Argidius Annual Report 2022
From missed opportunity to transforming growth: Unlocking SME finance
Money makes the world go around...
Ask any entrepreneur what they need and their first response is often finance. But if you are an SME, where to get it? The famed ‘missing middle’ of SME finance is still missing. So, as well as building highly effective non-financial business development services, we have been tackling this question too.
Over the past 10 years, we have helped enterprises raise over €1.8 billion in capital at a ratio of €30 for every €1 of Argidius’ support.
At the same time, we have been helping to pioneer new approaches to making this finance more readily accessible. We have experimented with the booster effect of grants for very early stage businesses, built a network of early stage investment funds, often the first in their markets, that have acted as role models for others to follow.
We have provided commercial banks with new pathways to deploy inclusive and profitable products that have made it easier for women entrepreneurs to borrow. Finally, we have enabled businesses to get smarter at using their own money to invest in their own futures.
As we have experimented, we have discovered allies on the same path to making ‘the missing middle’, the 'transforming' middle, to unleash the true potential of SMEs to create employment in low income communities and move a country’s needle from low to middle income status.
A message from Bernard Brenninkmeijer, the Chairman
Business is a very important part of our social fabric and an incredible engine for societal advancement; business harnesses human talent with a creativity and rapidity which is unequalled."
As I take up the role of chair of Argidius, I am excited to learn more about both the opportunities and challenges faced by entrepreneurs in our markets, as well as how we take what we’ve learned so far and share it even more broadly. By sharing Argidius’ learnings and the inspirational stories of the entrepreneurs we support, we can attract and leverage far more capital to help even greater numbers of entrepreneurs and their teams – changing whole societies.
I vividly remember my father, Anthony, who chaired Argidius in the eighties, talking about the intersection between philanthropy and business and the fulfilment which came from enabling people to elevate themselves out of poverty. He had a deeply relational style of work. He preferred to accompany grantees and financial partners on their business journeys, rather than telling them what to do, checking in with them regularly to understand what was working, what needed changing and celebrating successes.
As we explore together methods to help entrepreneurs build more successful businesses, I reflect on the way my father was deeply involved in micro-finance work when it was still a relatively new and unproven concept. Thanks to the pioneering work of Argidius and others, micro-finance has now become a global reality, showing how low-income individuals, when given the right support, can become very good creditors. Microfinance, when done right, is a fantastic tool for empowering individuals and the economic and human development of their societies.
I am very proud of the Argidius work I have learned about in my short tenure so far. The big investment we made with Kenya Commercial Bank, mentioned in the Executive Director’s message, has been a fantastic success. I also think it’s incredibly exciting to see how the white paper on SCALE, published by Argidius two years ago (How to Fulfill the Potential of Business Development Services using SCALE | Argidius), has had a huge impact in the SME support eco-system. It has been taken up by governments in their economic development work and by numerous donors in their due diligence and support programmes. By providing this toolkit and evidence-based guidance we have improved small business support and job creation in ways that leverage our investments manyfold.
It is also fascinating to see how some of the projects we support at early idea stage become real business success, while also blazing a new trail to a more sustainable future. Samuel Nyingi Matimu, the Kenyan recycling entrepreneur we feature in the report, is a wonderful example. He began his journey in the town of Nakuru going from house to house with a hand-pulled cart, gathering waste and taking it to sell. Mocked at first by people he passed on the street, his business, Mob Enterprises, now has ten trucks, employs 56 members of staff and since receiving a loan and business support from our partner, Balloon Ventures, has doubled its income to 7.2 million Kenyan shillings per month. Samuel’s recycling enterprise has grown from nothing to a solid business which still shows lots of potential and shows us that recycling can be great business.
Developing our work in Colombia is a unique step forwards for Argidius. It is an interesting new country to be working in and I look forward to seeing how we can help local businesses and partners expand while learning how to support them best. We will take the lessons we’ve learned in Central America and bring them to South America, hopefully generating a good return on our earlier knowledge building efforts.
