10 membersbased in the region
51 memberswith staff in the region
138 membersinterested in the region
2018 Sector Trends in the Andean Region
- The impact investing sector continues to mature in the Andean region; however, much of this growth is targeted towards microfinance. In a 2018 review of the impact investing landscape in Latin America, ANDE and LAVCA identified 42 deals in Colombia totaling US $86 million in 2016 and 2017. The largest portion of these deals went to the microfinance sector (45 percent), followed by the ICT sector (28 percent). 
- The Andean region garnered investment attention from traditional investors as well, with US $1.5 billion in private capital across 110 deals in the region in 2018. Although this is a slight decrease from the US $1.7 billion invested in 2017, 2018 saw 15 exits that generated proceeds of US $376 million.
- The availability of financial resources for SMEs in the Andean region remains limited, reflecting a larger trend for Latin America as a whole. The Global Entrepreneurship Monitor’s median score for the Andean countries on the availability of SME financing in 2018, including debt, equity, grants, and subsidies has stayed steady around 2.08 (on a scale of 1 to 5). This lags behind other emerging market regions such as East Asia and Pacific, which has a median score of 2.95. This reflects larger trends in Latin America, which has a median score of 1.97, suggesting that finance constraints remain a limiting factor across the region.
- Failure is a necessary part of the entrepreneurial experience; however, fear of failure limits opportunities for those who seek to start a business. According to the Global Entrepreneurship Monitor’s (GEM) Adult Population Survey, in 2018 23 percent of the Colombian population responded that although they perceived good opportunities to start a business, the fear of failure would prevent them from doing so. Similar trends were found for the same demographic group in Chile, Argentina, and Peru at 29, 32, and 30 percent, respectively..
The Latin American and Caribbean region is garnering renewed interest from the impact investing sector, with 40% of the Global Impact Investing Network’s 2018 survey respondents allocating funds to the region.
In the 2019 Industry Data & Analysis report, LAVCA reports venture capital investments of US $334 million across 19 deals in Colombia in 2018. This was bolstered by a $220 million funding round for the popular last mile delivery app Rappi, a so-called “unicorn” with a valuation of over US $1 billion and partnerships with over 50,000 businesses. However, it is unclear how many of the venture deals in Colombia were focused on SGBs rather than larger-ticket investments into more mature ventures.
Distribution of 2017 Donor Disbursements to Andean Region by Country
12 membersbased in the region
43 memberswith staff in the region
105 membersinterested in the region
2018 Sector Trends in Brazil
- In 2016 and 2017, the majority of impact investing deals in Brazil focused on the ICT sector, which dominated in terms of total amount invested (US $54 million) and in number of deals (16). According to ANDE and LAVCA’s 2018 Impact Investing Landscape in Brazil report, approximately half of these deals were for less than US $250k.
- The total number of impact investment deals made in Brazil is increasing, with total assets under management (AUM) of US 4.7 billion in 2016 and 2017. The number of impact deals increased by 42 percent from 2014-2015 to 2016-2017. The aggregate amount invested increased by 56 percent and the proportion of deals in the expansion/growth stage increased from 25 to 67 percent. This was also the first period of the bi-annual ANDE and LAVCA study to track exits, with eight total exits in Brazil in 2016-2017, six of which were debt repayments.
- Eighty percent of impact investors active in Brazil align their strategy with the United Nations’ Sustainable Development Goals (SDGs). Of the impact investors that were active in Brazil in 2018 surveyed for the ANDE and LAVCA study, the two most common targeted SDGs are Goal 1: No Poverty and Goal 10: Reduce Inequality.
- Brazil continues to face financial inclusion challenges. Approximately 35 percent of women do not have a formal bank account, and of the 27 percent of low-income adults that were able to save money in the previous year, more than one-third did so informally (i.e. not through a bank). Additionally, the number of defaulters in the country reached a historical record in July 2018.
- Over two-thirds (69 percent) of Brazilian ventures applying to accelerator programs have all-male founding teams, compared to 48 percent in the GALI global sample. Additionally, Brazilian teams with prior acceleration more often had revenues, employees, and investment at the time of application than those that had not been previously accelerated. There is a clear trend that male-led ventures are more often participating and benefitting from acceleration.
Impact Investments by Sector for Years 2016-2017
- Total Invested (USD Millions)
- Number of Deals
In Brazil, SME-related donor disbursements made up a very small percentage (less than one percent) of total donor funding disbursed to the country in 2017. Of the 20 donors that ANDE and Devex analyzed in depth, six have a focus in Latin America and two specify supporting SGBs in Brazil. One of these is the World Bank, which supports SGBs in Brazil indirectly through its support for TechEmerge, a matchmaking initiative in collaboration with IFC that connects startups to major corporations in emerging markets for a specific sector. The initiative is initially focusing on the healthcare sector in Brazil and India, where the selected startups will receive funding for the pilot launch of their local business ventures.
