MISSING MIDDLE

The "Missing Middle" refers to the gap of capital financing in emerging markets. A financial gap that stands between micro enterprises, typically financed by microfinance institutions and medium-large enterprises, which are leveraging on traditional institutional financing. Investors, policymakers and development professionals dedicate most of their efforts to either large corporations of over 500 employees or very small businesses with less than 10 employees. The issue of the small-medium enterprises (SMEs) extends beyond just a lack of capital, includes the lack of support, infrastructure and overlaying networks of intermediaries, institutions, and investors.

The Missing Middle presents a unique opportunity for emerging market investors to achieve both competitive financial returns and significant social impact, addressing some of the largest income and wealth gaps faced by developing countries and communities around the world. Closing this funding gap is the next stage of capital development after microfinance.
Quantifiable evidence in a number of studies show the correlation between the presence of SMEs with the growth of a nation's GDP and job creation.

The potential for an effective combination of social and financial returns is higher when investments are directed to:

• SMEs that deliver essential goods and services that directly benefit low income communities by providing access to affordable housing, healthcare, education, energy, livelihood opportunities, water, sanitation and the likes
• Financial Institutions that serve the unbanked and SMEs in developing countries