Equity and Quasi Equity

In Asia, small and medium-sized enterprises (SMEs) account for the major share of employment and dominate the economy. Asian economies are often characterized as having bank-dominated financial systems and underdeveloped capital markets, in particular venture capital. Hence looking for new methods of financing SMEs is crucial.
Hometown Investment Trust funds (HIT) are a new form of financial intermediation that was only recently started and has now been adopted as a national strategy in Japan.

Local capital is an important part of the overall story in Africa. If Africans and African institutions are not investing in their own markets, why should somebody from outside the region think there is an opportunity here? To give credibility to the story they must invest, otherwise the story doesn't hold together.The markets in Africa are all at different stages of development in terms of regulation and knowledge about this asset class. For example, in Nigeria, the regulatory framework has changed considerably and pension funds are increasingly able to invest in different asset classes. South Africa and Botswana may be a bit ahead of the game; however, Botswana's internal markets lack depth, so the investment strategy is oriented more externally. Then you have the South African pension funds, which have a lot of capital and are now starting to look beyond South Africa. As you can imagine, South Africa combined with the rest of Africa is a great story. So for them, understanding the challenges and the characteristics of investing outside of South Africa is their learning curve.Limited partners in these markets face different issues, but I can see them all converging to form a very big investor group in the next five years. They are starting from virtually zero in terms of exposure to private equity, so allocations are going to go up from 0-5 per cent to maybe 10 per cent or 15 per cent of their portfolio. On the other hand, pension fund assets under management are increasing at exponential rates because their markets are growing, and more people are coming into the workforce. The importance of African pension funds as a source of capital is not to be underestimated.

Researchers at Babson College identify enormous, untapped opportunity for venture capitalists to drive new growth and innovation by investing in women entrepreneurs.
Babson College has unveiled the findings of a new study on venture capital funding for women entrepreneurs and ways venture capitalists can capitalize on the significant gender gap that persists. 

The Development Bank of Jamaica Limited will host Venture Capital Conference 2014 at the Jamaica Conf

Entrepreneurs seeking to grow their business must look beyond traditional financing options such as bank lending and explore equity as a possible source of capital. Failure to do so may lead to stagnation or, ultimately, going belly up, warned a startup expert.Tarek Kettaneh, a senior lecturer of entrepreneurship at Olayan School of Business at American University of Beirut, told Zawya that funding is the major challenge that small and medium enterprises (SMEs) in the region face."Financiers [often] consider an SME a risky investment and they prefer more sizeable deals with big companies. The risk is the highest at the SME's start-up phase as it doesn't have a proven track record of success at such an early stage of its development," said Kettaneh, who also lectures on venture capital.

Rwanda has added another solution to its cocktail of efforts aimed at increasing funding opportunities for small and medium scale enterprises. The new solution, quasi equity, is seen as a direct response to commercial banks that have in the past been reluctant to finance start-ups.

How can Asia's small and medium-sized enterprises (SMEs) access finance? The rapid growth of emerging Asia is generating SMEs’ long-term funding needs and requires robust capital markets as an alternative channel for providing their growth capital. The G20 Leaders also addressed the importance of promoting long-term financing for SMEs in the context of investment.

This publication is the first ENSEAD publication related to ESG and it establishes a base for our ongoing work on ESG in the private equity industry. We trust that it will provide a practical guide and food for thought for private equity professionals – both GPs and LPs – looking to develop a robust understanding of the current approaches to managing ESG investment considerations in portfolio firms. This paper is published with the express desire to engage more GPs in discussions as they develop their capabilities related to ESG.

Sarona is a private equity firm, investing growth capital in companies and private equity funds in frontier and emerging markets around the world. Our particular focus is the small to mid-market companies that meet the growing needs of the rising middle class in those markets. Our goal is to achieve superior returns by creating world class companies employing highly progressive business strategies, and operating to the highest standards of business, ethical, social and environmental excellence.