Publication: Private Equity and Venture Capital in SMEs in Developing Countries : The Role for Technical Assistance
Date
2014-04
ISSN
Published
2014-04
Author(s)
Divakaran, Shanthi
McGinnis, Patrick J.
Shariff, Masood
Abstract
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.
Citation
“Divakaran, Shanthi; McGinnis, Patrick J.; Shariff, Masood. 2014. Private Equity and Venture Capital in SMEs in Developing Countries : The Role for Technical Assistance. Policy Research Working Paper;No. 6827. © World Bank, Washington, DC. http://hdl.handle.net/10986/17714 License: CC BY 3.0 IGO.”
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