17 membersbased in the region
67 memberswith staff in the region
122 membersinterested in the region
2018 Sector Trends in Central America and Mexico
- In 2016 and 2017, investors allocated US$392 million through 198 impact investing deals in Central America (excluding Mexico). Nicaragua and Costa Rica received the most investment. The median deal size for the 198 deals in Central America was US$ 1 million, while about one-third of deals were for $500,000 or less.
- Impact investors in Central America reported four exits in 2016 and 2017, and an additional four new exits in 2018, indicating a high potential for additional investments in the region. Three of the four exits from 2016 and 2017 were strategic sales, with combined proceeds of the four exits was $2.9 million, while the four new exits in 2018 generated $155 million in combined proceeds.
- In 2018, there were 137 private equity and venture capital deals in Mexico for a total of US $1.5 billion. Two large energy deals accounted for the majority of this sum, including the acquisition of InterGen’s Mexico operations by Actis (US $1.3 billion) and a solar energy project Ahumada funded by Infared Capital Partners.
- New opportunities continue to appear in Latin America’s ICT sector. Latin America has the third largest population of internet users, behind Europe and Asia, which improves potential market access for startups in the region. This is reflected in the number of ventures with an ICT focus applying to accelerator programs, with ICT representing the most common specific focus area for these ventures (13 percent of all applicants) according to data from the Global Accelerator Learning Initiative.
- Three percent of the 1.7 billion unbanked adults in the world live in Mexico. This is in spite of the fact that Mexico emerged as having one of the best regulatory frameworks for fostering financial inclusion within the region, demonstrating additional needs in the financial inclusion ecosystem. For Central America, the population of adults with a bank account for individual countries ranges from 28 percent (in Nicaragua) to 68 percent (in Costa Rica). Mexico falls on the weaker end of the inclusion spectrum, with 35 percent of its adult population with formal bank accounts.
- Female participation in the entrepreneurial market relies heavily on other women. A study on Women’s Entrepreneurship in Latin America shows that 72 percent of male entrepreneurs hire a majority male team and 67 percent of female entrepreneurs hire majority female teams. This suggests that an entrepreneur’s gender can create bias in the hiring process, developing a self-reinforcing cycle of barriers to women.
SME-related donor disbursements to the region annually
Impact investing in the Central American region (excluding Mexico) in 2016 and 2017 focused primarily on microfinance, with 84 percent of deals going towards the sector. For Mexico, the trend is slightly different, with deals in microfinance lagging behind the ICT sector. The other top sectors for impact investors active in Central America and Mexico include agriculture, financial inclusion, health, and energy. 
18 membersbased in the region
115 memberswith staff in the region
172 membersinterested in the region
2018 Sector Trends in East Africa
- Continued growth of Sub-Saharan Africa’s technology sector and related verticals showed promise for investors and entrepreneurs alike, with internet connection rates across the continent reaching 24% in 2018. Additionally, M-PESA continues to lead as the most active and recognizable brand in East Africa, highlighting the relevance of the ICT and digital finance sectors to the SGB ecosystem in the region.
- Despite significant recent economic growth, local financial institutions in Ethiopia remain notably underdeveloped relative to other East African countries. Ethiopia’s banking sector manages an approximate US $1 billion, while Kenya’s banking system manages over 30 times that amount. International NGO (INGO) impact investors heavily target East Africa, with 67 percent of members of the INGO Impact Investing Network active in the region.
- Over half of the region’s SGB ecosystem support providers are concentrated in Kenya. Additionally, approximately 50 percent of impact investments in East Africa went into Kenyan ventures. However, research from Endeavor suggests that the entrepreneurial support system remains largely driven by international donors with a gap in engagement with successful local entrepreneurs. This may be one factor in the large number of “low-productivity microbusinesses,” hiring few employees and raising little in venture capital.
- Debt continues to lead as the main investment tool used in Rwanda, with most investors in ANDE’s 2018 country snapshot reporting using debt as their vehicle of choice. Additionally, the GIIN found that a significant portion of DFI direct impact investment capital disbursements in East Africa were comprised of debt.
