'Most Missing Middle' Celebrates 2 Years Since Launch

This Micro, Small and Medium Enterprises Day, VisionFund International is celebrating the milestones achieved in the second year of its “Most Missing Middle” (MMM) program in Ghana and Myanmar. The MMM program is delivered in partnership with the Australian Government (DFAT’s innovationXchange and Aid4Trade), World Vision Australia and also supported by the Shapansky Foundation.

Small and medium enterprises (SMEs) are the backbone of economic growth and are by far the largest employers in low-income countries (accounting for 78 percent of employment). SMEs create stable jobs, raise incomes, create connections to regional and global markets, stimulate local economies, and increase access to critical goods and services for underserved communities. Small and Growing Businesses (SGBs) are SMEs with strong financial and job-creation growth potential. SGBs are frequently excluded from both microfinance and the formal banking sector; deemed too large to be considered for microcredit, but too small to qualify for a proper banking loan. SGBs remain a key focus for VisionFund as we meet the needs of our growing business clients, but also for the critical role they play in creating jobs for low and unskilled workers.

Without targeted services, SGBs in Myanmar and Ghana representing the ‘most missing of the missing middle’ (those seeking loans of USD $3,000-50,000) will remain constrained and will not achieve their full potential -particularly women-led SGBs that face greater barriers to growth. To address the credit market failure for SGBs, the MMM project is offering larger scale loans (USD $3,000 and above) in Myanmar and Ghana, to provide sufficient credit for this overlooked segment. The project also offers business coaching to these clients, and is also testing effectiveness of targeted technical assistance.  

Since the beginning of the project, 1,510 loans worth US$6,169,074 have been disbursed to 1,398 clients, 55% of whom were women entrepreneurs, meaning VisionFund has disbursed 120% of its cumulative second-year targets. In Myanmar, SGBs on their first loan cycle reported average annual business turnover of US$193,559, with a 54% increase again on the second loan cycle. In Ghana, a 79% increase in turnover on the second cycle compared to the first indicates that SGB clients are utilising the access to credit to grow their business income. 

A key element of the MMM project is also the delivery of business coaching alongside the SGB loans, so that entrepreneurs can improve their knowledge, skills and business decision making. This year, our impact measurement data shows that over one-third of clients in Myanmar and over half of clients in Ghana have substantially changed their business practices as a result of the business coaching, including revisions in marketing and selling practices, as well as cashflow and physical assets management. In both countries, women are more likely to recognise the value of business coaching in building their business knowledge, skills, and ultimately profitability with 48% of women entrepreneurs in Myanmar, and 29% of women entrepreneurs in Ghana indicating (unprompted) that the business coaching was a key reason in their increasing profitability .

The hypothesis of the MMM project is that when SGBs become more profitable, they are able to take on more staff and therefore create employment opportunities in their communities. From our 1,398 SGB clients, an estimated 8,469 jobs are being sustained, ensuring that the benefits of SGB investment go far beyond VisionFund’s own clients to almost seven times the number of families. Over three-quarters of our clients pay their employees more than the minimum wage, ensuring economic prosperity for others, as well as borrowers.

Though the COVID-19 pandemic has disrupted both VisionFund’s and our clients’ SGB operations, both VisionFund Myanmar and VisionFund Ghana have been quick to transition their SGB clients from a growth and employment mindset to operations focused on survival and employee support. Business coaching has switched to more remote/online modes of delivery, and both microfinance institutions are continuing to conduct surveys to understand how businesses are adapting, and how we can provide further, tailored support.

In year 3 of the MMM project, VisionFund is looking forward to a range of new and revised activities. Key activities in the coming year will involve further upgrading and gender lens strategies including gender-awareness in training materials, developing strategic partnerships for client acquisition that target women, and exploring peer learning support models (including digital tools/apps). Business coaching materials will also be revised to include a stronger focus on business continuity and business resilience to shocks and stresses in coping with the COVID-19 impact. We are excited to support even more MSMEs and their employees over the coming year and into the future.

A growing middle class and increasing consumer sophistication has bolstered sales of beauty and personal care products in Myanmar. SGB client Daw Hmwe Hmwe, a 30- year-old single mother, understands the sector and burgeoning local demand for Korean skincare products due to the popularity of Korean dramas and celebrities. Knowing what her clients want, she stocks Korean lotions, make-up, and other skin care products.

Daw Hmwe Hmwe started her cosmetics store in 2007, but despite having market knowledge and skills, her business remained small as she could not access credit to scale up. VisionFund’s small and growing business loans provided her with the much-needed funds to

increase her range of inventory to match rising customer demand, that in turn increased her business turnover and profitability significantly. With the loan, she was able to increase her stock and her sales increased to 1,000 facial masks per week. With additional capital, she was able to move out of her father’s house to a larger retail shop closer to the city centre, receiving much higher traffic. She employs six workers who help her in receiving orders, packaging, delivery, product advertising and marketing, among others, and is now on her third loan of US$7,230.

“I now have over 30 wholesale buyers and retail buyers and so it is important to keep track of my business meticulously,” says Daw Hmwe Hmwe. With coaching support from her VFM Client Relationship Officer, she is taking steps to expand her business into three neighbouring townships.

Prior to the outbreak of the COVID-19 pandemic, Daw Hmwe Hmwe had plans to expand her cosmetic business and open a beauty salon. However, her business has been affected by the recent lockdowns and restrictions of movement, with monthly sales for cosmetics dropping by about 30 percent. However, Daw Hmwe Hmwe has also been quick to seize on the high demand for face masks from China. Surging demand for these masks means that she is seeing daily sales in excess of US$70.

“The success of my business does not only benefit myself, my 9-year-old daughter and elderly father. It also helps the families of my workers. And most importantly, it enables me to continue supporting 11 foster children (aged 6- 16),” added Daw Hmwe Hmwe. “In 2011, a big storm Giri orphaned many children and since then I have taken them in to live with us and pay for their education, food and healthcare.”

Written by Chris Rowlands, Director – Small and Growing Business (SGB) Finance, VisionFund International