Report: Segmenting Enterprises
Entrepreneurs, small and medium sized enterprises (SMEs) and small and growing businesses (SGBs) come in many types and sizes. They cannot be treated as one homogenous group. The Collaborative for Frontier Finance (CFF) developed a segmentation framework which aims to help investors, intermediaries, their funders, and entrepreneurs better navigate the landscape of SGB investment.
Four key segments are of SGBs are proposed:
- Livelihood-Sustaining Enterprises Opportunity driven small businesses, that may be formal or informal, that have grown beyond subsistence to hire additional employees.
- Dynamic Enterprises Well established small to medium sized businesses, typically operating in traditional industries such as manufacturing, agriculture, services and retail.
- Niche Ventures Entrepreneurs seeking to grow, but whose products or services target niche markets.
- High-Growth Ventures Led by ambitious entrepreneurs with significant risk tolerance, who are seeking to scale into large addressable markets.
These segments are distinguished from subsistence enterprises, those comprised only of the owner with no other employees and little trajectory for growth, and are financially serviced by microfinance institutions.
CFF developed the report to enable actors to more effectively diagnose the distinct financing needs and gaps faced by these different types of enterprises, with the hope this will enable the industry to better focus on scaling the financing solutions that are most needed to empower these enterprises to meaningfully contribute to inclusive economic growth. The Collaborative for Frontier Finance is growing community of stakeholders that aims to increase access to capital for small and growing businesses in frontier and emerging markets. The initiative includes Omidyar Network, The Dutch Good Growth Fund, DFAT, infoDev (World Bank), MacArthur Foundation, Small Foundation, & Argidius.