The Missing Middle
Taking Financial Inclusion to the next stage…
The Missing Middle is an interesting concept in the world of economics. This new focus in MEDA’s Financial Services area will bring a positive impact to millions of families living in poverty.
Small and medium enterprises … the backbone of the economy
This one slice of the economy – The Missing Middle – generates a large share of a nation’s gross domestic product (GDP) and jobs. SMEs – small and medium enterprises, often family owned – are the backbone of the economy. They also drive innovation and competition in many parts of the market.
In high-income countries, SMEs account for half of GDP and 60% of jobs. But in low-income countries – like those where MEDA works – they provide only a third of the employment and 17% of GDP. Research has shown than for every dollar invested in an SME, $6-$12 of economic benefit is realized through new jobs, increased tax revenue, export income and local product consumption.
Entrepreneurs in The Missing Middle face a common barrier: lack of access to capital to grow their business. They are "underserved" by financial institutions. – Microfinance institutions cater to very small companies or micro-entrepreneurs; commercial banks often lend only to larger businesses and corporations. – So SMEs are, in effect, squeezed out.
Working with local partners, MEDA improves access to financial services for Missing Middle businesses – taking financial inclusion to the next stage and helping to create new jobs.
When we work with local partner financial institutions and business development services to create products such as loans or credit lines to serve SMEs, we …
- pinpoint the specific needs of those entrepreneurs,
- provide training to the institution’s staff to strengthen capacity, and
- partner with other local organizations that offer entrepreneurs critical training in marketing, product development and market access.
MEDA is also focused on increasing access to finance for women and youth - two groups that currently are excluded from receiving quality financial products and services – to give these people a better chance for the future.
We believe that our approach of creating business solutions to poverty restores hope and dignity – in a sustainable way – to people living in poverty that a handout could never accomplish.