“Encouraging more women to start businesses and not providing them with adequate capital for growth is like sending talented novice mountain climbers up Everest without oxygen, a guide, and a tent. Few will make it to base camp, and for those that do, the odds of survival are even lower.”
— Alison Rose, co-founder of Decoded and board member of The Alison Rose Review of Female Entrepreneurship
The recent news regarding Silicon Valley Bank (SVB) has sent shockwaves through the banking industry, encouraging fears of a global banking crisis. It is worth acknowledging, however, that SVB appears to have taken substantial risks that led to their fall. When interest rates were low SVB bought US government bonds but when the inverse occurred, managers took very little or no steps to hedge their portfolio from the interest rate risks that were to come. As we previously communicated, AGC does not have any banking relationship or otherwise with SVB. The majority of our cash is held with Barclays Bank in the UK. We have some short-term deposits at other banks but we do not believe that any of those institutions have exposure to SVB. In addition to this, none of our portfolio companies have exposure to SVB as far as we know.
At AGC we remain optimistic for the rest of the year. We remain committed to putting capital to work and creating positive social impact in all the countries where we are active. Signs have been growing that the global economy is launching into 2023 on a surprisingly strong note. Private debt is starting to embrace impact investing and our investors continue to be pioneers. There is much to be done and hurdles to overcome.
Over the last almost 8 years since the Fund was launched in 2015, we have gotten to know our financial institution partners and their SME clients deeply. Primarily we have supported invoice discounting as the preferred product, and we continue to do so. But as the SMEs’ need for capital continues to evolve, so has our product offering. In the markets in which we operate, particularly South America and Eastern Europe, there is a developed market for invoice discounting and demand from SMEs for the product remains strong. In other markets, such as Sub-Saharan Africa, there is less need for factoring and more demand for short-term loans e.g. working capital or asset backed loans, where the SME has more flexibility to use the capital to run their business. Expanding our product offering will enhance our ability to create a positive impact for underserved SMEs in such markets where invoice discounting is non-existent or has a very limited reach.
In other news, Sam Miller Hicks, Chief Impact Officer at AGC, recently spoke on a panel about integrating stakeholder voices into the investment process at the Latin American Impact Investing Forum (“FLII”), held in Mérida Mexico February 28-March 2. The panel included Caitlin Rosser, Director of Impact Management at Calvert Impact, Eduardo Villaseñor, of CAPEM’s “Smart Money” division, and Juan Carlos Diaz-Bernard of Luxon Energy. The panelists spoke about how they have worked together to democratize access to financing throughout the entire capital supply chain. The discussion emphasized the importance not only delivering fairly priced financing to underserved small businesses, but also the crucial role that advisory and non-financial support from trusted local partners plays in helping small businesses grow. The session was well attended and received great feedback from both entrepreneurs and financial institution audience members.
Our latest case study this month focuses on our Estonia based partner and their accomplishments in meeting the demand of clients by expanding their product offerings. They share how valuable AGC has been in servicing them as a smaller lender who faces challenges receiving funding from large banking institutions. to support small businesses. By increasing offerings to customers, Finora’s ambitions to become a bank began to grow. For 2023 they continue with their plans to expand and grow their business with further ambitions to operate on the stock market in the long-term.
Current interest rates are hurting us all but none so more than SMEs, so supporting their working capital needs is needed now more than ever. If you would like to put capital to work this year, please contact Sudha at your earliest convenience.
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