Nairobi – Many middle companies are being forgotten as more investors channel their resources and nonfinancial support towards startups and successful companies, Yunus Social Business (YSB) has said.
Susan Ngalawa, the investment director at Yunus Social Business decried that very little resources and support go to these two leaving out those she described as ‘missing middle’ which also has a lot of potential for growth.
She cited a survey conducted by Yunus which indicated that 30 percent of financial resources go to startups valued at USD 100,000 and below while 50 percent goes to those large companies valued higher than USD 1 million.
“Very little goes to these middle-companies, they are not being serviced, Initially, we thought it was a bank issue but we see the same duplicated across sustainable fund managers. Everyone wants to fund startups, it sounds great, we have a lot of venture capital going there and everyone also wants to fund the success story, the one that has made it, but the one that is on the verge of growth is being forgotten, “she decried.
Among the reasons she cited is that many companies do not want to take additional risk to these firms which have less established structures and may in turn require a lot of support.
Further, she said that majority of these businesses need more than money which many investors do not want to offer.
“Large companies have established structures and therefore investors look at the potential of higher returns. Also, some of these ‘missing middle’ companies are not known and are therefore invisible to the investors,” she added.
Most of these companies, she said, need non-financial support as much as the financial resources even as she explained that the majority lack various information on how to conduct business efficiently.
“When you dig deeper, they need more than just money, they require additional non-financial support, some of these companies do not understand where to look for investors. Despite, the high number of incubators, many do not know when to get them and do not know what kind of investment opportunity they need, “she remarked.
In order to bridge that gap, she noted that Yunus has structured its products so that it not only gives funds but additional non-financial support
“At Yunus, we offer concessional loans at lower rates than the banks and we work with the existing collateral a company has,” she explained.
YSB is a social impact fund co-founded by Nobel Peace Prize Laureate, Prof. Muhammad Yunus and has worked with Burn and ED Partners in the country