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Google, Soros, Omidyar launch $17 million fund for Indian SMEs

Google.org, the philanthropic arm of Google, has joined hands with Soros Economic Development Fund, a non-profit private foundation launched by George Soros, and Omidyar Network, a philanthropic investment firm established by eBay founders Pamela and Pierre Omidyar, to create a $17 million Small to Medium Enterprise Investment Company for India.

Google.org, the philanthropic arm of Google, has joined hands with Soros Economic Development Fund, a non-profit private foundation launched by George Soros, and Omidyar Network, a philanthropic investment firm established by eBay founders Pamela and Pierre Omidyar, to create a $17 million Small to Medium Enterprise Investment Company for India.

The initiative is aimed at creating job opportunities and spurring greater economic participation for a larger segment of the country’s population. The Investment Company plans to hire an investment advisor and two senior investment analysts based in India to recommend and build the pipeline of portfolio investments.

“While SMEs in rich countries represent half of GDP, they account for a much lower portion in developing economies like India, partly because SMEs don’t have access to the same type of financing,” Sonal Shah of Google.org has said. “Our goal is to increase the flow of capital to SMEs in India. This is an important step in helping to attract commercial capital and reduce dependency on philanthropy or soft capital to fund this industry.”

Many small to medium Indian businesses lack formal funding options because of a market gap between the microloans offered by microfinance institutions and the larger investments of commercial banks and private equity funders. Most of the existing small to medium enterprise funds make investments in the $3-$5 million range, leaving out a significant portion of this market. The Investment Company plans to target this ‘missing middle’ with equity investments between $500,000 and $3.5 million.

“With this investment, we will meet the huge demand to serve smaller businesses in India that have little access to finance,” Neal DeLaurentis, vice president, Soros Economic Development Fund (SEDF), has said. “Long ignored by commercial capital markets, small and medium businesses are an attractive investment opportunity as well as an engine for economic growth for India.”

“We have seen what microloans can do at the individual level and are excited about bringing that same opportunity to small and medium businesses,” Jim Bunch, director, investments, Omidyar Network, has said. “A new generation of entrepreneurs and their families will benefit economically and socially, and as their enterprises grow, these benefits can be shared with employees and their families, as well as the community at large.”

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