the field more generally. These cap-
ital aggregators serve as the interface between triple bottom line
investors, emerging market financial and credit markets, and
sustainable SMEs in need of financing. Their combined experi-
ence can be the starting point for any broader effort to define sus-
tainable SME finance as a coherent field of investment.
With interest growing, there is increased opportunity for contin-
ued collaborative action and development of the field.
Sustainable SME finance is still at an early stage, yet obvious
opportunities exist for information sharing and collective work
that will grow the field as a whole. Attendees suggested that an
especially valuable next step would be the development of a
cross-sector alliance of specialized capital aggregators, institu-
tional investors, emerging market private equity investors,
development agencies, public corporations, and related parties
to focus on the key issues such as innovative financial products,
impact reporting, technical assistance, and corporate involve-
ment in sustainable SME finance.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 9
ENDNOTES
Endnotes
1
See Chapter 2 (Mainstream Eye for the MFI) in De Sousa-Shields, M. and C.
Frankiewicz (2004) Financing Microfinance Institutions: The Context for Transitions
to Private Capital, U.S. Agency for International Development: Washington, DC.
On the development of the microfinance sector as an asset class.
2
Raynard, P. and M. Forstater (2002) Corporate Social Responsibility: Implications for
Small and Medium Enterprises in Developing Countries, U.N. Industrial Development
Organization: Vienna.
3
Small Enterprise Assistance Funds (SEAF) (2004). The Development Impact of Small
and Medium Enterprises: Lessons Learned from SEAF Investments.
4
Capital needs vary dramatically between SMEs due to a confluence of factors.
Generally, SMEs require financing that is in excess of those loans provided by
micro-finance institutions. For example, SME capital needs may require multi-mil-
lion dollar investments by venture capital funds such as Aureos Capital.
5
United States Small Business Association (SBA) Office of Advocacy, Frequently
Asked Questions,http://www.sba.gov/advo/stats/sbfaq.pdf (accessed July 17,
2006).
Emerging Markets 10
SELECTED READI NGS
Selected Readings
Bayon, R., J. Cheng and M. De Sousa-Shields. (2003). Towards Sustainable and
Responsible Investment in Emerging Markets: A Review and Inventory of Social
Investments Industry’s Activities and Potential in Emerging Markets, International
Finance Corporation (IFC): Washington, DC.
Dalberg Global Development Advisors. (2006). Report on the Taskforce on Capacity
for Program Delivery: A Clinton Global Initiative Commitment “From Walk to Talk”:
Ideas to optimize development impact, www.dalberg.com/taskforce.pdf.
De Sousa-Shields, M. and C. Frankiewicz. (2004). Financing Microfinance
Institutions: The Context for Transitions to Private Capital, U.S. Agency for
International Development (USAID): Washington, DC.
Enterprising Solutions. (2003). The Potential for Social Investment in Microfinance
and Small Enterprise in Developing Countries, Enterprising Solutions Brief No. 3.
Fox, T. (2005). Small and Medium-Sized Enterprises (SMEs) and Corporate Social
Responsibility: A Discussion Paper, International Institute for Environment and
Development (IIED): London.
Hallberg, K. (2000). A Market-Oriented Strategy for Small and Medium-Scale
Enterprises, IFC Discussion Paper No. 40, International Finance Corporation:
Washington, DC.
Luetkenhorst, W. (2004). Corporate Social Responsibility and the Development Agenda:
Should SMEs Care?, United Nations Industrial Development Organization
(UNIDO): Vienna.
Nelson, J. (2006). Building Linkages for Competitive and Responsible Entrepreneurship:
Innovative Partnerships to Foster Small Enterprise, Promote Economic Growth, and
Reduce Poverty in Developing Countries, Corporate Social Responsibility Initiative and
United Nations Industrial Development Organization (UNIDO): Cambridge and
Vienna.
