This story originally appeared in our December 17, 2010 e-magazine. Click here to subscribe.

By the Numbers

A new report by the International Fund for Agricultural Development (IFAD) presents interesting statistics about food production.

• 70%: The necessary increase in food production to feed the projected global population of 9bn people in 2050
• 15%: The annual percentage of national budgets spent on agriculture in Asian countries since 1972
• $36 billion: The value of total global investments in agricultural R&D in  2000 where close to 50% was concentrated in Brazil, China and India
• 321 million: In acreage, the area under cultivation of genetically modified seeds in 25 countries in  2009
• 13 million: The number of smallholder farmers growing genetically modified crops in 2009 » Continue reading “Data: Living Off the Land”

This story originally appeared in our December 3, 2010 e-magazine. Click here to subscribe.

There’s no doubt that the demand for investment is growing, but how much opportunity is there? Nisha Kumar Kulkarni examines the investment potential and how it’s being measured.

Approved Proposals and Credit Issued under India’s Credit Guarantee Fund Trust for Micro and Small Enterprises

Since 2000, the Small Industries Development Bank of India has increased the amount of credit issued to micro, small and medium enterprises. There has been growing demand for bank funding. » Continue reading “By the Numbers: Today’s Impact Investing Industry”

SME investment can be proftable

The good news is that the importance of SMEs in terms of a country’s economic growth has now begun to be recognized by the formal banking sector. Spurred by increasing competition in their traditional businesses, banks are now looking to the largely untapped SME segment, which now presents a lucrative opportunity. When traditional banks downscale their operations to serve the SME market, higher transaction costs and undefined risk management strategies are seen to be a major obstacle. However, the profitability of SME banking, if it is served effectively by creative business models, has been proven by various case studies. The graph below shows that Return on Assets (ROA) of SMEs is higher than the ROA of the total portfolios of the sample banks. So it looks like this is one trend that banks would do well not to ignore.

ROA SME vs Bank Total

Source: SME Banking Best Practices – Benchmarking, International Finance Corporation

Lack of Access to Financing  – A Case in Pakistan

A recent survey conducted by the Small and Medium Enterprises Development Authority in Pakistan is a clear case in point of how SMEs struggle from lack of access to formal financing opportunities.

According to the results, only 16% of SMEs surveyed applied for bank loans in the last two years; more than half of these applications (53%) were rejected. In fact, a great majority of SMEs resort to personal connections for financing.

The Importance of the SME sector

The Importance of the SME sector

The SME sector, with its ability to generate jobs and wealth can have a direct and significant impact on the  formalization of a country’s economy.

It is said that among high-income countries of the Organization for Economic Cooperation and Development (OECD), two-thirds of all jobs are created by the SME sector. The figure is lower among low-income countries because of the overwhelmingly dominant informal sector, yet the SME sector’s contribution is significant. And as an economy grows and income levels rise, the impact of the SME sector only increases.

Source; SME Banking Guide 2009, International Finance Corporation

Small and Medium sized Enterprises (SMEs) are a driving force of economic development, and are key to job creation and GDP growth, both in developed and developing countries. However, mainstream banks, particularly in emerging markets, have typically viewed SMEs as high-risk investments and have shied away from serving these businesses.

And while banks may consider many of these SMEs to be too small or risky, even the fast growth of microfinance has not helped their cause too much because many of them are too large to be effectively financed by microfinance institutions. More SMEs are suffering from this noticeably widening gap, which is called the SME financing gap.

Everyday this week, we bring to you some key findings of our Indian Social Enterprise Landscape Survey.

Main Sources of Financing – Limited access to the commercial financing

The survey results revealed that there is a clear divide between those that have access to mainstream and/or commercial funds and those that rely on personal connections and grants/donations to raise money. The ratio is about 50/50. Forty-five percent of respondents obtained funds from commercial sources whereas 21% of respondents source their funds from personal connections such as family members and friends; another 21% rely on grants and donations from charitable organizations.

The survey report, which offers an in-depth analysis of the results, is available for INR400/US$10. Just click the Social Enterprise Landscape Survey Report banner on the top of our website – www.beyondprofit.com or send an email to Asako Matsukawa atpublications@intellecap.com.

See other data sets from the Social Enterprise Landscape Survey

Revenue Stream

Profitability

Sectors to Watch

Everyday this week, we bring to you some key findings of our Indian Social Enterprise Landscape Survey.

Challenge – Financing

The results reveal that acquiring funding is by far the biggest challenge for social entrepreneurs. Forty four percent of enterprises said that Financing/Funding is their main challenge.

The survey report, which offers an in-depth analysis of the results, is available for INR400/US$10. Just click the Social Enterprise Landscape Survey Report banner on the top of our website – www.beyondprofit.com or send an email to Asako Matsukawa atpublications@intellecap.com.

See other data sets from the Social Enterprise Landscape Survey

Revenue Stream

Profitability

Sectors to Watch

Everyday this week, we bring to you some key findings of our Indian Social Enterprise Landscape Survey.

Sectors to Watch

Education
Sector with a track record of profit
The Education sector has shown a marked degree of financial stability and growth potential. There are two key elements. First, the sector represents the highest number of profit-making enterprises (38%) among others, and also has one of the lowest numbers of loss-making entities (24%). Second, we observed a good growth potential; 38% of education enterprises are breaking even — which means the number of profit-making enterprises in this sector could increase in the coming years.

Health
Sector with large growth potential
Although the sector currently produces a very small number of profit-making entities, it has the lowest percentage (13%) of loss-making enterprises. Most importantly, at 73%, the Health sector has the largest segment of break-even businesses. If/when these enterprises begin to turn a profit, the Health sector could sustain a multitude of successful, profit-making enterprises.

Rural Development
Sector to watch out for future growth
Despite the fact that the largest number of social enterprises are in this field, it is the biggest loss-making sector at the moment. However, Rural Development demonstrated the largest revenue increases last year, so there could be more surprises in store.

The survey report, which offers an in-depth analysis of the results, is available for INR400/US$10. Just click the Social Enterprise Landscape Survey Report banner on the top of our website – www.beyondprofit.com or send an email to Asako Matsukawa at publications@intellecap.com.

See other data sets from the Social Enterprise Landscape Survey
Revenue Stream
Profitability