New Perspectives on Financing Small Cap SMEs in Emerging Markets: The Case for Mezzanine Finance
This report by the Dutch Good Growth Fund explores new models to provide risk capital in the form of mezzanine finance. Mezzanine Finance, which blends elements from traditional Private Equity (PE) and debt financing into a unique product, provides an additional offer in the SME finance ecosystem for missing middle entrepreneurs.
SMEs form a crucial part of the economies of emerging countries. Limited access to finance for these SMEs is commonly seen as their main barrier to growth. The lack of financing options is particularly problematic for SMEs in the so-called missing middle, which refers to entrepreneurs that are too big for microfinance and informal investors, but that are too small or too risky for regular banks and private equity firms. This study provides an understanding of the specificities, diversity (and complexities) of it, critical to spur innovative thinking on both the fund managers and investors sides so products may be improved and models may be more scalable.
View full report here.