Raynard, P. and M. Forstater. (2002). Corporate Social Responsibility: Implications for
Small and Medium Enterprises in Developing Countries, United Nations Industrial
Development Organization (UNIDO): Vienna.
Sanders, T. and Wegener, C. (2006). Meso-finance: filling the financial services gap for
small businesses in developing countries, www.bidnetwork.org.
Shell Foundation. (2005). Enterprise solutions to poverty: Opportunities and Challenges
for the International Development Community and Big Business, www.shellfounda-
tion.org.
Small Enterprise Assistance Funds (SEAF). (2004). The Development Impact of
Small and Medium Enterprises: Lessons Learned from SEAF Investments, SEAF:
Washington, DC.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 11
CONTACT I NFORMATI ON
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A Working Paper from Boston College Center for Corporate Citizenship
Investing in the Backbone
of Emerging Markets
doc_654938913.pdf
Small and medium sized enterprises (SMEs) form the backbone of a strong market economy. Yet in emerging markets, there is often a dearth of financing options forSMEs, creatinga ‘missing middle’ in the economic structure.
Investing in the Backbone
of Emerging Markets
Small and medium sized enterprises (SMEs) form the back-
bone of a strong market economy. Yet in emerging markets,
there is often a dearth of financing options forSMEs, creating
a ‘missing middle’ in the economic structure. These entrepre-
neurs, so vital for sustainable development, are too large to
qualify for microfinance, but too small
to obtain loans from international
institutions. Investors are now
looking at this issue and
seeking a coherent invest-
ment framework that would
ensure the sustainability of
these enterprises, and the
maturation of investment
in emerging market SMEs.
A Working Paper from Boston College Center for Corporate Citizenship’s
Institute for Responsible Investment
Sustainable SME Investment
While the world of emerging market Small and Medium
Enterprise (SME) finance has long presented chal-
lenges for both the international development com-
munity and interested private investors, it is also
beginning to offer investment opportunities.
A recent meeting of representatives from
SRI investment funds identified the poten-
tial for SMEs to become a viable sector in
institutional investment portfolios, particular-
ly for those investors who seek value in blend-
ing social, environmental, and economic value.
Many of the barriers that have limited financing
for SMEs in emerging markets were acknowl-
edged as legitimate: high transaction and due dili-
gence costs, political and currency risks, the need
for technical assistance, difficulties identifying suit-
able targets for financing, legal and regulatory concerns,
the illiquidity of the SME equity market. Nonetheless, the
investors believe that with careful scrutiny and research, invest-
ment in SMEs present an opportunity to facilitate development
in emerging markets while at the same time realizing sustain-
able financial returns.
This report grew out of a convening of capital aggregators who
invest in sustainable SMEs in emerging markets. It proposes
that the emerging market SME sector presents an opportunity
to create vehicles for sustainable private investment for
investors seeking real returns while at the same time furthering
vital international development goals by supporting an under-
served sector of the economy. Sustainable SME investment
presents an opportunity to develop the ‘missing middle’ of
emerging market economies.
1
Sustainable SMEs are precisely
the sort of entrepreneurial concerns that triple bottom line
investors have learned to support through community lending
and social venture funds in the United States. However, prom-
ising new vehicles for investment in SME businesses in devel-
oping countries have yet to receive the attention necessary for
investors to make SME investment in developing countries a
significant part of their overall portfolios.
The goal of this paper is twofold. First, it probes the reasons for,
and the difficulties associated with, the development of sustain-
able SMEs as a field of investment. Second it proposes four key
areas where coordination and collaborative activity would facili-
tate the development of new financial products and increased
support for investment in sustainable SMEs in emerging mar-
kets.
2
SUSTAI NABLE SME I NVESTMENT
By David Wood, Ph.D.,
Cameron Pratt, and
Belinda Hoff
This Working Paper reflects a May 2006
meeting hosted by the the Institute for
Responsible Investment at Boston College
that brought together a group of capital
aggregators to discuss current impedi-
ments to investing in emerging market
SMEs. This working paper summarizes
the issues that were identified at that
convening.
