Going for Growth

Capitalism is something of a dirty word at the moment, so the launch on March 24th of a new initiative to attract finance for capital-starved entrepreneurs in the developing world is a timely reminder that jobs and economic growth are the most powerful levers in ending poverty. The Aspen Network of Development Entrepreneurs (ANDE) wants to create a new class of investment targeting small firms that are too big for microfinance but too small for venture capital.  The goal is to create a commerical market for investments in ‘growth finance’ – typically loans ranging from $50,000 to $1 million – to meet a huge unmet need for capital.

ANDE has support from many of the big names in philanthrocapitalism, including private foundations such as Gates, Rockefeller and Lemelson, corporate foundations including those of Shell and Citigroup, as well as organisations such as and Omidyar Networks that are leading that way in for-profit philanthropy. In the next five years, ANDE wants to raise $750 million to invest in the growth finance sector. “In the long term, our goal is to create the real possibility that the next Bill Gates or Richard Branson could come from a developing country” says ANDE director Randall T. Kempner.

The economic downturn, which has severely reduced the value of philanthropic endowments, means that foundations are going to have to use their money more strategically. As we discuss in the book, entrepreneurial philanthrocapitalists and corporate donors with big ambitions to make an impact are therefore looking beyond traditional grant-making to for-profit mechanisms. Some argue that the biggest hindrance to the growth of microfinance to scale over the past 20 years was a tendency to view it as a philanthropic rather than business investment. By starting out with a business mindset, the philanthrocapitalists behind ANDE want to build a multi-billion dollar for-profit growth finance sector a lot faster.