The fourth and final SME Finance Loans for Growth (LFG) impact report shows how SMEs in emerging and frontier markets benefit from access to finance, as well as how they were affected by the COVID-19 pandemic in 2020.
After four years of annual data collection, we find a positive relationship between access to finance and business owners’ ability to buy new assets, launch new businesses, raise the wages they pay to their employees, and increase the proportion of full-time employment. However, SMEs were severely affected by the COVID-19 pandemic and had to resort to several coping mechanisms, including reducing their working hours, temporarily closing their business and laying off employees. In coordination with other players in the impact investing industry, LFG demonstrated flexibility in its repayment schedules to ease the burden of loans on SMEs during the pandemic and support their recovery.
Launched in September 2016, the LFG fund was a public-private partnership between Symbiotics, UBS and the Swiss State Secretariat for Economic Affairs (SECO). The fund benefitted from a 10% first-loss risk protection, co-funded equally by UBS and SECO, which made it an attractive vehicle to mobilize private capital to promote economic growth in emerging and frontier markets. Over four years, the fund achieved both a positive financial return and social impact through its investments, which financed SMEs in 24 emerging markets through 42 financial institutions active in the SME segment. It aimed at fostering employment growth and entrepreneurship, as well as at promoting the democratization of access to capital, and ultimately helping to advance towards the Sustainable Development Goals.
LFG had a dedicated budget for impact measurement, which allowed us to collect data directly from the SMEs financed by the fund and publish the results in a series of four annual impact reports. The sample examined included 924 SMEs in 12 countries, interviewed in four rounds of annual data collection. This effort not only shows that LFG had measurable social impacts on SMEs, but also allowed us to learn how to improve impact measurement initiatives in the future.
“Sustainability is at the heart of UBS’s purpose and mission, and we recognize the important role we can play in channeling capital where it is most needed. Blended finance solutions, such as the Loans for Growth fund, promote SMEs’ financial inclusion, job creation and entrepreneurship, while providing an opportunity for engagement of private wealth.” said Diana Celotto, Investment Executive Private Markets (Wealth Management) at UBS AG.
“For SECO, the Loans for Growth fund has been a pioneering public-private partnership, successful in mobilizing private capital for development and contributing in a measurable way to selected SDGs. SECO entered this partnership to act as a catalyst to scale such financing solutions and to assess their impact. The fund confirmed that such investments are commercially viable and private investors perceive them as less risky. This report summarizes key economic and social outcomes achieved in the past four years at the SME level. The Loans for Growth fund generated significant development impact by promoting SME financial inclusion, job creation and entrepreneurship, allowing SMEs to grow and improve their business performance. This final report provides us with some insights on the short-term effects of the COVID-19 pandemic on SMEs, which will help us to adjust and improve our approach and interventions for future engagements in impact investing.” added Liliana de Sá Kirchknopf, Head of the Private Sector Development Unit at the Swiss State Secretariat for Economic Affairs (SECO).
Yannis Berthouzoz, Head of Portfolio Management at Symbiotics stated “Symbiotics is very pleased to have contributed to this innovative and stimulating public-private partnership with the SECO and UBS. The Loans for Growth fund is a tangible achievement of Symbiotics’ impact promise, advancing access to capital for SMEs, the backbone of the economy, in regions of the world where it is most needed. While providing positive return to investors, state-of-the-art impact measurements proceeded over four years demonstrate the positive impact of the fund’s investments and their contribution to Sustainable Development Goals.”
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Symbiotics is the leading market access platform for impact investing, dedicated to financing micro- small and medium enterprises and low- and middle-income households in emerging and frontier markets. Since 2005, Symbiotics has structured and originated some 4,000 deals for over 490 companies in almost 90 emerging and frontier markets representing more than USD 6.5 billion. These investments have been purchased by more than 25 fund mandates and more than 50 third party specialized fund managers, forming a growing ecosystem and marketplace for such transactions. symbioticsgroup.com
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For more information, contact:
Samy Derradji, Corporate Communication Manager, Symbiotics