DGGF launches study on Mezzanine Finance for small cap SMEs in in emerging markets

2 June, 2016

Dutch Good Growth Fund (DGGF) launches first of its kind study, representing a first step into building small cap SME mezzanine finance as an asset class on its own.

On May 20th, the Dutch Good Growth Fund (DGGF) hosted an expert panel in the framework of the annual DFI /IFI Working Group on SME Finance 2016, co-hosted by the International Finance Corporation (IFC) and the International Fund for Agricultural Development (IFAD). The panel discussion was fed by the presentation of the outcomes of the DGGF commissioned study on "New perspectives on financing small cap SMEs in emerging markets: the case for mezzanine finance".

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 requiring medium to long-term financing in ticket sizes in the range of USD 100.000 - 2 million.

In search for new models to provide risk capital, 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.

As a relatively young and rather complex segment in the impact investing space, the commissioned 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.

This study is the first of its kind and represents a first step into building small cap SME mezzanine finance as an asset class on its own.

To access the report, click here.

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