As part of a project sponsored by the UN
Foundation, the Institute for Responsible
Investment at Boston College is attempt-
ing to identify ways to increase the
financing options available to emerging
market SMEs in order to foster growth
in this vital sector.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 3
WHY SMEs?
new or growing markets for energy efficiency, clean technology,
or fair labor production. In other cases, sustainable SMEs can
offer vehicles that maximize environmental and/or social
impact in underserved communities.
SMEs and Market Failure
Recently, emerging market SMEs have received increased atten-
tion from the development and investor communities. This
interest is due to the SME sector’s obvious potential for growth,
its ability to provide new solutions to important social and envi-
ronmental problems, and the positive development outcomes
associated with a robust SME sector. Investors are particularly
interested in new paths through which to allocate capital, and
new ways to spread risk across SME investment portfolios—in
other words, ways to stimulate an underdeveloped market.
The goal, of course, is to provide funding that leads to the
growth of self-sustaining enterprises and a vibrant local busi-
ness market in the developing world. Why, then, should we not
depend on the finance market to allocate capital to the most
promising small businesses, and let them grow? As skeptics are
quick to point out, subsidies such as below-market-rate loans
and loan guarantees can distort local credit markets, making it
hard to develop self-sustaining businesses. In the same vein,
subsidies for risk mitigation can encourage moral hazard, and
can also lead to situations where macroeconomic and political
changes can swamp even the best SMEs, but leave their foreign
investors untouched.
In response to this skepticism, capital aggregators who work in
the SME market identify various points of market failure.
3
The
problems for SME financing are intimately linked to the inter-
sections of local and global finance markets and their relation-
ship to development institutions. Despite their intimate knowl-
edge of local market conditions, local banks and other sources
of credit typically lack the experience of supporting SMEs—
especially those incorporating new technologies or innovative
business plans—and are reluctant to take on the risks associat-
ed with such ventures. Consequently, their risk mitigation
strategies—in part because of the weakness in domestic savings
—do not allow for the sort of credit terms that allow promising
young companies the time and capital to grow.
Private equity financing presents its own problems. Regulatory
issues can play an important role here: poor information disclo-
sure, weak corporate governance, and the lack of strong private
property rights can all raise the cost of capital. Low levels of sav-
ings, combined with the preference of local angel investors to
move their capital abroad, also leave a gap in the private equity
markets.
Why SMEs?
• Growth potential through reaching underserved markets
• Contribute to international development goals
• Strengthen climate for business and civil society in
emerging markets
• Maximize positive influence regarding environmental
impacts
Despite the barriers associated with investing in SMEs, financ-
ing the SME sector in emerging markets remains an important
factor in meeting vital development goals—such as the UN
Millennium Development Goals. Though definitions of SMEs
vary, rough estimates suggest that businesses with 10-200
employees account for 90 percent of firms and 50-60 percent of
employment worldwide.
2
The SME sector offers significant
opportunities for economic growth and its related benefits, as
well as a fundamental link in the chain from microenterprise to
large companies. SMEs can reach underserved markets, espe-
cially in rural communities and impoverished urban areas that
lack the infrastructure necessary to support larger scale public
or business activity. In addition, a more developed SME sector
can provide support for the overall business and civil society cli-
mate, increasing the overall health of emerging markets.
Investors with an interest in the development impacts of their
investments should view emerging market SMEs as a crucial
part of the overall development portfolio. The sector offers real
potential to contribute to poverty alleviation, achieve productiv-
ity gains through the infusion of new technologies and business
practices, and develop local supply chains that feed into the
world’s globalized markets. Similarly, investors concerned with
the triple bottom line impacts of their investments can find
important opportunities in emerging market SMEs committed
to sustainable business practices.
