Tweet

5.7 Meeting the needs of the entrepreneur: Enterprise solutions to poverty

Guest post by: Shell Foundation

Article Overview: Simply making finance available in the $10,000 to $500,000 deal size was crucial to attracting the interest of Ugandan and South African SMEs since it had never been available before. But other features were also designed into the model to provide tailor-made support to entrepreneurs.

5.7 Meeting the needs of the entrepreneur: Enterprise solutions to poverty

Simply making finance available in the $10,000 to
$500,000 deal size was crucial to attracting the
interest of Ugandan and South African SMEs since
it had never been available before. But other
features were also designed into the model to
provide tailor-made support to entrepreneurs.

First, finance is offered in local currency rather than
US dollars – a feature of other SME funds that in
effect puts them out of reach of most SMEs.

Second, we try to offer finance in a form that suits
the particular needs of the SME client. Third,
collateral requirements are kept low by the ability
of the fund managers to lend against the business
plan as opposed to only lending to the value of the
assets the entrepreneur can pledge as security.

All together now: finance, business
support and risk assessment

But perhaps the most important and innovative
feature of the Foundation’s SME investment funds
is that appropriate finance and BDA are jointly
provided to clients via the fund manager.

Elsewhere, these are provided separately with
entrepreneurs picking up business advice where
they can from people usually not experienced in
business and in a form that is not useful to their
specific needs and interests.

The concept embedded in our funds, is that the
managers work first with the entrepreneur to
develop a robust business plan. During this, the
managers develop an understanding not just of
the competence of the entrepreneur but of the
particular package of finance and ongoing
technical and BDA that will be required to ensure
the profitable operation of the enterprise.

So the manager, while applying rigorous financial
criteria, can base his risk assessment not just on the
value of the collateral but on empirical insight into
the prospects for success of the business. So in
effect, lending decisions are based on the business
plan rather than the value of recoverable assets. And
once the deal is completed this means there is a
plan of ongoing assistance, tailored to the needs of
the entrepreneur as he/she enters the most difficult
stage of any business – start-up and early operation.

As our results show, this aspect of the model –
though it has had to undergo adaptation to get it
‘right’ – lowers risk considerably in the portfolio,
imparts valuable training even to those SMEs that
don’t get offered finance, and provides a useful
vehicle for local banks to learn about the SME
sector, thus changing their own perception of risk
regarding the sector.

Related Articles
  1.9 Building local development through cooperatives: Working Out of Poverty
  6.0 Propositions and conclusion: Enterprise solutions to poverty
  6.3 Come Together: Enterprise solutions to poverty
  1.15 Building an employment agenda: Working Out of Poverty
  Microfanchising and Economic Self-Reliance

Article Tags: BDA, business advice, business plan, entrepreneur, entrepreneurs, fund manager, fund managers, risk assessment, robust business plan, SME, SMEs, SMEs



Related Forum Posts
Re: What or Who Sparks Your Business Interest - this might be surprise to you, but poverty spark my business interest. Poverty is prevalent in Africa. And I discovered early in life that people that own their businesses are richer than anypne else. I decided to get out of the poverty level and business provided a way of escape.
Re: How do you budget your life? - Here is my financial management categories for today: 15% Long Term Savings; 10% Home Expenses; 45% Business and Marketing charges; 10% Friends (Meeting); 20$ Scientific and Law Books. But this will change when it is August or September. Orxan
Entrepreneurs come up with "The Big Idea" - A question we have been asked more than once recently, by both aspiring entrepreneurs and entrepreneurship researchers, is: How do entrepreneurs come up with "The Big Idea"? The most recent case was an MBA student who really wanted to become an entrepreneur but felt he could never come up with a "big idea". Well, in our experience the reality is that most successful entrepreneurs didn't think they were going to come up with a big idea either! Our advice to this MBA was straightforward. Don't look for big ideas, look for problems that need solving. Problems are a much easier starting point and act as a focus for creativity and innovation - providing you can be passionate about it and are prepared to devote an obsessive level of attention to the important details. At our core we are all resourceful, creative creatures once we have a problem in front of us. Ideally the problems that you should seek should be in an area where you have experience / expertise. That will help ensure you really understand the problem and increase the likelihood of you being able to formulate an intelligent and practical solution, incorporating the potential for a competitive advantage. Virtually all the ventures we know arose out of dissatisfaction with the current state of things. Viewing innovation and entrepreneurship as the process of identifying problems, devising potential solutions and then implementing those solutions is often more useful and productive as a perspective.
Hi Folks!!! - This is to introduce myself as the Marketing Manager of iridium interactive ltd. I came across this forum while browsing and wanted to become a member of it. To give you a brief of the company, iridium interactive (ii) specializes in offering unique user centric e-business solutions varying from Strategy, Design, Technology & Marketing. ii with its presence in three continents, has been in the forefront in integrating strategy, design and technology to build unique, robust user centric e-business solutions. ii is an idea commune manifested by a group of futurists, business strategists, creative minds, technowizs, cyber marketers & web brand builders that work in harmony to deliver innovative interactive solutions. Our team has worked on a variety of disciplines for a multitude of clients drawn from various industries. Let us have a nice time together in this forum. I suppose we will all have a good time together.
Re: Does it help to join business groups? - I think so, yes, if you can join the right group, then it can be beneficial. Meeting other entrepreneurs in various fields and industries, some are long-time entrepreneurs, others have just started, each one can learn something from the other. Business groups are great platform to get support too, especially if you want to raise a particular question. Forums like these make it easier to get help and at the same time, contribute your own insights for others. It's a give and take thing:)


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

The Value of Small Businesses

Paint A Word Picture - Excite Your Customer

Severance and Separation Agreements

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.