Large businesses, NGOs and the governments need to work hand in hand to support the ecosystem - this includes supporting financial service provision during the crisis. For example, Mercy Corps is working with a commercial bank in Uganda under our NUTEC program to develop a risk-sharing fund that helps mobilize loan capital to rural SMEs. Not only does this create access to capital that otherwise might not have been available, but the teams are considering how those loans might be restructured to further ease pressure on SMEs.
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For almost 20 years, Root Capital has worked collaboratively with Keurig Dr Pepper to deliver critical advisory services and catalytic financing to coffee cooperatives throughout the globe. This support enables these businesses to grow, access additional sources of credit, and become more resilient in the face of climate change and other challenges. Ultimately, these impacts benefit the cooperative members: smallholder coffee farmers, their families, and the rural communities in which they live. Both KDP and smallholder coffee farmers rely on these businesses to be professional, efficient, and service-oriented—upstream to their members (farmers) and downstream to their clients (KDP). With record-low coffee prices and the quickening pace of climate change, sustainable coffee enterprises serve crucial roles in helping farmers build a resilient future. In early 2018, alongside USAID and Keurig Dr Pepper, we formed the Partnership for Sustainable Coffee: a public-private initiative to improve the lives and livelihoods of 90,000 smallholder coffee farmers across the globe.
The Partnership for Sustainable Coffee, an alliance between KDP, Root Capital, Intelligentsia, and USAID, is working to build the resilience and competitiveness of coffee businesses in Peru, Colombia, Honduras, Rwanda, Uganda, and Indonesia. This three-year project brings together public and private sector resources, applying Root Capital’s proven “credit-plus-capacity” model to expand access to finance and build critical management capacities. Since 2017, the partnership has reached 141 coffee businesses, fueling growth and strengthening the livelihoods of more than 300,000 smallholder farmers in coffee communities across the globe.
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Yes, “community connector” is a great concept here. Large companies like Bayer can play the role of focal points, hubs or connectors to bring other critical players to the table, including financiers and other market players. As you are scaling this up, do you see synergies across places? And can this be part of Bayer’s future business model? @Lino
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I am curious to know if you’ve seen an improvement in the small businesses you are supporting during this COVID crisis vs those that you are not partnering with? It seems in general that those SMEs that have collaboration schemes with larger businesses are fairing better.
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*Government: Single biggest impact
Donor and foundations: Key role in implementation and executing business training and other skills
Digital Platforms: Next wave of solutions and tools are digital, peer-based and community enabled
Alternative funding mechanisms to ensure the viability model needed for success
*Thinking differently: Purpose + Business = Positive Impact
Some of our examples e are working on new MSMEs solutions related to micro-insurance to make SBO more resilient to unexpected shocks. In addition, we have developed our own business skills / financial literacy content and platforms. We are testing new credit management tools to make access to working capital easier. We continue to promote simplified accounts as a stepping-stone into the digital economy. We do research and other partnerships with Fintech to create solutions that will help the underserved in a more impactful way.*
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Thanks for sharing Christina! Agree, there’s an opportunity to elevate MSME program partnerships and solutions beyond the value chain to consider broader market system and landscape collaborations. This report we developed with Business Fights Poverty, CARE and Harvard Kennedy School provides some additional insights on this.
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This is what we are pioneering. Special purpose vehicles or facilities that bring together key actors but on an investment basis. One major emerging example now is around forest restoration in Brazil, where a major company/investor is seed funding a project development facility that will seed fund agroforestry initiatives with strategic offtakers and other impact investors. This will regenerate 100,000 hectares with at least $500 million in investment. But it has to be people centric with the communities in the priority regions
Amy / Willy - To what extent does Root Capital look at orchestrating its finance with large companies and government donors? Have you had much experience and success with this approach?
Hi Christina (@Christina_Tewes-Grad). The diag makes sense. Just one question: Who facilitates the conversations and agreements that must take place to solve those questions? Is it an expert who is paid for by a project funded by an NGO or a donor? Is it one of the companies or perhaps a business association or a chamber of commerce? Thanks!
Another role for large businesses and NGOs is to provide sustained business services and mentorship that will allow MSMEs to be more agile. This type of shock is likely to occur again – in this form or another – now is the time to strengthen businesses by providing services to help them adapt their products, services and business model to sustain those shocks in the future. Through our online MicroMentor platform, Mercy Corps is rolling out COVID adaptation mentorship programs for participating MSMEs. Through the platform, entrepreneurs can access guidance from peers on key COVID-19 challenges, such as pivoting business models, managing finance and online sales. It is operational in numerous Mercy Corps countries and has a plan to reach 100,000 businesses.
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Hi Leila - please feel free to add in your own question!
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Sandrine - what are you learning about delivering mentoring and support remotely through technology?
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The way partners need to coordinate activities at local level is similar, although partners will be different. We believe there is a replication potential and, yes, this is a business model that we want to further expand.
Agreed. We have continuous programs for SMEs that are part of our value chains. it is complete range from technical problems to access to affordable finance. Of course all of this needs to be continued and doubled down in covid situation
This is interesting Pam - would be interested to know what similar practices you may have scaled up in your East African markets?
From our perspective it needs to be one actor that has influence over all stakeholders or someone that brings impartiality and long term viability. Trust is a key factor in enabling partnerships for long term commitments.
Cross-sectoral collaboration is essential to create opportunities for MSMEs, corporates, and also intermediaries such as investors, accelerators and others. We should use this crisis to look at the more structural and systemic issues that undermine SMEs and large businesses alike. “Building back better” must mean building back more systemically. There are good examples of the collaboration, many of them referenced in the new Business Fights Poverty/Endeva report. But as the report points out, there is much more to do – and it requires a mindset shift and entrepreneurial attitude.
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Messages are much more powerful when they come from peers, and online platforms help create relationships with peers from all over the world. This is a powerful tool that does not necessarily require large investments to maintain.
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Dear @LuchoOsorio, we at Endeva actually work as system facilitators. Our work is funded by both public sector and large companies. Sometimes, our work is on demand, especially for large companies aiming to catalyze the industries of the future. We are working with Airbus at the moment to explore systems change opportunities based on remote sensing. Sometimes, we see an opportunity and fundraise for it. We see the demand for system facilitation increasing, as large companies (as well as others) realize the need for more transformative innovation and systems change.
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Third and final question for us:
Q3. How do we better enable and incentivise greater long-term collaboration between sectors in support of MSMEs, and who has a role to play in making it happen?