- In Tanzania, there was an emergence of innovation, tech, and entrepreneurship programs that target female entrepreneurs. Some of the new players in this ecosystem subset include Ndoto Hub and SafeSpaceco, which offer support in the form of skill development and building entrepreneur confidence. They join some influential players like SheCodesForChange, which continue to encourage women and girls to join the tech space in a leadership capacity.
- Uganda’s entrepreneurial ecosystem continues to be dominated by very small firms with limited growth, despite SMEs being identified as fundamental job creators and engines of economic growth in the Ugandan government’s National Development Plan II. This trend could explain why Uganda falls so low on the 2018 Global Entrepreneurship Index Rank , despite being highly rated in terms of total early-stage entrepreneurial activity (TEA).
SGB-inclusive investment vehicles with a specific focus on East Africa* have been declining for the last three years
Donor funding for the SGB sector in East Africa did not change significantly from 2016 to 2017; however, this represents an improvement over recent years that saw a negative trend in terms of funding for the sector
Yield Uganda Investment Fund
Leveraging local capital to de-risk impact investments has long been a topic of conversation in the region and in the greater impact investing sector. Through its Yield Uganda Investment Fund, Pearl Capital Partners (PCP) has tackled this challenge through the support of the National Social Security Fund (NSSF) in Uganda in the form of a €2 million commitment, alongside the European Union’s (EU) €10 million through the International Fund for Agricultural Development (IFAD).
The fund, which aims to support small and growing agribusinesses, is making investments in SGBs in the range of €250,000 to €2 million. It also has a technical assistance and business development services facility that benefits the investees post investment by covering a variety of key improvement areas including ESG, out-grower farmer trainings, certifications, capacity and systems improvements, and corporate governance on a cost sharing arrangement basis funded by the EU and managed by IFAD. The impact goals are to improve rural household livelihoods, improve access to markets, create jobs, promote food security, and generate income and new export opportunities, ultimately contributing to the country’s economic growth and goal to eradicate poverty. This is the first SGB fund in the region to be capitalized by a pension fund.
8 membersbased in the region
66 memberswith staff in the region
115 membersinterested in the region
2018 Sector Trends in East & Southeast Asia
- There is often a mismatch between what entrepreneurs need from the banking system and what is available. Loan products are most commonly geared towards housing, land, and vehicles rather than businesses (particularly small or startup businesses), often resulting in short loan repayment terms that are unrealistic/unmanageable for entrepreneurs and SGBs.
- More initiatives in the region are launching to promote gender equality. The Australian Department of Foreign Affairs and Trade (DFAT), a large donor active in the region, launched two new initiatives in this area: the Investing in Women program, focused on gender equality through fostering coalitions of female-led businesses and other stakeholders seeking to encourage gender equality through their asset allocation, and the Pacific Women Shaping Pacific Development initiative, with one of four focuses being to empower women through training, financial literacy, and access to retail.
- Challenges differ considerably across countries in the region, reflecting the varying development levels among individual economies and adding a level of complexity in creating region-wide collaboration and initiatives to support the sector. For example, stakeholders noted in a recent study that in Thailand there are few private capital players and few stakeholders to take the conversation forward. In contrast, stakeholders active in Singapore have a positive outlook on the investment pipeline, while looking for opportunities for a more regional approach to grow the sector region-wide.
- Comfort with failure is low in the East and Southeast Asian entrepreneurial ecosystem. According to a 2018 Global Entrepreneurship Monitor’s (GEM) survey of the adult population (ages 18-64) in China, Indonesia, Japan, and Thailand, 45 percent of respondents reported that fear of failure would prevent them from setting up a business despite perceiving good opportunities in the market.
SGB Inclusive Impact Capital Deployed by Private Impact Investors in ESEA by Deal Size*
- Capital Deployed (USD Millions)
- Number of Deals
Vietnam has consistently received the largest portion of donor disbursements to support SMEs for the region over the past 11 years. The ANDE and Devex deep-dive into 20 donor institutions supporting SGBs found that nine of these donors had a regional focus in East Asia & Pacific; the largest of these being the Australian Department of Foreign Affairs and Trade (DFAT). DFAT’s support is relatively unique in that it is focused in Asia but generally open to SGBs in a wide variety of sectors, whereas many donors direct their SGB funding towards specific sectors.
15 membersbased in the region
65 memberswith staff in the region
103 membersinterested in the region
2018 Sector Trends in India
- Agriculture continues to be the primary source of livelihood for over half of India’s population, presenting a large potential market for local start-ups. Consistent with global startup trends, Indian entrepreneurs are driving innovation in the AgTech sector based on local needs; one resulting innovation is the development of Farming-as-a-Service (FaaS), a model that has garnered significant attention from investors, governments, and corporates.