The underdeveloped market for developing world SMEs offers
a clear potential for social and environmental as well as eco-
nomic impacts. Investment in SMEs has the potential for posi-
tive externalities that offer substantial benefits beyond their
immediate financial returns to investors. In some cases, sus-
tainable SMEs could enhance financial return through access to
Though definitions of SMEs vary, rough
estimates suggest that businesses with
10-200 employees account for 90% of firms
and 50-60% of employment worldwide.
Emerging Markets 4
SUSTAI NABLE SME I NVESTI NG
Offshore investors face a range of difficulties that further hinder
SME capital markets. Political and macroeconomic risks, which
are difficult to both measure and hedge against, raise
risk/return ratios to often unacceptable levels. Most emerging
market SMEs require money in the $10,000 to $1 million
range, with $3 million to $5 million as the upper limit—these
relatively small amounts coupled with high transaction costs
make SMEs unattractive to lenders.
4
In addition, because of
underdeveloped local business skills and climates, technical
assistance for emerging market SMEs can increase transaction
costs even further. Illiquid equity markets with few exit oppor-
tunities make SME financing that much more intractable, and
debt financing is also stifled by high due diligence costs in
uncertain risk environments.
It is important to remember that many of these problems, to
some extent, are also associated with SME finance in the devel-
oped world. The United States uses government support from
the Small Business Administration, and in particular the Small
Business Investment Companies [SBIC] program, to support
activity in the small business sector, driven in no small part by
the fact that small businesses created 60 to 80 percent of net
new jobs annually over the last decade.
5
While regulatory struc-
tures, lending and private equity fields are substantially more
robust in the richest countries, financing small business
remains an important and risky venture throughout the world.
In emerging markets, the SME sector remains a niche market,
rather than a developed finance arena. While the microfinance
movement has begun the impressive development of the small-
est finance markets, and international development funds and
institutional investors have made advances in emerging market
public equities and sovereign debt, SMEs remain to a large
extent the “missing middle.” For structural reasons, local invest-
ment communities find it hard to raise the capital to fund the
SME sector; foreign investors find the costs and risks too great.
How to develop this difficult market? Fully subsidizing emerg-
ing market SMEs could defeat the purpose of developing a sta-
ble, growing group of businesses; depending on private
investors to develop the finance market in so risky a sector with-
out intervention is a virtual guarantee of paralysis. Collaborative
action that brings the tools of market discipline, backed by
smart public and philanthropic subsidy, is perhaps the most
likely path forward.
Sustainable SME Investing – A Target
Market for Developing the Field
In the case of microfinance, growth depended on pioneers who
developed effective models, distribution techniques, and
fundraising sources to create the potential for a sustainable
finance market that serves the lowest end of the spectrum. This
market grew in large part because those pioneers believed that
the tools of finance – including the introduction of sound busi-
ness and accounting practices, the possibility of sustainable
credit, and a more robust equity market – offered an alternative
to top-down development models that often failed to meet spe-
cific needs. Philanthropic support provided the fundamental
underpinnings for market growth.
The microfinance market thus grew as a result of investors who
utilized the tools of private finance, but sought impacts beyond
immediate financial returns. While bringing that market to
scale remains a difficult task, pioneering work has at least made
the scalability of microfinance a viable topic of discussion.
This example suggests that market development should lever-
age the work of public and private investors who seek to apply
private finance for public purpose, with the long-term goal of
Collaborative action that brings the tools of
market discipline, backed by smart public
and philanthropic subsidy, is perhaps the
most likely path forward.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 5
FI ELD DEVELOPMENT
cultivating sustainable, commercially viable
enterprises and finance markets. The key
here is the notion of “blended value,” in
which financing mechanisms yield
social and/or environmental returns as
well as a range of financial returns on
investment. Blended value investors
who support sustainable SME invest-
ments in emerging markets, in this view,
may also be supporting research and devel-
opment into the best practices for financing the
field more generally.
