IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/6827.html
   My bibliography  Save this paper

Private equity and venture capital in smes in developing countries : the role for technical assistance

Author

Listed:
  • Divakaran, Shanthi
  • McGinnis, Patrick J.
  • Shariff, Masood

Abstract

This paper discusses the constraints for private equity financing of small and medium enterprises in developing economies. In addition to capital, private equity investors bring knowledge and expertise to the companies in which they invest. Through active participation on the board of directors or in partnership with management, private equity investors equip companies with critical improvements in governance, financial accounting, access to markets, technology, and other drivers of business success. Although private equity investors could help to create, deepen, and expand growth of small and medium enterprises in developing economies, the vast majority of private equity in such markets targets larger or more established enterprises. Technical assistance, when partnered with private equity, can unlock more investor commitments and considerably enhance the ability of small and medium enterprises in emerging markets to raise private equity capital. Technical assistance provides funding that allows private equity funds to extend their reach to smaller companies. Technical assistance can mitigate some level of risk and increase the probability of successful investments by funding targeted operational improvements of investee companies. Dedicated technical assistance facilities financed by third parties, such as development finance institutions, governments, or other parties, have emerged to fill this critical need. The paper discusses the provision of investment capital twinned with technical assistance, which is now more accepted by limited partners and general partners or fund managers and is becoming more of a market model for private equity finance focused on small and medium enterprises.

