In the final installment of this mini-series, I wanted to share one other debate worth mentioning: SMEs versus SGBs. Small and growing businesses (SGBs) is a term often used by the Aspen Network of Development Entrepreneurs. SGBs are different from small and medium-sized enterprises (SMEs) in that, first, they have ambition to grow and, second, they have less access to finance than medium-sized businesses. They seek capital growth capital from $20,000 to $2 million. (To me, “growth” capital reads “equity.”) This Dalberg report identifies four “families” of SGBs; the table below highlights two:

The other two families are niche ventures, e.g. target niche markets, and livelihood-sustaining enterprises that “operate on a small scale to maintain a source of income for an individual family.” I excluded them only to save space but encourage folks to read the whole report.

In the United States, dynamic enterprises are companies often served by community development financial institutions (CDFIs.) If you are a small business in the United States, you may want to get a loan from a local CDFI. If you are a small business looking for equity, you might go to Wefunder, which focuses on start-ups. 

CDFIs are often nonprofits that receive support from the U.S. government. Wefunder is a for-profit private company. Focusing on equity is like looking for a unicorn in the United States, whereas focusing on debt is like lending to mom-and-pop retail businesses. Which should USAID be doing? 

I think both are necessary for the market, but it seems easier for the market to set up venture capital funds, which can offer attractive returns even in developing markets, while debt funds need more subsidy support. The challenge is that lending to steady growth businesses doesn’t seem as exciting as supporting a new ag-tech digital platform. Said another way, we support debt funds because they need it and we support equity funds because we want to.