In many emerging markets, the case for, say,
poverty alleviation, is an easy one to make—in
some cases, the entire market of SMEs would fit the
guidelines for what developed markets call “communi-
ty investment.” The impact of SMEs that create jobs, support
supply chains, and pay taxes can yield benefits well beyond the
return on investment. Where market failures have occurred,
external public/private financing mechanisms can offer impor-
tant avenues to support small business growth. Indeed, as
“Bottom of the Pyramid” investment strategies receive more
attention, SMEs offer an attractive opportunity to develop a sec-
tor that serves the vast population of underserved people in the
world market. Crucially, SMEs can offer vital support for formal
economies, creating enterprises that pay taxes and so support
the public infrastructure that allows communities and
economies to thrive.
Similarly, sustainable SMEs offer valuable opportunities for
realizing environmental goals. SMEs can be key resources for
biodiversity, for instance, by combining sustainable biodiversity
conservation and management with employment opportunities
for those who might otherwise be drawn to less environmental-
ly sustainable practices. Sustainable SMEs can be especially
good vehicles for providing clean energy services and technolo-
gies to rural communities, and in the process reducing the
labor-intensive and environmentally damaging use of charcoal.
Support for local cooperatives with good environmental and
labor practices can help embed corporate social responsibility
(CSR) in the business community at large.
In some cases, these social and environmental benefits offer
significant potential for enhancing financial returns – whether
through improved risk management, as proxies for good gover-
nance, or through entry into new markets such as carbon
finance. In other cases, the positive externalities associated with
these investments may justify subsidies for technical assistance,
political and currency risk mitigation, and below-market return
on investment.
Developing these markets, however, requires
careful attention to the potential costs of
s ubs i di zi ng s mal l bus i nes s es .
Enterprises that cannot become eco-
nomically sustainable do not offer
good long term bets for sustainable
development. Subsidized protec-
tion of investors from risk and
loss brings the threat of moral
hazard. One key question that
remains to be answered is how to
best organize the public/private
partnerships that can grow the
field without foreclosing the devel-
opment of sustainable commercial
finance markets in the future.
Ideas for Collaborative Action for
Developing the Field
Where are there opportunities to develop this missing middle?
The argument for developing the field of SME investment is
two-fold:
• SMEs are a crucial component of the overall economies of
emerging markets, with high impacts across the economy.
• Public support and private finance, both local and global,
have failed to provide the level of investment and support to
match the opportunities and need.
What is needed is a model of financial innovation and smart
subsidy brought to scale. A successful model would also help
manage risk for investors but provides the opportunities and
business practices necessary for the sector’s development. We
believe the field is most likely to develop through the initiative
of triple bottom line investors in collaboration with capital
aggregators who focus on sustainable SMEs. The experience
developed over the past decades in sustainable SME finance
may offer the seeds for a sustainable SME sector writ large.
We see four key areas in which coordination and collaborative
activity can help better support the field of SME investment:
• New financing mechanisms and technical assistance part-
nerships that capitalize on public/private financing.
• A more coherent definition of the sustainable SME field.
• Development of more cohesive investment assessment
methodologies to reduce investors’ due diligence costs in
evaluating the social, environmental, and economic impacts
of their investments.
• The integration of sustainable SME financing with corpo-
rate social responsibility and supply chain management.
Emerging Markets 6
FI ELD DEVELOPMENT
1. New financing mechanisms and technical assistance
partnerships that capitalize on the potential for
public/private financing.
Given the underdeveloped state of the field, and the extensive
risks and transaction costs endemic to emerging market SME
investment, it is unreasonable to suppose that a vibrant market
for private finance can exist without some form of smart sub-
sidy. As noted before, this is the case in developed markets,
including the United States. The question is: how best to struc-
ture the range of investments in sustainable SMEs so as to
enable the maturation of the market?
