Details

Abstract / Summary

This case presents the real-world history of a field program to promote the financing of viable small and medium enterprises (SMEs) in one of the poorest and most troubled countries of the world. A key goal and expectation of the donor-funded project was the promotion of social enterprises -- sustainable local businesses that create employment and promote economic development. A second, and just as significant expectation, is that the services provided by this program on a subsidized basis should also become sustainable, as a service that can be costed-out to the financial institutions and clients. The idea of 2 Bridges refers to the two sides of the effort: one that operates through lending by commercial banks, and one that operates through creation of an angel venture fund to invest in equity of the SMEs. The program in Honduras is described in detail, along with issues and questions for further analysis, discussion, debate, and also potential implementation in other countries and contexts. There is a long history of expectations related to the financing of SMEs, some born out of a negative view of the economic development impact of micro finance, based on the conception that micro finance institutions were to 'graduate' their clients to a level where their growth in revenue (and employees) would require that they seek commercial bank financing. There is also a growing literature on the 'missing middle,' where the impact of addressing the lack of SME financing is expected to be job creation, the development of entrepreneurship, the building of a middle class, increases in the growth of GDP, and the promotion of innovation. Interest in the SME has been the foundation of many government and non-government organization training programs, but very little has been done in practical terms to create the link between these (hopefully) worthy small businesses and commercial bank financing. This case is, in effect, a challenge for building a bridge between banks and small businesses that may be a tool for the promotion of economic development in many countries of the world today. The teaching purpose of the case is to illuminate the problem of SME finance, and to both explain the solutions that 2 Bridges offers as well as to challenge the class participants to come up with new ideas for this purpose. The participants can focus on judging whether 2 Bridges has a sustainable model –- which is the way the case is presented –- or they could focus on coming up with a sustainable model whether it is one of the two presented here. We have found that it is easier to focus on the bank lending and venture fund bridges, and to try to judge whether they are sustainable. From that discussion, participants tend to come up with additional ideas about alternatives.

Field of Interest

Business & Economics

Author

Robert Grosse, fl. 2013, David R. Befus, fl. 2016

Copyright Message

Copyright © 2017 Thunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise.

Content Type

Case study

Duration

0 sec

Format

Text

Original Publication Date

2017

Page Count

10

Publication Year

2017

Publisher

Thunderbird Global School of Management

Place Published / Released

Glendale, AZ

Subject

Business & Economics, Social Sciences, Finance, Loans, Small business, Finance, Finance and Insurance, Finanzas, Finanças, Honduras, Hondurans

Keywords and Translated Subjects

Finanzas, Finanças