The Missing Middles: Segmenting Enterprises to Better Understand Their Financial Needs

Small and growing businesses (SGBs) contribute to significant positive impact in emerging economies, but they struggle to access the capital they need to reach their full potential.  According to the IFC, SGBs in emerging markets face a $930 billion financing gap.  Many are stuck squarely in the “missing middle”: they are too big for microfinance, too small or risky for traditional bank lending, and lack the growth, return, and exit potential sought by venture capitalists.

SGBs are also incredibly diverse: ranging from an agricultural cooperative to a high-tech start up to an energy access venture serving base of the pyramid customers.  

In order to move the needle on addressing the SGB financing gap, we need to better understand and dissect this huge and diverse market – and identify the financing solutions that can be scaled up to address the distinct financing needs of different types of SGBs.  

In partnership with the Collaborative for Frontier Finance, Omidyar Network, Dutch Good Growth Fund, and Dalberg Advisors have worked together to develop a segmentation framework with the aim of helping investors, intermediaries, and entrepreneurs better navigate the complex landscape of SGB investment in frontier and emerging markets. 

By segmenting the SGB market into multiple “missing middles,” we aim to help more effectively diagnose the distinct financing needs and gaps faced by different types of enterprises, and in turn better focus on scaling the financing solutions that are most needed to empower enterprises of all types to meaningfully contribute to inclusive economic growth.