One way to answer this question is to expand the range of
investment opportunities— from full subsidy to reasonable rate
of return—that make up the field of sustainable SME invest-
ment. Some investments, in high risk areas with high impact
potential, may require public or philanthropic funding. This
method of funding can nonetheless be considered an invest-
ment in the field if it supports the development of small enter-
prises and offers lessons for identifying viable opportunities for
smart subsidy. At the other end of the spectrum would be larg-
er investments, for instance in medium-sized enterprises in
more developed markets. These investments offer commercial
rates of return on investment, however, for reasons of market
failure in local and global lending institutions they require
investment from a specialized intermediary.
These extremes help define what is possible in sustainable SME
financing. Innovative financing packages that identify smart
subsidies from the public sector to support patient capital from
private finance may help bridge the funding gap now seen in
emerging market SMEs. A clear definition of the range of vehi-
cles available may help match investors to their appropriate
place along the spectrum. Here again, there is a key role to be
played by triple bottom line investors, for whom the benefits of
blended value creation form a core part of their asset allocation
strategies. There is also substantial room for the development of
local/international partnerships to mitigate currency and trans-
action cost risks, with capital aggregators partnering, for
instance, with local pension funds or banks who cannot (or are
unlikely to) invest in SMEs without offshore partners.
For technical assistance, there are opportunities for horizontal
integration across the sustainable SME field. Opportunities
exist especially in the standardization of business training tools,
where technical assistance in support of SME financing has the
potential to be standardized through collaborative action among
capital aggregators, investors, and other interested parties,
reducing the transaction costs for individual deals. Similarly,
pipeline development for various forms of sustainable develop-
ment may best be performed by specialized organizations who
receive public or philanthropic subsidy.
2. A more coherent definition of the sustainable SME field,
focusing on the shared potential of disparate sustainable
SME projects.
At present, the world of sustainable SME financing consists of
disparate capital aggregators and other special purpose interme-
diaries that link capital to SMEs – these aggregators often have
specific goals, such as poverty alleviation, biodiversity and land
conservation, clean energy production, support for high-growth
potential businesses, and so on. Development agencies, mis-
sion-based institutional investors, and philanthropists jointly
fund many of these “niche” projects, but to date there is no gen-
eral place for sustainable SMEs in their investment portfolios.
A more coherent, consensus-based definition of the field (per-
haps with the development of a corresponding trade association
or related institution) would facilitate a more integrated
approach to the field. A collaborative focus might consolidate
the shared characteristics of sustainable SMEs: their share of
the overall business market, their geographical and social reach,
their contributions to the formal economy, and their role in
establishing emerging markets’ overall business climate. In this
way, investors might be encouraged to view the field of SME
investment itself as an important asset allocation possibility,
rather than to assess each investment as a boutique project. Key
to defining such a field will be consideration of the links that
SMEs play across the entire chain of business enterprises in the
global market.
The impact of SMEs that create jobs, support
supply chains, and pay taxes can yield bene-
fits well beyond the return on investment...
Crucially, SMEs can offer vital support
for formal economies, creating enterprises
that pay taxes and so support the public
infrastructure that allows communities
and economies to thrive.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 7
FI ELD DEVELOPMENT
ble reporting system for impacts, would offer a significant
impetus for investors to approach sustainable SMEs as a field of
investment. A consensus reporting framework would also
reduce the reporting burden on capital aggregators, who now
must devise their own system for external reporting.
The development of the field definition and assessment
methodologies will require collaborative activity from both
investors and the capital aggregators who will place their money
in sustainable SMEs. Both are crucial steps in the development
of the field.
4. The integration of sustainable SME financing with
strategically-designed corporate social responsibility
and supply chain management practices.
The corporate community is a relatively untapped resource for
the development of emerging-market SME financing, and
offers significant opportunities for collaborative action. As cor-
porations become more attuned to the strategic alignment of
corporate social responsibility and supply chain management
practices, opportunities for corporate involvement in smart sub-
sidy become increasingly available.
