Last night, I had the pleasure of listening to Alan Patricof speak on Entrepreneurship in Africa at the Core Club. As you are probably aware, microcredit has been one of the success stories of development in the past decade allowing extremely impoverished people to engage in self-employment. Alan made a compelling case for why microcredit is great, but not enough.
On the low end, he presented the work of Trickle Up (www.trickleup.org). Trickle Up provides grants of $100 and business training to help people launch micro enterprises. They work with the extreme poor who live on less than $1 per day and are unable to obtain micro loans, usually because the financial institutions are not yet operating where they are located. Tricke Up has mostly been focusing on Mali where it is making a substantial impact.
Alan made an even more impassioned speech in favor of equity financing in Africa. As he pointed out, almost all the capital available in Africa is debt financing. There is also a growing private equity business in Africa, but no real venture capital funds making equity investments in early stage businesses. Debt financing, given the need to pay interest in the short term, limits entrepreneurs to businesses with immediate sales, and misses many of the more scalable, employment and wealth generating ideas. To change this, he is creating a $45 million fund, funded by foundations at this stage (given the below market expected rate of return).
I hope his investments succeed!