Root Capital in Cambridge, Massachusetts, has announced $10 million in loan capital and a $4 million operating grant from the Bill & Melinda Gates Foundation to support the organization's efforts to provide financing to small and growing businesses in developing countries.
Over the next six years, the program-related investment will help Root expand its operations in sub-Saharan Africa, where the organization provides financing to businesses in rural communities that are part of the "missing middle" — those that are too big to qualify for microfinance loans and too small to attract the interest of traditional banking institutions. The investment will enable the organization to extend access to credit, financial management training, and global market opportunities for these businesses while expanding economic opportunities for more than five hundred thousand rural households.
The grant will also support Root Capital's growth plan to achieve a financially self-sustainable lending program by 2013.
Small and growing businesses, especially those in rural areas linked to agricultural value chains, are critical to establishing economic growth and alleviating poverty in developing countries. Such businesses account for less than 20 percent of employment in low-income countries, however, compared to 60 percent in developed countries.
"Access to the types of financial services provided by Root Capital is a critical enabling factor in the development of efficient agricultural markets and the entire value chain," said Lutz Goedde, deputy director of the Gates Foundation's Agricultural Development initiative. "By funding these services, we hope to provide small farmers and their families opportunities to increase their incomes and lift themselves out of hunger and poverty."