There are already good examples, for instance of coffee distrib-
utors supporting coffee-growing cooperatives in an effort to
assure the continued production of high-quality environmental-
ly sustainable coffee. This model might transfer to any number
of supply-chain management practices, and may also, for
instance through climate change and political risk initiatives,
become part of larger corporate risk mitigation strategies.
Corporations also have the potential to develop reputa-
tion-enhancing, strategically aligned CSR initiatives
in the SME sector. The finance industry has obvious
reasons to support CSR activity that develops and
helps stabilize potential markets in the developing
world. Technology companies have the potential to
aid technical assistance programs, and in the
process help grow a potential market for their
products in the future. Similarly, accounting firms
might develop triple bottom line disclosure frame-
works for sustainable SMEs, in the process devel-
oping tools that can be adapted to new auditing sys-
tems. Again, these models are potentially transfer-
able to a number of CSR programs.
The key here is to involve corporations in the field devel-
opment process from the beginning, as partners in a multi-
sector effort to grow the field of SME investment.
3. Development of more cohesive assessment methodologies
to reduce investors’ costs in evaluating the social, environ-
mental, and economic impacts of their investments.
Triple bottom line investors need the tools to assess investment
impacts in order to justify their asset allocation strategies. A
crucial part of field definition is the coordination of a vocabulary
to describe and assess the social, environmental, and economic
profile of sustainable SME investments, and tools to make dis-
parate finance vehicles comparable in the eyes of their financial
backers.
What is needed is not a simple scoring system that places bio-
diversity conservation projects against “Bottom of the Pyramid”
investments. Instead, investors would benefit from a consen-
sus-based evaluation system that places an investment within a
range of criteria for impact assessment. SME finance cannot be
reduced to a single metric that captures the potential environ-
mental, social, and economic effects associated with successful
investments. Nevertheless, an assessment methodology that
addressed specific issues, including the risk/return profile of
the investment, the intended environmental or social impacts
of the investment, the governance systems in place to assure
the project’s best performance, and a comprehensive, compara-
Emerging Markets 8
NEXT STEPS
Next Steps
It is important, in conclusion, to acknowledge that many efforts
are already underway in this field. Development agencies have
given SMEs—and sustainable SMEs in particular—a more
prominent role in their overall agendas. Many national govern-
ments are also focused on this problem. A few foundations are
also extending microfinance strategies to SMEs working in
developing countries. Organizations such as the UN
Foundation, the sponsor of this convening report, are working
on new strategies to help pool capital, mitigate risk, and facili-
tate public-private partnerships that help define and grow the
SME investment sector.
In the field of SME finance, there is an important niche market
of capital aggregators, many of whom were represented at this
meeting, who offer innovative financing and technical assistance
to sustainable SMEs, in the process bringing a great deal of
research and development to the field more generally. These cap-
ital aggregators serve as the interface between triple bottom line
investors, emerging market financial and credit markets, and
sustainable SMEs in need of financing. Their combined experi-
ence can be the starting point for any broader effort to define sus-
tainable SME finance as a coherent field of investment.
With interest growing, there is increased opportunity for contin-
ued collaborative action and development of the field.
Sustainable SME finance is still at an early stage, yet obvious
opportunities exist for information sharing and collective work
that will grow the field as a whole. Attendees suggested that an
especially valuable next step would be the development of a
cross-sector alliance of specialized capital aggregators, institu-
tional investors, emerging market private equity investors,
development agencies, public corporations, and related parties
to focus on the key issues such as innovative financial products,
impact reporting, technical assistance, and corporate involve-
ment in sustainable SME finance.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 9
ENDNOTES
Endnotes
1
See Chapter 2 (Mainstream Eye for the MFI) in De Sousa-Shields, M. and C.
Frankiewicz (2004) Financing Microfinance Institutions: The Context for Transitions
to Private Capital, U.S. Agency for International Development: Washington, DC.