I am so pleased to be stepping in as chair, building on previous work that has brought Argidius to the strong place it currently occupies – well respected and influential in the field of business development. I look forward to visiting many more of our projects, partners and fellow funders as we continue to build on the Argidius legacy. Helping entrepreneurs succeed is a fantastic challenge and I look forward to realizing even more of the Argidius potential to help business be a force for good.
A message from Nicholas Colloff, the Executive Director
The results have been spectacular. A grant of $820,000 from Argidius has led to $500 million in new finance for mostly women-led SMEs. The loans have significantly increased the proportion of women borrowers, helping them sustain and expand their businesses. These SMEs are growing and creating employment in a powerful way and helping to create a strong middle class in those societies."
When the entrepreneurs featured in this year’s annual review spoke about the most influential people in their lives, a good number cited their mothers.
After losing her husband in El Salvador’s civil war, Maria Isabel Ortíz raised ten children alone as well as running a number of small businesses. “My mother encouraged her children not to wait for opportunities, but to make them,” says her son, Carlos, whose love of the ocean inspired him to set up a chain of surf and beach-themed restaurants in an area of high unemployment and gang violence. Her mantra, “Never give up” inspired Carlos to stay positive during the pandemic. Since receiving business support from an Argidius partner, through their Impulsa tu Empresa program, he has seen his company sales increase by 56% and his staff size by 53%.
Siaka Sanon, the founder of AgroServ Industrie in Burkina Faso, also cites his mother, a cereal producer, as being the key influence in his life. “She was a strong woman. Her efforts paid my school fees,” he told us. Her courage in the face of adversity has inspired him to remain optimistic during the many difficulties the company has faced because of regional armed violence and the climate crisis.
I’m encouraged not only by these stories, but also by other entrepreneurs featured in this year’s review. Beatriz Paloma has been at the helm of the Colombian company, Rubbercorp, for over ten years. Her arrival provoked resentment amongst staff and farmers in the area who didn’t believe a woman could do the job. Beatriz remained undeterred. Her efforts to encourage small-holder farmers to give up producing coca, the raw ingredient in cocaine, and instead grow rubber, have transformed their livelihoods.
Our work with entrepreneurial women in El Salvador, Colombia, Burkina Faso and Rwanda, reminds us constantly that in many countries in the global south, women running SMEs still lack access to finance. In Kenya, for example, despite running 25% of the country’s SMEs, women currently access only 9% of available credit.
At Argidius, we are committed to increasing SME access to finance. Since 2020, Argidius has supported Women’s World Banking in a three-year project to provide technical assistance to Kenya Commercial Bank, (KCB) to improve their services to small and medium enterprises (SMEs). This project has enabled the bank to build strong relationships with SMEs for the first time, especially women-led businesses.
With our partners’ assistance KCB has since developed a more accessible financing product based on cash flow. The results have been spectacular. A grant of $820,000 from Argidius has led to $500 million in new finance for mostly women-led SMEs. The loans have significantly increased the proportion of women borrowers, helping them sustain and expand their businesses. These SMEs are growing and creating employment in a powerful way and helping to create a strong middle class in those societies. This is a profitable product for KCB, reinforcing their commitment to this market and its sustainability for the long term. Similar projects are already being set up with six other financial institutions in East Africa and Latin America and we hope to see access to finance take another leap forward in the years to come.
I’m inspired not only by the way the entrepreneurs we work with transform their SMEs as a result of business support and finance, but how they navigate the challenges they encounter along the way. As you will read in this review, these challenges are immense and varied, including climate change, regional insurgency and the drugs trade. What strengthens them in their business journeys is the guidance they receive from our financial partners and from each other in the peer learning we help facilitate.
The ‘missing middle’ is a term which has been used to describe the lack of SMEs in emerging economies. In contrast, in developed economies, the majority of the economy is made up of SMEs. I’d like to see the term rechristened into something far more positive. The ‘transforming middle’ would be a better way of seeing the possibilities inherent in the need to create employment and to take countries from low income to more flourishing middle income. Creating a body of organisations and institutions to respond to the challenge of the ‘transforming middle’ and giving them the resources to fund this is, in my view, the way forwards. There is huge opportunity here and there are signs that change is already happening.