Responsible Investment Management and Advisory Services

Segmenting Enterprises to Better Understand Their Financial Needs

For our Advisory Services team, October 2018 has been rich with important milestones. This included the official launch of the Collaborative for Frontier Finance (CFF), and the release of its first publication at SOCAP Summit 2018 in San Francisco. Co-founded by Triple Jump’s DGGF, Omidyar Network and Infodev/World Bank the CFF is a multi-stakeholder initiative consisting of a group of fund managers, investors, and field-building organizations with a commitment to increase the appropriate capital available for small and growing businesses in frontier and emerging markets. The CFF itself, together with its latest study, are part of our continuous effort to address the needs of the so-called “missing middle” – enterprises that are too big for microfinance, but are too small or risky for traditional banking, and lack the growth, return, and exit potential expected by venture capital providers.

The businesses that fall into the “missing middle” are also incredibly diverse, ranging from a cooperative of smallholder farmers, a family-run car shop business, or a high tech startup. All these companies require the financing solutions that can be scaled up to address the distinct financing needs. To tackle this challenge, Triple Jump’s DGGF team, together with Omidyar Network, Dalberg Advisors, and CFF have worked together to develop a segmentation framework with the aim of helping investors, intermediaries, and entrepreneurs better navigate the complex landscape of investment into small and growing businesses in emerging markets. The latest research presented segments the universe of these enterprises with financing needs between USD 20K and USD 2M into four distinct segment, which we refer to as “families” of the “missing middle”. The four “families”- high growth ventures, niche ventures, dynamic enterprises and livelihood sustaining enterprises – have distinct growth, product, and management characteristics, and thus distinct financing needs. Such segmentation of enterprises has brought several insights and makes it clear that there is no “one size fits all” financing solution to address the finance gap.

We hope that this framework can be used and further developed by stakeholders in the ecosystem to help move the field forward. This segmentation framework adds a strong foundation to efforts already underway and CFF is one such platform focused on bringing together stakeholders across the ecosystem to more effectively collaborate on financing solutions for the “missing middle” enterprises.

We invite you to read the full and summary reports on the newly launched CFF website, where you can also sign up to receive the latest updates from the network and get in touch with the team.

Enjoy the reading!
Karina Avakyan
Knowledge Manager Triple Jump