On the development of the microfinance sector as an asset class.
2
Raynard, P. and M. Forstater (2002) Corporate Social Responsibility: Implications for
Small and Medium Enterprises in Developing Countries, U.N. Industrial Development
Organization: Vienna.
3
Small Enterprise Assistance Funds (SEAF) (2004). The Development Impact of Small
and Medium Enterprises: Lessons Learned from SEAF Investments.
4
Capital needs vary dramatically between SMEs due to a confluence of factors.
Generally, SMEs require financing that is in excess of those loans provided by
micro-finance institutions. For example, SME capital needs may require multi-mil-
lion dollar investments by venture capital funds such as Aureos Capital.
5
United States Small Business Association (SBA) Office of Advocacy, Frequently
Asked Questions,http://www.sba.gov/advo/stats/sbfaq.pdf (accessed July 17,
2006).
Emerging Markets 10
SELECTED READI NGS
Selected Readings
Bayon, R., J. Cheng and M. De Sousa-Shields. (2003). Towards Sustainable and
Responsible Investment in Emerging Markets: A Review and Inventory of Social
Investments Industry’s Activities and Potential in Emerging Markets, International
Finance Corporation (IFC): Washington, DC.
Dalberg Global Development Advisors. (2006). Report on the Taskforce on Capacity
for Program Delivery: A Clinton Global Initiative Commitment “From Walk to Talk”:
Ideas to optimize development impact, www.dalberg.com/taskforce.pdf.
De Sousa-Shields, M. and C. Frankiewicz. (2004). Financing Microfinance
Institutions: The Context for Transitions to Private Capital, U.S. Agency for
International Development (USAID): Washington, DC.
Enterprising Solutions. (2003). The Potential for Social Investment in Microfinance
and Small Enterprise in Developing Countries, Enterprising Solutions Brief No. 3.
Fox, T. (2005). Small and Medium-Sized Enterprises (SMEs) and Corporate Social
Responsibility: A Discussion Paper, International Institute for Environment and
Development (IIED): London.
Hallberg, K. (2000). A Market-Oriented Strategy for Small and Medium-Scale
Enterprises, IFC Discussion Paper No. 40, International Finance Corporation:
Washington, DC.
Luetkenhorst, W. (2004). Corporate Social Responsibility and the Development Agenda:
Should SMEs Care?, United Nations Industrial Development Organization
(UNIDO): Vienna.
Nelson, J. (2006). Building Linkages for Competitive and Responsible Entrepreneurship:
Innovative Partnerships to Foster Small Enterprise, Promote Economic Growth, and
Reduce Poverty in Developing Countries, Corporate Social Responsibility Initiative and
United Nations Industrial Development Organization (UNIDO): Cambridge and
Vienna.
Raynard, P. and M. Forstater. (2002). Corporate Social Responsibility: Implications for
Small and Medium Enterprises in Developing Countries, United Nations Industrial
Development Organization (UNIDO): Vienna.
Sanders, T. and Wegener, C. (2006). Meso-finance: filling the financial services gap for
small businesses in developing countries, www.bidnetwork.org.
Shell Foundation. (2005). Enterprise solutions to poverty: Opportunities and Challenges
for the International Development Community and Big Business, www.shellfounda-
tion.org.
Small Enterprise Assistance Funds (SEAF). (2004). The Development Impact of
Small and Medium Enterprises: Lessons Learned from SEAF Investments, SEAF:
Washington, DC.
BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP 11
CONTACT I NFORMATI ON
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based research organization associated with the Carroll School of Management. It is
committed to helping business leverage its social, economic and human assets to
ensure both its success and a more just and sustainable world. As a leading resource
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www.bcccc.net
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A Working Paper from Boston College Center for Corporate Citizenship
Investing in the Backbone
of Emerging Markets
doc_654938913.pdf