- The green economy represents a major potential growth area for impact investments in India. The Indian green bond market has matured considerably, with the total green bond issuance reaching US $7.15 billion in 2018 – with at least 10 green bonds having been oversubscribed. Recent innovations in mechanisms to lower transaction costs in green finance, such as the Solar Investment Trust which pools small-scale rooftop solar projects into a special purpose vehicle, provide pathways through which clean energy investments can continue to grow.
- A shift from grants to impact investments has created new opportunities for entrepreneurs. Growing interest from impact investors is a positive sign for entrepreneurship in the country, though the market will need to catch up to investor needs. For example, many investors require strong monitoring and evaluation of impact outcomes, something that many entrepreneurs struggle to implement effectively. However, it remains to be seen how the shift from grants to investment capital translates into faster firm growth.
- Bengaluru (Bangalore) continues to be a major driver of entrepreneurial innovation in India, particularly in advanced manufacturing, FinTech, and EdTech. In the past six years, Bengaluru’s Fintech startups received approximately 20 percent of all venture capital investments to the country, making it the premier destination for the sector’s venture capital investors.
The portion of SME-related donor disbursements remained the same as in 2016 and represent slightly more than half of the historic high of 4.1 percent in 2009.
- SME-related donor funding to India (USD Millions)
- Percent of all donor funding to India that is SME-related
In ANDE’s 2019 report Fueling Entrepreneurship in Emerging Markets, India is named as a focus for 8 of the top 20 major donors. Some of the most notable donor supporters to the sector in the country include the Japanese International Cooperation Agency (JICA) that directed two thirds of its 2017 SME-related disbursements to India, the Overseas Private Investment Corporation’s 2x initiative and its US $124 million loan facility shared between India and Mongolia, and a US $18 million investment in the equity of Indian SME lender Veritas Finance from the UK CDC Group.
20 membersbased in the region
57 memberswith staff in the region
114 membersinterested in the region
2018 Sector Trends in South Africa
- The MSME sector as a whole in South Africa is experiencing stagnant growth, with 2.3 million MSMEs in 2017 compared to 2.0 million in 2008. South Africa has experienced protracted economic weakness; the rate of early stage entrepreneurship should be three times its current rate and the country GDP only grew 0.8 percent in 2018 from 2017. Female MSME ownership has also been in decline over the past decade (38 percent in 2017 from 48 percent in 2008).
- The public sector and corporate donors remain key supporters of social enterprises and SGBs, though the quality of support is an issue. Social enterprises “succeeded mostly in attracting funds from the public [sector]", while donor support remained the dominant funding mechanism for business development service (BDS) providers. However, confusion and a lack of quality among BDS providers hampers effectiveness, with BDS providers experiencing an “identity crisis” of different names for the same set of services to respond to donor demands.
- SGBs are creating jobs in the South African market, spurred by investment. Small enterprises employ between 50 and 60 percent of the country’s work force and contribute around 34 percent of GDP. High-growth small enterprises are leveraging investment to accelerate employment, with SAVCA’s 2018 Venture Capital Survey finding that 77 percent of companies that received investment from a venture capital firm increased their number of full-time employees.
- The Gauteng ecosystem remains active yet fragmented, with at least 265 SGB support programs in the ecosystem. Over 60 percent of these have offices or staff in the most affluent suburbs of Gauteng, while less than 13 percent have a physical presence in the rural or impoverished areas. Additionally, there is a lack of collaboration among ecosystem players, possibly due to a lack of common knowledge base, resulting in siloed approaches to the many gaps.
- South African entrepreneurs are attracting VC funding, though this funding is concentrated in a few geographies. The total number of VC investments increased from 114 in 2016 to 159 in 2017, an increase of 39.5%. Over 93 percent of these deals (by value) were located in Gauteng or the Western Cape. Of these, Gauteng saw a higher value per deal, but more VC-backed businesses in 2017 were based in the Western Cape. Cape Town is positioning itself as a booming tech ecosystem, drawing many early-stage tech firms, with a few larger firms accounting for the majority of employment creation in the region. A higher percentage of companies receive VC funding in Cape Town than in comparable cities in Sub-Saharan Africa, including those based in Lagos or Nairobi.
Percent of investment vehicles launched annually with a focus on South Africa
Although the percentage of SME-related donor disbursements shows small incremental growth over the past few years, this is largely due to the amount of total donor aid to South Africa (SME-related and non) decreasing over the past six years. The portion of SME-related donor disbursements also has not come near its peak of two percent (reached in 2007) in over a decade, which is still a small fraction of the billions disbursed to the country over the years.
