1. Investment Supply for SMEs Ana Marr and Charles Chiwara June 2011

2. Content OverviewInstruments SMEs - The Missing Middle Barriers to Financing SMEs in Africa Global Investment Funds Innovative Financial Models Private Equity Credit Guarantee Schemes Islamic Banking Current Funding Sources

3. “Missing middle” – debt and equity Commercial bank debt Private Equity Family & friendsMoney lenders Micro-finance $25K Investment Size (US$) $2M “Missing middle”

4. Perpetual Barriers to Financing SMEs in Africa Perceived risks Institutional barriers Policy and regulations Skills and training needs

5. Global Investment Funds

6. Innovative Financing Models Acumen Fund Grofin E+Co Root Capital

7. Private Equity Definition Seed Capital – Valley Of Death – FFFs Venture Capital/Early Stage Buyouts/Later Stage

8. Later Stage Early Stage B C Mezzanine A Seed Capital Public Market or Private Equity Secondary Offerings Investment Banks, Merchant Banks or other Financial Institutions Emerging Growth Company Valley of death REVENUE Angels FFF Public / Private Company IPO/ M&A VCs, Acquisitions/Mergers & Strategic Alliances Break Even INVESTMENT New venture financing cycle

9. INVESTMENT PERIODFUNDRAISINGREALIZATION PERIODPOTENTIAL EXTENSION Commitments By limited partners (multiple closings) Liquidation 1 year4-5 years4-6 years2 years Private Equity Life Cycle

10. Fundraising Investing Selecting Structuring Monitoring Divesting / exiting Private Equity Investment Process

11. Provide Capital Business designed with intent To generate positive social and / or environmental impact Expect financial returns Impact Investing Defining Impact Investing

12. Credit Guarantee Schemes Definition Proponents Critics Operation of CGS

14. Islamic Banking Rationale – Emerging – Significant population in Africa Principles – Prohibition of usury – Profit sharing – Certainty of contracts – Ethical Examples – Mudarabah- VC – Marabaha- Asset Finance / HP – Musharaka- FRL, mortgage finance

15. Current Funding Sources 1.Guarantees – AGF, MIGA 2.Private Equity : 1.SMEs 2.Buyouts 3.DFI’s :- 1.African, Regional, International 2.Tools 1.Debt 2.Equity 3.Guarantees 4.Grants