The World Bank released its World Development Report 2013 and addressed the progress of small companies in the developing world. These are the bread and butter of impact investments.
While small companies don't inure the same positive social impact as larger companies, which provide more jobs, higher wages and foster more exports, they in many cases outperform financially-by as much as 10 times.
According to the World Bank report, small enterprises in Africa outperform by a factor of 10 the largest 20% of companies in the same region. That's nothing to shrug off.
Despite the fact that critics of late say data show small companies and micro-enterprises in the developing world don't lift people out of poverty as much and as fast as big companies, the fact that smaller enterprises can and do flourish is something to celebrate, not denigrate. The book Poor Economics comes to mind with regard to this negative position on microfinance.
In any event, the World Bank report surveyed 54,000 firms in more than 100 developing countries. It's worth checking out all the data and information on the World Bank Web site (www.worldbank.org).
From a business, procurement and trade perspective, the World Bank report certainly endorses the idea that bigger is better in developing world dealings. But for investors, that is not the case.
According to The Economist, "Some small firms are doing well, not just surviving.... The question is what can be done to improve matters."
Impact investors know what can and should be done: Wage more capital at smaller enterprises that are on a clear growth trajectory.
Small firms may not become big firms overnight in the developing world. Infrastructure, governance and other problems haunt startups, even moreso overseas than right at home in the U.S. Solving matters takes risk. But if nothing else, the World Bank report shows there is reward.
Thomas M. Kostigen, who writes about impact investing for fa-mag.com, is a New York Times bestselling author whose latest book is Golden Dawn.