Private Equity and Venture Capital in SMEs in Developing Countries : The Role for Technical Assistance

This paper discusses the constraints for private equity financing of small and medium enterprises in developing economies. In addition to capital, private equity investors bring knowledge and expertise to the companies in which they invest. Through active participation on the board of directors or in partnership with management, private equity investors equip companies with critical improvements in governance, financial accounting, access to markets, technology, and other drivers of business success. Although private equity investors could help to create, deepen, and expand growth of small and medium enterprises in developing economies, the vast majority of private equity in such markets targets larger or more established enterprises. Technical assistance, when partnered with private equity, can unlock more investor commitments and considerably enhance the ability of small and medium enterprises in emerging markets to raise private equity capital. Technical assistance provides funding that allows private equity funds to extend their reach to smaller companies. Technical assistance can mitigate some level of risk and increase the probability of successful investments by funding targeted operational improvements of investee companies. Dedicated technical assistance facilities financed by third parties, such as development finance institutions, governments, or other parties, have emerged to fill this critical need. The paper discusses the provision of investment capital twinned with technical assistance, which is now more accepted by limited partners and general partners or fund managers and is becoming more of a market model for private equity finance focused on small and medium enterprises.

Bibliographic Details

Main Authors:	Divakaran, Shanthi, McGinnis, Patrick J., Shariff, Masood
Language:	English en_US
Published:	World Bank, Washington, DC 2014-04
Subjects:	ACCESS TO CAPITAL, ACCESS TO INFORMATION, ACCESS TO MARKETS, ACCOUNTING, ACCOUNTS RECEIVABLE, ADVANCED ECONOMIES, ADVISORY SERVICE, AFFORDABILITY, ALTERNATIVE ASSET, ALTERNATIVE INVESTMENTS, AMOUNT OF CAPITAL, ANGEL INVESTOR, ANGEL INVESTORS, ASSET CLASS, ASSET CLASSES, BANK FINANCING, BENEFICIARY, BUDGETING, BUSINESS ADVISORS, BUSINESS ADVISORY, BUSINESS OPPORTUNITY, BUSINESS OWNERS, BUSINESS PLAN, BUSINESS STRATEGY, BUSINESS SUCCESS, BUSINESS TRAINING, CAPACITY BUILDING, CAPACITY CONSTRAINT, CAPACITY CONSTRAINTS, CAPITAL FLOWS, CAPITAL FUND, CAPITAL INVESTMENTS, CAPITAL MARKETS, CAPITAL STRUCTURE, CAPITAL · · · · FUND, CASH FLOW, CASH FLOWS, CENTRAL BANK, CONFLICTS OF INTERESTS, CORPORATE DEBT, CREDIT GAP, CREDITS, CUSTOMER BASE, DEBT FINANCING, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT BANK, DEVELOPMENT CORPORATION, DEVELOPMENT FINANCE, DEVELOPMENT FINANCE INSTITUTION, DEVELOPMENT FINANCE INSTITUTIONS, DISBURSEMENT, DUE DILIGENCE, ECONOMIC DEVELOPMENT, ECONOMIES OF SCALE, EMERGING