If you’ve ever visited a developing country and ventured into the bustling city markets, you’ve likely come upon rows and rows of stalls packed into an impossibly tiny space – selling everything you can imagine.
I love the commotion of these markets because you get to see behind the proverbial curtain – where the buying and selling of goods is so real and upfront.
But why is it that so many of these small businesses seem unable to grow into larger, even more prosperous businesses?
Let’s consider an example. A small business owner – living in say, Ghana – has applied for and received a small group loan – such as a microfinance loan. Using that money, she then purchases a bit of inventory: a crate of tomatoes, a few t-shirts and some soft drinks. She opens up a kiosk where she will sell these items. The majority of her earnings will go toward taking care of her family’s need. She may save a small amount, and use the remaining amount to replenish her inventory. But without a larger surplus of money, she likely won’t be able to grow her business – ie. move from operating a market stall to operating a grocery store.
She can't go to the bank for a larger loan because the banks require strict record keeping and collateral, and many small businesses owners don’t have these things.
We’ve created this 'missing middle' of business – businesses that are unable to move from selling chairs on the side of the road to opening up a furniture shop. We have suppressed the opportunities of people by not putting forward means of access capital so that they can grow their businesses.
But we have the ability to create better opportunities for business owners, which will empower them to make smart and meaningful decisions for their businesses and in turn, for their families.
By Josh Folkema
Josh Folkema leads a team at World Vision Canada, that explores and executes initiatives around innovative finance tools; these tools blend both philanthropy and financial capital, while delivering measureable social and environmental impacts. Josh had more than ten years of experience in the development and humanitarian sector.