Mobilizing data to deliver big money to small firms

25 June 2020
ITC News
The challenge

Developing countries are full of small and medium-sized enterprises (SMEs) with commercially viable business ideas. Nevertheless, private investors face substantial uncertainty when investing in SMEs: they perceive the macro environment as precarious, and investment processes as non-transparent and unpredictable.

Knowledge can go a long way toward dispelling these concerns. Indeed, investor surveys underscore how information about local small businesses is a critical element in their investment decisions. Investors need to know which small firms can meet quality, quantity and time requirements and which are financially stable and ready to expand.

However, such data is all too often absent. Investment promotion agencies would be better placed to attract and retain investors if they could provide granular information on SMEs with investment potential. Many investment promotion agencies in developing countries suffer from capacity and budgetary constraints that undermine their ability to gather data on SMEs in their countries and connect this business intelligence to potential investors.

The failure to bring data about investment-ready SMEs to the doorstep of investors can have grave development implications. ITC frequently works with start-ups with excellent business plans that are unable to find the funding to turn these ideas into reality.

The solution

In 2019, ITC continued to develop local business intelligence guides that provide investors with granular information on private-sector investment opportunities. These guides are complements to traditional investment promotion guides containing information on the macroeconomic performance of countries and processes relevant for investors.

Local business intelligence guides add to this by providing information on businesses in the sectors to which local authorities want to draw investors. The guides are, therefore, a useful tool to match investor and local stakeholder interests and to match investors with local SMEs looking for finance.

Drawing on data from ITC’s SME Competitiveness Surveys, ITC’s Local Business Intelligence briefs provided timely and appealing micro-economic data on the investment readiness and sustainable development potential of SMEs in developing countries.

For instance, ITC published Invest in Ghana in partnership with the Ghana Investment Promotion Centre to build its capacity to match investors with local firms. In addition, in collaboration with UkraineInvest, ITC published Invest in Ukraine to help boost the country’s investment inflows for small businesses.

On a global scale, a financing gap stands in the way of scaling up small and medium-sized enterprises to generate the economic activity needed to attain the United Nations Sustainable Development Goals (SDGs) by 2030.

In 2019, to add detail to this challenge, ITC’s flagship SME Competitiveness Outlook (SMECO) outlined how local financial intermediaries can use high-quality data on investment-ready SMEs to mobilize an additional $1 trillion of private investment needed to make significant inroads toward achieving the SDGs. This research report, subtitled Big Money for Small Businesses, provided thought leadership on how to match SMEs and investors at the volume and quality required to boost investment flows.

ITC launched the report on International Micro, Small and Medium-Sized Enterprises (MSME) Day on 27 June 2019 in Geneva, New York, Mumbai, Nairobi, Lyon and Offenburg.

The results

The provision of local business intelligence through the SME Competitiveness Survey publications continues to deliver dividends.

Ghana has used its investment brochure to reach out to investors. Yofi Grant, the Chief Executive Officer of the Ghana Investment Promotion Centre, received the brochure at a meeting at ITC in June 2019. He held a series of meetings with impact investors as part of a delegation that included entrepreneurs and a representative of the Ghana Export Promotion Authority.

‘This informative material will be essential in our activities moving forward,’ said Christopher Daniel Tettey, Assistant Investment Promotion Officer in the office of the CEO at Ghana Investment Promotion Centre.

UkraineInvest also used its investment brochure in a series of strategic actions to boost investment in Ukraine.

‘Ukraine has a unique opportunity to become a key Eurasian technology, manufacturing and agribusiness nexus, a critical link in the new 21st century global supply chain economy,’ said Mykhailo Bechkalo, Executive Director of UkraineInvest.

‘The “Invest in Ukraine: Local Business Intelligence” report reveals invaluable information about three sectors:
food processing, civil aircraft maintenance, repair and operations, and information technology, which can be of practical interest to those exploring investment opportunities in Ukraine and eager to contribute to sustainable development while reaping good business returns.

The UkraineInvest team was happy to cooperate with the International Trade Centre on this report and is grateful to the ITC team for promoting Ukraine as an attractive investment destination globally and the lucrative opportunities it has to offer.’

Meanwhile, the solutions proposed in the SMECO 2019 were taken up by stakeholders to answer global financial questions and influence policy discourse. For instance, key stakeholders discussed the flagship’s ideas during the United Nations Economic and Social Commission’s Forum on Financing for Development in New York in April 2019.

The future

ITC’s data on SME competitiveness provides good insights into investment opportunities that can help enterprises get the investment they need to contribute to the 2030 Agenda for Sustainable Development.

In 2020, ITC plans to publish three more local business intelligence reports based on SME Competitiveness Surveys. Global initiatives linked to the G20 are drawing from the insights of SMECO 2019. In addition, ITC is gathering more SME data in Togo, Burkina Faso, and Cambodia to develop more intelligence for investment in SMEs.