From Microfinance to the Missing Middle

Microfinance has grown from projects run by Non-Governmental Organizations to an industry, which has raised billions of dollars and serves millions of people. There are now over 100 dedicated microfinance funds and there is an aggregate microfinance loan portfolio of over USD 43.8bn. As microfinance has grown into an asset class of its own, it has proven to be a reliable and steady investment.

This contribution has been vital for millions of people and will continue to be an important source of financing for poor people. Microfinance has expanded from being exclusively loans to include savings, remittances, insurance, leasing, warrants etc. There are however still limited financing opportunities for small and medium enterprises (SME). For the microenterprises that have been able to grow their businesses to the point where they are ready to expand faster, there are few options and enormous frustration as they find the next step on the ladder missing. A World Bank study says that “small and medium enterprises (SMEs) account for as much as 60% of GDP, 97% of firms, and 70% of employment in both developed and developing economies”.

MFIs are typically providing short term credit, with weekly repayments, for amounts that do not exceed USD 2,000, with most loans less than USD 1,000 (average loan size varies by country and region). Yet small and growing businesses need access to larger and longer term financing to grow their companies and take advantage of business opportunities.

Venture South International is a lending company which began by lending to small and medium enterprises in Colombia and the Philippines. Since 2016, we are active in Kenya and Uganda providing specialized loans in the solar space.