ImpactAlpha, April 22 – Local providers of equity and debt capital in emerging markets have become “economic first responders” to small and growing businesses reeling from the economic effects of the COVID-19 pandemic.
In partnership with the Collaborative for Frontier Finance, ImpactAlpha is seeking survey responses from such local capital providers to better understand the challenges and potential solutions for the businesses they support. The Local Capital Providers survey will inform the Collaborative, which is working with Courageous Capital Advisors and Palladium Impact Advisors to design and implement a liquidity and stabilization facility to support such local capital providers.
The Emerging Markets Capital Managers survey is designed for firms and funds that operate in Emerging Markets and principally invest in or lend to small and growing businesses, or SGBs. Complete the survey right in this post, or click here.
In emerging markets, even more so than in developed economies, such small businesses are essential businesses. They are the backbone of local economies, providing essential goods and services to their communities. They generate job opportunities that are more sustainable and offer higher incomes than those in informal economies.
The COVID-19 crisis is forcing many small businesses with the dual challenge of triaging their own operations at the same time they continue to try to meet the needs of their customers. Many of those customers, of course, are themselves among the most vulnerable to economic and health shocks.
Local capital providers that invested in such small businesses before the COVID-19 pandemic supplied vital funding to ensure their viability and growth. These same funders have now become economic first responders. They are renegotiating loan terms, facilitating working capital and offering strategic guidance, providing lifelines to their portfolio companies. Yet these businesses, and these capital providers, face a many-billion-dollar gap between what is needed and what is available.
ImpactAlpha’s recent Agents of Impact call, hosted with the Collaborative, surfaced the need for ‘responsive, aggregated and accessible capital’ to help portfolio companies survive. “We need to get these guys through the next three to six months before we can begin rebuilding,” said Grofin’s Brienne van der Walt. Local capital providers weighed in on the need for fast and flexible working capital, supply chain financing, and sidecar relief funds.
Even as relief and recovery funds begin to flow, “Often there’s a big gap between demonstrative need and ability to draw down on that funding,” said Evan Jones of South Africa-based Inyosi Empowerment.
Aruwa Capital’s Adesuwa Okunbo Rhodes said development-finance and other institutional investors that understand the urgency “can work with “funders like us who are on the ground, who have access to these small businesses that need capital now.”
The survey’s three sections seek general information on SGB capital vehicles, the impact of COVID-19 on the local business operating environment, and the impact of COVID-19 on investor’s capital vehicles and on their portfolio enterprises.
If you are a provider of equity or debt capital to small and growing businesses in emerging markets, please complete the survey above, or click here. Please share this post or link with relevant partners and networks. The survey should take less than 15 minutes to complete. Your input and insights will be invaluable in crafting responses to the immense challenges ahead.
The Collaborative for Frontier Finance is a sponsor of ImpactAlpha’s series, Capital on the Frontier.