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Building Prosperity Through Small Business Entrepreneurs: An Update

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As many as 2.5 billion people in the world -- 1 in 3 -- do not have access to functioning sanitation systems. Not surprisingly, a host of maladies arise for families faced with this situation, ranging from malodorous living conditions to major diseases. Throughout the developing world, diarrheal disease is a top cause of death for children under five years old.

In Kenya, one entrepreneur decided a market-based approach could help his fellow citizens. In the face of significant underinvestment in sanitation services by the public sector, David Kuria, decided to launch a business to confront this challenge. With support of a $757,000 loan from the Acumen Fund, he launched Ecotact in 2008. Today, the firm operates 40 pay-per-use toilet and shower facilities in Kenya that received 6 million visits in 2010 by users who pay less than 10 cents per visit. The firm has created 100 jobs and improved health results in 12 Kenyan communities.

David is not alone. In developing countries, there are many other firms with good ideas that can both address a social challenge and earn profits. However, the vast majority of small business entrepreneurs lack access to resources they need to thrive.

The Aspen Network of Development Entrepreneurs (ANDE) is a global network of organizations dedicated to supporting small and growing businesses (SGBs) in emerging markets. One of our core activities is to track the development of the SGB sector, especially of the various intermediaries that provide capital and other services to entrepreneurial firms.

In late March, the Shell Foundation in London hosted ANDE's second anniversary celebration at which we launched our new video and our 2010 Impact Report. The report showed solid growth for the SGB sector. Some highlights:

- 31+ new funds launched in 2010 that include SGBs as target investments; 22 of these funds are primarily focused on SGB investments

- The total target fundraise for these SGB-focused funds was $1.5 billion.

- From 2001 through the first half of 2010, the total target raise for 199 SGB-focused funds was $10.6 billion.

We know that ANDE members and the sector as a whole are reaching more small business entrepreneurs all around the developing world; but we also know we have barely scratched the surface of the need for both capacity development funds and investment capital. According to McKinsey and the International Finance Corporation (IFC), small and medium enterprises in emerging markets have an unmet demand for credit of between $750 and $850 billon. Over the past 10 years, the 63 funds managed by ANDE members have only invested about $900 million.

Of course, local banks, non-ANDE funds, and especially development finance institutions (DFIs) have been major players in the space and have made billions of dollars in direct investments and capacity building projects. And DFI interest is on the upswing. Earlier this month, the Overseas Private Investment Corporation (OPIC) launched a new $250 million impact investing call for proposals. The G20, through their SME Finance Challenge, has raised $550 million in commitments from bilateral and multilateral donors to fund innovative approaches to unlocking additional private sector finance for these entrepreneurs.

Good news to be sure. But many obstacles still remain before every successful small manufacturer in Lahore, solar-cell distributor in La Paz, or IT firm in Lagos has access to the resources they need to grow their companies and their workforce. Access to talent, access to markets and access to capital remain out of reach for most of these firms - even when they have already proven themselves successful.

ANDE and its members are dedicated to helping these companies overcome these barriers. We want to be sure that every David Kuria finds the resources he needs to help his fellow citizens.