Investing in Local SMEs through DGGF in Developing Countries

The Dutch Good Growth Fund (DGGF) by the Ministry of Foreign Affairs of the Netherlands aims to bridge the financing gap for SMEs in developing countries, particularly focusing on entrepreneurs looking to expand. It offers investments in Dutch and local SMEs, targeting specific groups like women, young entrepreneurs, and those in fragile states. The fund supports the Missing Middle by providing financial backing to small and medium-sized enterprises that often struggle to access traditional financing. DGGF's track 2 involves a fund-of-funds structure and a dedicated monitoring and evaluation function to measure impact and ensure rigorous evaluations despite challenges faced by impact investors.

• SMEs
• DGGF
• Developing Countries
• Financing Gap
• Entrepreneurship

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1. Government of the Netherlands Ministry of Foreign Affairs Dutch Good Growth Fund Investing in local SMEs

2. Challenges for SMEs in developing countries Financing gap, especially for entrepreneurs aiming to grow Specific financial products not available on the local market Coaching of entrepreneurs can be of added value to merely providing loans or equity Specific groups of entrepreneurs (women, young entrpreneurs, and entrepreneurs in fragile states) face these challenges more often

3. DGGF: a revolving fund Investments in Dutch SMEs 175 mln Investments in Local SMEs 175 mln 1.Dutch businesses that invest partner with local SMEs 2.Direct investment in local SMEs Objectives: development impact (e.g. jobs, productivity, financial sector development) and financial return Innovative & additional to existing market offering: - Higher risk tolerance investing in vulnerable groups (female and young entrpreneurs, entrepreneurs in fragile states) - Corporate Social Responsibility requirements (ESG en tax) Export by Dutch SMEs 175 mln Post-2015 370 mln

4. DGGF supports the Missing Middle Corporates and multinationals >$10 Mio Large enterprises $2 $ 10 Mio MISSING MIDDLE $ 50K - $ 2 Mio Small and Medium Sized Enterprises (SMEs) The SME financing gap Micro- enterprises $ 1K $ 50K

5. DGGF track 2: Fund-of-funds structure DGGF track 2

6. DGGF track 2: Dedicated M&E function DGGF Impact Monitor: impact measurements on all IFs and SME investees, collected annually, e.g. - revenues - # employees - % young/female ownership - et cetera 7 external evaluations at IF level, commissioned by the track 2 implementers, including measurement of impact at SME and financial sector level 1 overall DGGF external evaluation 2014-2019, including some IF and country case studies

7. DGGF track 2: Rigorous evaluation, but Aim: 7 IF evaluations, using rigorous methods, i.e.: - experimental or quasi-experimental methods, using baseline-endline and with-without comparisons; or - when the numbers do not allow for the above, in-depth case studies at SME level. Challenges: - new approach for impact investors, administrative burden deemed too great; - limits to data access; - methodological difficulties in forming proper control groups; - risk of short-termism due to pre-selected indicators. Result: pushing evaluation frontier outwards

8. Contact information: www.dggf.nl dggf@nl.pwc.com http://www.curtomuito.net.br/wp-content/uploads/2013/11/facebook-login-como-entrar-300x336.jpg http://www.geokingsbury.com/wp-content/uploads/2013/12/linkedin-icon.png https://pbs.twimg.com/profile_images/666407537084796928/YBGgi9BO.png