The Collaborative for Frontier Finance officially launches as a multi-stakeholder initiative
New initiative will build a better financial ecosystem for small and growing businesses in frontier markets
October 10, 2018 - The Collaborative for Frontier Finance (CFF) officially launched today as a multi-stakeholder initiative comprised of investors, funders, and fieldbuilders that aim to increase the amount of appropriate capital available for small and growing businesses (SGBs) in frontier and emerging markets.
Building on a yearlong period of market-informed design, CFF was incubated at the Global Development Incubator by founding partners the Dutch Good Growth Fund, infoDev/World Bank, and Omidyar Network. CFF is supported and led by a steering committee including Argidius Foundation, DFAT, MacArthur Foundation, and Small Foundation.
Small and growing businesses are defined as a business seeking investment between $20K - $2M to finance working capital, capital expenses, and / or growth capital. SGBs range from agricultural cooperatives to early stage starts up with high growth potential, and operate in every sector (e.g. education, logistics, technology, manufacturing, food and agriculture, consumer goods, services, etc.). SGBs create roughly 80% of formal employment opportunities in frontier and emerging markets, making them an essential part of every economy and a lever for social and environmental impact.
However, SGBs face an estimated $940B financing gap in appropriate capital they need to grow. Many SGBs struggle to access financing because they are too big for microfinance, too small for private equity, too risky for commercial banks, and lack the growth trajectory that venture capital seeks. Additionally, because SGBs require small amounts of capital to grow, the cost of conducting the transaction is often disproportionately high relative to the size of the investment. CFF is working with a variety of stakeholders to identify emerging solutions and pioneering organizations that are deploying solutions reaching SGBs. With this progress to date, CFF aims to build on progress to accelerate and pilot new solutions.
The three main goals of CFF are to:
Define an action agenda and common vision to increase appropriate capital for SGBs
Design and accelerate promising, scalable models that address SGB financing needs
Connect, pool, and facilitate the flow of capital to SGBs and the intermediaries that support their growth
Through “clusters” – or communities of stakeholders focused on specific themes related to SGB finance – CFF is co-designing initiatives that can catalyze new capital for SGBs. Current clusters focus on mezzanine finance, very early stage funds, pre-investment advisory, angel investment networks, impact monetization, and capital mobilization. The initiatives that clusters are exploring aim to solve critical pain points to financing SGBs, such as clarifying the segmentation of enterprises and each group’s specific financing needs, reducing the transaction cost to invest in SGBs through shared services and improved post investment technical assistance offerings, analyzing performance benchmarks for SGB investors, and pooling capital to experiment with different investment models that provide financing specific to the needs of SGBs. CFF is actively exploring what initiatives are most pertinent to fund managers, funders, and fieldbuilders.
Interested stakeholders can find out more information about specific initiatives or modes of engagement by signing up to receive periodic updates on the sector including resources and opportunities to participate in events and initiatives. CFF will also be connecting with interested partners through hosting a series of panels and workshops at ANDE’s Annual Conference, GSG Impact Summit, SOCAP, and the GIIN Investor Forum.
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ABOUT THE COLLABORATIVE FOR FRONTIER FINANCE: The Collaborative for Frontier Finance (CFF) is a group of fund managers, funders, and field builders committed to increasing the amount of capital available for early stage small and growing businesses in emerging and frontier markets. Learn more at www.frontierfinance.org.