SME Competitiveness Outlook 2019: Big Money for Small Business – Financing the Sustainable Development Goals

Financing the Sustainable Development Goals 85Countryprofiles © International Trade Centre 2019 The International Trade Centre (ITC) is the joint agency ofthe World Trade Organization and the United Nations. Big money for small business Financing the Sustainable Development Goals About the report Increasing annual investments in small and medium-sized enterprises by $1 trillion would yield disproportionate dividendsin terms of progress towards the Sustainable Development Goals. These investments also have the potential to deliverhealthy returns for investors. To boost investment in developing country small firms, this report finds that stronger investment facilitators (actors whichconnect firms to investors) are key. Other major findings: bundling investments for small firms into large packageshelps scale up financing; disseminating information on small business credit performance improves risk assessments;and helping these firms to be investor-ready improves their commercial viability. Publisher: International Trade Centre (ITC) Title: SME Competitiveness Outlook 2019: Big Money for Small Business – Financing the Sustainable Development Goals Publication date and place: Geneva, June 2019 Page count: 230 Language: English (Executive Summaries are available separately in French and Spanish) ISBN: 978-92-1-103673-2 eISBN: 978-92-1-004276-5 Print ISSN:2519-1071 e-ISSN:2519-1225 UN Sales Number:E.19.III.T.2 ITC Document Number:P95.E/DMD/CEES/19-VI Citation:International Trade Centre (2019).SME Competitiveness Outlook 2019: Big Money for Small Business – Financingthe Sustainable Development Goals. ITC, Geneva. For more information on ITC’s SME Outlook, see http://www.intracen.org/SMEOutlook/ and ITC’s Competitiveness Suveys,see: http://www.intracen.org/SMEBenchmarking/ The designations employed and the presentation of material in this publication do not imply the expression of any opinionwhatsoever on the part of the International Trade Centre concerning the legal status of any country, territory, city or area orof its authorities, or concerning the delimitation of its frontiers or boundaries. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, without priorpermission in writing from the International Trade Centre. Digital image on the cover:© Shutterstock © International Trade Centre (ITC),www.intracen.org ITC is the joint agency of the World Trade Organization and the United Nations. Contents AcronymsXIForewordXIIExecutive SummaryXIVAcknowledgementsXXIV PART I. SCALING UP INVESTMENTS IN SMEs1 CHAPTER 1: Investing in small business for sustainable development2A tale of two finance gaps2Finance gap for Sustainable Development Goals2Finance gap for small and medium-sized enterprises3Solving the financing conundrum3Investing in small businesses for sustainable development4SMEs affect the SDGs through four channels4Small businesses key to Sustainable Development Goals 8 and 99Decent work and economic growth10Invest $1 trillion in SMEs to fulfil their sustainable development potential10Potential of large-scale private investment11Redirecting investment to small businesses in developing countries11Investments in small and medium-sized enterprises12Risks of investing in SMEs in developing countries16The way forward16 Higher risks, higher expected rewards17Lending to start-ups or small businesses18Taking equity in start-ups or small businesses19Five stages of the investment process19Who invests in small businesses in developing countries?21Start-up investors21Foreign direct investors27Investment funds29 CHAPTER 3: Approaches to investing in small businesses37 Innovative approaches to investing for sustainable development37Impact investing37Blended finance38Measuring investment contribution to sustainable development40Innovative investment tools to promote sustainable development44SDG bonds44Trade finance44 CHAPTER 4: Getting small businesses investor-ready47From start-up to success48Presenting an enticing investment opportunity49Preparing business plans49Signalling quality and reliability through standards50Being visible51How investors view and assess enterprise risk51Market risk51Operational risk54Financial risk54Regulatory risk55Natural catastrophes and other risks60Cybersecurity61Securing the best investment terms62Defining the investment need62Firm valuation62Applying for investments63Converging on terms64CHAPTER 5: Connecting investors with small businesses65Fixing the matching problem65The process of matching investors and small businesses66Accelerators67Accelerators are having a positive impact68Despite expanding reach, weaknesses remain69To thrive, accelerators need to operate within a robust ecosystem72Online investment platforms72Crowdfunding is growing rapidly72Online matchmaking has limits78Appropriate policies can help maximize the potential of online investment platforms78Investment promotion agencies78What inve