Suggested Citation

  • Divakaran, Shanthi & McGinnis, Patrick J. & Shariff, Masood, 2014. "Private equity and venture capital in smes in developing countries : the role for technical assistance," Policy Research Working Paper Series 6827, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6827
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/04/01/000158349_20140401132328/Rendered/PDF/WPS6827.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Eric V. Edmonds & Norbert Schady, 2012. "Poverty Alleviation and Child Labor," American Economic Journal: Economic Policy, American Economic Association, vol. 4(4), pages 100-124, November.
    2. Angus Deaton, 2010. "Instruments, Randomization, and Learning about Development," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 424-455, June.
    3. de Janvry, Alain & Finan, Frederico & Sadoulet, Elisabeth & Vakis, Renos, 2006. "Can conditional cash transfer programs serve as safety nets in keeping children at school and from working when exposed to shocks?," Journal of Development Economics, Elsevier, vol. 79(2), pages 349-373, April.
    4. Bando, Rosangela & Lopez-Calva, Luis F. & Patrinos, Harry Anthony, 2005. "Child labor, school attendance, and indigenous households : evidence from Mexico," Policy Research Working Paper Series 3487, The World Bank.
    5. V. Del Carpio, Ximena & Macours, Karen, 2009. "Leveling the Intra-household Playing Field: Compensation and Specialization in Child Labor Allocation," Policy Research Working Paper Series 4822, The World Bank.
    6. Irineu Evangelista de Carvalho Filho, 2012. "Household Income as a Determinant of Child Labor and School Enrollment in Brazil: Evidence from a Social Security Reform," Economic Development and Cultural Change, University of Chicago Press, pages 399-435.
    7. Ucw, 2010. "Joining Forces against Child Labour: Inter-agency report for The Hague Global Child Labour Conference of 2010," UCW Working Paper 59, Understanding Children's Work (UCW Programme).
    8. Amarante, Véronica & Ferrando, Mery & Vigorito, Andrea, 2011. "School Attendance, Child Labor and Cash Transfer: An impact evaluation of PANES," PEP Policy Briefs 164618, Partnership for Economic Policy (PEP).
    9. Jere R. Behrman & Jorge Gallardo-García & Susan W. Parker & Petra E. Todd & Viviana Vélez-Grajales, 2012. "Are conditional cash transfers effective in urban areas? Evidence from Mexico," Education Economics, Taylor & Francis Journals, pages 233-259.
    10. Harounan Kazianga & Damien de Walque & Harold Alderman, 2009. "Educational and Health Impacts of Two School Feeding Schemes: Evidence from a Randomized Trial in Rural Burkina Faso," Economics Working Paper Series 0904, Oklahoma State University, Department of Economics and Legal Studies in Business.
    11. Ravallion, Martin & Chen, Shaohua, 2005. "Hidden impact? Household saving in response to a poor-area development project," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2183-2204, December.
    12. Britta Augsburg & Ralph De Haas & Heike Harmgart & Costas Meghir, 2015. "The Impacts of Microcredit: Evidence from Bosnia and Herzegovina," American Economic Journal: Applied Economics, American Economic Association, vol. 7(1), pages 183-203, January.
    13. Alam, Andaleeb & Baez, Javier E. & Del Carpio, Ximena, 2011. "Does Cash for School Influence Young Women's Behavior in the Longer Term? Evidence from Pakistan," IZA Discussion Papers 5703, Institute for the Study of Labor (IZA).
    14. Fernando Borraz & Nicolás González, 2009. "Impact of the Uruguayan Conditional Cash Transfer Program," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 46(134), pages 243-271.
    15. de Hoop, Jacobus & Rosati, Furio C., 2014. "Does promoting school attendance reduce child labor? Evidence from Burkina Faso's BRIGHT project," Economics of Education Review, Elsevier, pages 78-96.
    16. repec:pri:rpdevs:deaton_instruments_randomization_learning_all_04april_2010 is not listed on IDEAS
    17. Kevin A. Gee, 2010. "Reducing Child Labour Through Conditional Cash Transfers: Evidence from Nicaragua's Red de Protección Social," Development Policy Review, Overseas Development Institute, vol. 28(6), pages 711-732, November.
    18. Skoufias, Emmanuel & Parker, Susan W., 2001. "Conditional cash transfers and their impact on child work and schooling," FCND briefs 123, International Food Policy Research Institute (IFPRI).
    19. Ariel Fiszbein & Norbert Schady & Francisco H.G. Ferreira & Margaret Grosh & Niall Keleher & Pedro Olinto & Emmanuel Skoufias, 2009. "Conditional Cash Transfers : Reducing Present and Future Poverty," World Bank Publications, The World Bank, number 2597.
    20. Martin Ravallion, 2009. "Evaluation in the Practice of Development," World Bank Research Observer, World Bank Group, vol. 24(1), pages 29-53, March.
    21. Andrea Rodrigues Ferro & Ana Lucia Kassouf & Deborah Levison, 2011. "The Impact Ofconditional Cash Transfer Programs On Household Work Decisions In Brazil," Anais do XXXVII Encontro Nacional de Economia [Proceedings of the 37th Brazilian Economics Meeting] 208, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
    22. Felipe Barrera-Osorio & Marianne Bertrand & Leigh L. Linden & Francisco Perez-Calle, 2011. "Improving the Design of Conditional Transfer Programs: Evidence from a Randomized Education Experiment in Colombia," American Economic Journal: Applied Economics, American Economic Association, vol. 3(2), pages 167-195, April.
    23. Sarah Baird & Craig McIntosh & Berk Özler, 2011. "Cash or Condition? Evidence from a Cash Transfer Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1709-1753.
    24. Lorenzo Guarcello & Fabrizia Mealli & Furio Rosati, 2010. "Household vulnerability and child labor: the effect of shocks, credit rationing, and insurance," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 169-198, January.
    25. Akresh, Richard & de Walque, Damien & Kazianga, Harounan, 2013. "Cash transfers and child schooling : evidence from a randomized evaluation of the role of conditionality," Policy Research Working Paper Series 6340, The World Bank.
    26. Jere R. Behrman & Susan W. Parker & Petra E. Todd, 2011. "Do Conditional Cash Transfers for Schooling Generate Lasting Benefits?: A Five-Year Followup of PROGRESA/Oportunidades," Journal of Human Resources, University of Wisconsin Press, vol. 46(1), pages 93-122.
    27. Ana C. Dammert, 2009. "Heterogeneous Impacts of Conditional Cash Transfers: Evidence from Nicaragua," Economic Development and Cultural Change, University of Chicago Press, vol. 58(1), pages 53-83, October.
    28. Del Carpio, Ximena V. & Loayza, Norman V., 2012. "The impact of wealth on the amount and quality of child labor," Policy Research Working Paper Series 5959, The World Bank.
    29. Cigno, Alessandro & Rosati, Furio Camillo, 2005. "The Economics of Child Labour," OUP Catalogue, Oxford University Press, number 9780199264452.
    30. Duryea, Suzanne & Lam, David & Levison, Deborah, 2007. "Effects of economic shocks on children's employment and schooling in Brazil," Journal of Development Economics, Elsevier, vol. 84(1), pages 188-214, September.
    31. Robert Sparrow, 2007. "Protecting Education for the Poor in Times of Crisis: An Evaluation of a Scholarship Programme in Indonesia," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 69(1), pages 99-122, February.
    32. Felipe Barrera-Osorio & Marianne Bertrand & Leigh L. Linden & Francisco Perez-Calle, 2008. "Conditional Cash Transfers in Education Design Features, Peer and Sibling Effects Evidence from a Randomized Experiment in Colombia," NBER Working Papers 13890, National Bureau of Economic Research, Inc.
    33. Ravallion, Martin & Wodon, Quentin, 2000. "Does Child Labour Displace Schooling? Evidence on Behavioural Responses to an Enrollment Subsidy," Economic Journal, Royal Economic Society, vol. 110(462), pages 158-175, March.
    34. Norbert Schady & Maria Caridad Araujo, 2008. "Cash Transfers, Conditions, and School enrollment in Ecuador," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Spring 20), pages 43-77, January.
    35. Paul Schultz, T., 2004. "School subsidies for the poor: evaluating the Mexican Progresa poverty program," Journal of Development Economics, Elsevier, pages 199-250.
    36. Candace Miller & Maxton Tsoka, 2012. "Cash Transfers and Children's Education and Labour among Malawi's Poor," Development Policy Review, Overseas Development Institute, vol. 30(4), pages 499-522, July.
    37. Paul J. Gertler & Sebastian W. Martinez & Marta Rubio-Codina, 2012. "Investing Cash Transfers to Raise Long-Term Living Standards," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 164-192, January.
    38. de Hoop, Jacobus & Rosati, Furio C., 2014. "Does promoting school attendance reduce child labor? Evidence from Burkina Faso's BRIGHT project," Economics of Education Review, Elsevier, vol. 39(C), pages 78-96.
    39. Schady, Norbert & Araujo, Maria Caridad, 2006. "Cash transfers, conditions, school enrollment, and child work : evidence from a randomized experiment in Ecuador," Policy Research Working Paper Series 3930, The World Bank.
    40. Katia Covarrubias & Benjamin Davis & Paul Winters, 2012. "From protection to production: productive impacts of the Malawi Social Cash Transfer scheme," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 4(1), pages 50-77, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Debt Markets; Access to Finance; Emerging Markets; Investment and Investment Climate; Microfinance;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:6827. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.