This declining trend in donor disbursements to the country is consistent with ANDE and Devex’s finding that only one of the 20 major donor institutions examined for the study (the International Finance Corporation) is actively and explicitly targeting SGB support in the country.
16 membersbased in the region
59 memberswith staff in the region
139 membersinterested in the region
2018 Sector Trends in West Africa Region
- Many SMEs operate informally in West Africa, limiting their ability to access financing. Enterprise informality is common throughout the sector and particularly in West Africa; for example, an estimated 70% of SMEs in Ivory Coast are categorized as informal or semi-formal.
- West Africa’s population is very young and will have a large population of working-age people in the near future. The Gambia, for example, is expected to have 60% of its population of working age (15-64 years) by 2035. This is consistent with other West African countries – and exceeds the sub-Saharan average. SGB intermediaries such as accelerators and incubators are working to engage youth in entrepreneurship; GALI data indicates that youth-led ventures dominate applicants to accelerator programs in Nigeria but are less established and may face different challenges than older teams.
- Infrastructure remains one of the greatest challenges for support providers in Ghana, with incubators spending an average of 60% of overall expenditures just on operations. The aspects of operating a business that most adversely affect entrepreneurs in Ghana are unstable power, unregulated rent, and overpriced internet. Despite this, tech hubs continue to thrive in the region, with 55 operating in Nigeria, 24 in Ghana, 13 in Ivory Coast, and 12 in Senegal. These hubs include incubators, accelerators, and co-working spaces.
- Nigeria and Senegal each implemented five business-related regulatory reforms in 2018, making it easier to do business in the country. Both countries implemented reforms around starting a business, dealing with construction permits, registering property, getting credit, enforcing contracts, and paying taxes.
- Global payment giants have invested in and partnered with Nigerian FinTech companies. However, FinTech momentum in Nigeria, Africa’s largest economy, may be slowed by proposed regulation by Nigeria’s central bank which could make it more expensive for local FinTech startups to operate.
- Mismatches between investors and SGBs have created inefficiencies in the ecosystem and highlighted a gap in intermediary support. ANDE’s 2018 ecosystem snapshots of two Nigerian cities, Port Harcourt and Ibadan, as well as a country-level snapshot of Ghana found that investors are often disconnected from the true needs of the ecosystem, while SGBs have a low awareness of investor requirements.
Investors active in Sub-Saharan Africa have indicated an optimistic outlook on West Africa, with a growing number of investors indicating that the region will continue to be attractive for private equity investment over the next three years. The African Private Equity and Venture Capital Association’s (AVCA) survey of active LPs shows that 85% share this opinion, up from 76% in 2017. AVCA’s 2017 Annual African Private Equity Data Tracker shows that West Africa has attracted the greatest share of PE deals reported in Africa between 2012 and 2017.
Over the past six years, 282 PE deals have been made in West Africa for a total of US $10.8 billion. This is a promising sign for investment generally in the region; however, the median deal size during this period is US $6 million, indicating a lack of SGB-accessible capital. Additionally, a significant majority of PE deals (both in terms of number and capital disbursed) are concentrated in Nigeria. This is also reflected in VC funding, with 58 startups in the region raising a total of US $94.9 million in 2018. While reflecting the strong potential of the region, this also demonstrates the risk for Nigerian start-ups to overshadow entrepreneurs from the other West African countries hoping to draw in capital.
Annual SME-related Donor Disbursements to West Africa
- West Africa
- Anglophone West Africa
- Francophone West Africa
SME-related donor disbursements to West Africa have trended upward since 2007. In the past two years, there’s been a divergent trend between anglophone and francophone West Africa. In 2015 SME-related donor disbursements were evenly disbursed between the two; however, since then disbursements to the anglophone region have grown while those to francophone countries have declined.
ANDE research on the top 20 donors to SGBs identified a number of notable donor initiatives supporting entrepreneurship working in the region. For example, the regional co-funding initiative Youth Entrepreneurship and Innovation Trust Fund was launched by the African Development Bank (AfDB) with a contribution from the Swedish International Development Cooperation Agency (SIDA) of US $2.8 million in 2017. The goal of the initiative is to create 25 million jobs and allow 50 million young men and women to join the formal sector through training and skill development, by 2025. This effort reflects a broader donor interest in fostering youth entrepreneurship in the region; according to the National Bureau of Statistics 2017 third quarter report, 67 percent of young people in Nigeria were either unemployed or underemployed. Many policy makers and organizations working to spur economic development in West Africa see entrepreneurship as a potential means to provide employment opportunities for this youth bulge.