MARKET, EMERGING MARKETS, ENDOWMENTS, ENTERPRISE ASSISTANCE, ENTREPRENEURS, EQUIPMENT, EQUITY CAPITAL, EQUITY FINANCING, EQUITY FUNDS, EQUITY INVESTMENT, EQUITY INVESTMENTS, EQUITY INVESTORS, ESCROW, ESCROW ACCOUNT, EXIT MECHANISMS, EXPENDITURES, EXTERNAL CAPITAL, FINANCES, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL INSTRUMENTS, FINANCIAL INTERMEDIARIES, FINANCIAL INVESTORS, FINANCIAL LITERACY, FINANCIAL MANAGEMENT, FINANCIAL MARKET, FINANCIAL RESOURCES, FINANCIAL SERVICES, FINANCIAL STATEMENTS, FINANCIAL SUPPORT, FINANCIAL SYSTEMS, FLOW OF INVESTMENT, FUND MANAGEMENT, FUND MANAGER, FUND MANAGERS, FUNDING SOURCES, GRACE PERIOD, GREEN REVOLUTION, GROSS DOMESTIC PRODUCT, GROUP OF FIRMS, HOLDING, HUMAN CAPITAL, HUMAN DEVELOPMENT, INFORMATION TECHNOLOGY, INITIAL PUBLIC OFFERING, INSTITUTIONAL INVESTORS, INSURANCE, INSURANCE COMPANIES, INTERNAL RATE OF RETURN, INTERNAL RATES OF RETURN, INTERNATIONAL BANK, INTERNATIONAL CAPITAL, INTERNATIONAL CAPITAL MARKETS, INTERNATIONAL DEVELOPMENT, INTERNATIONAL FINANCE, INTERNATIONAL INVESTMENT, INTERNATIONAL INVESTORS, INVENTORY, INVESTING, INVESTMENT ACTIVITIES, INVESTMENT BANK, INVESTMENT BANKS, INVESTMENT CAPITAL, INVESTMENT CORPORATION, INVESTMENT FUND, INVESTMENT FUNDS, INVESTMENT OPPORTUNITIES, INVESTMENT PERIOD, INVESTMENT PORTFOLIO, INVESTMENT PROCESS, INVESTMENT PROPOSALS, INVESTMENT RISKS, INVESTMENT STRATEGY, INVESTOR INTEREST, INVESTOR RELATIONS, IPO, JOB CREATION, LEGAL ENVIRONMENT, LEGAL SYSTEMS, LENDER, LEVEL OF RISK, LOAN, LOCAL INVESTORS, LONG-TERM DEBT, LONG-TERM FINANCE, LONG-TERM INVESTOR, LONG-TERM RESOURCES, MARKET DEVELOPMENT, MARKET ENVIRONMENT, MARKET PLAYERS, MARKET REGULATORS, MARKET RETURNS, MATURITY, MICRO-ENTERPRISE, MICRO-INSURANCE, MICROCREDIT, MICROFINANCE, MICROFINANCE INSTITUTIONS, MINORITY SHAREHOLDER, MINORITY SHAREHOLDER RIGHTS, MONETARY FUND, NEW COMPANIES, NEW MARKET, NEW MARKETS, OPERATING COSTS, OWNERSHIP STRUCTURE, PENSION, PENSION FUNDS, PERSONAL SAVINGS, POLITICAL RISK, POOL OF FUNDS, POOLS OF CAPITAL, PORTFOLIO, PORTFOLIO MANAGEMENT, PORTFOLIOS, POTENTIAL INVESTMENT, PRIVATE BANKS, PRIVATE CAPITAL, PRIVATE EQUITY, PRIVATE EQUITY FINANCE, PRIVATE FUND, PRIVATE INVESTMENT, PRIVATE INVESTORS, PRIVATE SECTOR FINANCE, PRODUCTIVE INVESTMENT, PROFESSIONAL INVESTORS, PROFESSIONAL QUALIFICATIONS, REAL ESTATE, RETURNS, RISK CAPITAL, RISK MANAGEMENT, RISK PROFILES, SECURITIES, SEPARATE ASSET, SEPARATE ASSET CLASS, SHAREHOLDERS, SMALL ENTERPRISE, SOCIAL DEVELOPMENTS, START-UP, START-UP CAPITAL, START-UP COSTS, SUBORDINATED DEBT, SUPPLY CHAINS, TECHNICAL ASSISTANCE, TECHNICAL SUPPORT, TRADE CREDIT, TRANSACTION, TRANSACTION COSTS, TRANSPARENCY, TRUST FUND, TYPE OF INVESTOR, UNION, VALUATION, VENTURE CAPITAL, VENTURE CAPITAL FUND, WORKING CAPITAL,
Online Access:	http://documents.worldbank.org/curated/en/2014/04/19327172/private-equity-venture-capital-smes-developing-countries-role-technical-assistance https://hdl.handle.net/10986/17714
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