19th January 23

The Missing Middle

According to World Bank, “SMEs represent more than 95 percent of registered firms worldwide, account for more than 50 percent of jobs, and contribute more than 35 percent of Gross Domestic Product (GDP) in many emerging markets.” So why is this sector so neglected by financial institutions? 

There is perceived risk amongst this group, and entrepreneurs face a number of challenges when trying to access capital. Firstly, banks require collateral and tend to charge interest rates of 12-20% per annum. The typical SME does not have access to private investors either, so access to finance is limited. 

Acquiring the requisite skills required to propel businesses forward is also challenging for SMEs in frontier markets, as well as the complex systems of governance that developing countries experience, creating political unrest, poverty and vulnerability. 

Investors face a number of barriers when considering investment in SMEs. The companies often exist in challenging environments and are likely to struggle with repayments, as well as overall company success. Political regimes can limit development and expansion, particularly when it comes to land ownership. The costs involved with investing at a smaller scale can sometimes make the benefits negligible. Due diligence costs, lawyers’ fees, local registration fees, and banking fees all have a significant impact on return. Not only that, but documentation and processes are often sparse, increasing risk. 

Through our new Growth Hub initiative, we are identifying ways to assist with commercial investability, through the following technical assistance and business development services:  

Services Delivered by Agri Frontier: 

  • Market Research & Market Linkages
  • Investment Readiness
  • Business Planning
  • Financial Modelling
  • Strategy Development
  • Mentorship/Coaching
  • Corporate Governance
  • Compliance and Operations

Services Delivered in partnership with Crop Nuts: 

  • Soil Suitability Surveys
  • Soil Testing and Mapping
  • Precision Farming Services
  • Other Agri Technical Assistance

The Hub will provide: 

Fundraising support to its members in the form of: 

  • Facilitated access to funding opportunities.
  • Transaction advisory for equity and debt fundraising
  • Financial restructuring support

It will also:

  • Provide access to Investor-Ready SME’s
  • Ensure investors will have access to an agribusiness pipeline of potential investment opportunities through the hub.
  • Offer due diligence support
  • Conduct serious verification and validation in its selection process and programmes.
  • Offer mentorship and coaching for SMEs
  • Constantly build the capacity of SMEs. Conscious and mindful entrepreneurs make better decisions.
  • Provide business networking 
  • Connect SMEs with the expertise and resources they need to grow, as well as facilitate strategic partnerships for long-term growth.
  • Offer continuous support
  • Offer continuous follow up and customised assistance to the SMEs ensuring organic growth is maintained.

If Growth Hub is something that sounds interesting to you, we would love to have a chat. Contact us today: info@agrifrontier.com 

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