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Which is the Hottest of the Frontier Markets?




By Ryan Weeks on 14th May 2015

https://goo.gl/5hL5VO

The recently launched Emerging Crowd has conducted some research into which of the frontier markets represents the hottest opportunity.

 

Emerging Crowd is an equity and debt (via mini-bond) crowdfunding platform that went live towards the end of April. The platform arrived with a pair of African investment opportunities in tow – each aiming to raise half a million pounds via the issuance of equity. Investing within frontier markets – particularly in early stage companies – is an intrinsically risky business. Emerging Crowd is negotiating those risks with a painstaking, hands-on due diligence process, a firm emphasis on transparency and an all-round drive for professionalism.

 

But what of the frontier markets themselves? How are investors to know where best to root out opportunities?

 

These questions are not exclusively relevant to Emerging Crowd. There are other frontier-focused platforms out there. The Dutch SME lending site Lendahand. The peer-to-business lender Solvesting. Aztec Exchange – the trade finance marketplace for businesses in developing nations. The Middle Eastern equity crowdfunder Eureeca – which is keen to branch out into frontier markets.

 

These platforms cover a huge geographical spread – from Kenya to Columbia, from Ghana to the Philippines. With a rising number of developing nations churning out a mounting number of investment opportunities, Emerging Crowd has attempted to shed light on where private investors ought to be focusing their attentions. 

 

The numbers show Nigeria to be the world’s most attractive frontier market for investors, closely followed by African rivals Kenya and Ghana. Bringing up the rear in the 4th and 5th spots were the Philippines and Vietnam. Take a look at the leaderboard below.

 

 

Population
(million)

2014 GDP
estimate
(£ billion)

SME sector*
(£ billion)

SME as % of GDP

SME as % of all businesses

2015 forecast GDP growth

 

 

Nigeria

174

369

173.5

47%

96%

5.5%

 

Kenya

44

39

12.9

33%

98%

6.4%

 

Ghana

26

34

16.7

49%

90%

3.9%

 

Philippines

98

192

57.6

30%

99%

6.6%

 

Vietnam

90

120

48.0

40%

97%

6.2%

 

Source: World Bank; Philstar; Ghana Web; Kenya Institute of Management; Business-in-asia.com

*Note: SME sector sizes based on 2013 GDP contribution

 

Will Tindall, Co-Founder of Emerging Crowd, commented on the results:

 

“Nigeria is in a unique sweet spot for investors right now. This month’s smooth transition of power from one democratically elected president to another is a potent endorsement of its political stability, and the falling oil price has spurred its vast economy to diversify rapidly.

 

“Thousands of entrepreneurial young companies are springing up – and with such a huge and untapped market on their doorstep, the best have extraordinary growth potential. With the Nigerian currency now 14% cheaper against the Pound than it was a year ago, the country’s stocks represent exceptional value to investors who are keen to broaden their horizons into frontier markets.”

 

The numbers produced in Emerging Crowd’s research are by no means grounds for an investment decision to be based upon, but they do underscore the fundamental importance of small business activities within various frontier economies. Such businesses currently occupy a gaping hole in the financial ecosystem, creating a significant opportunity for the likes of Emerging Crowd.

 

Mr. Tindall summarised:

 

“All of the countries to make the top five have a thriving SME sector like the UK’s, together with strong GDP growth and favourable demographics. Crucially, they all have a strong legal framework for investor protection.

 

“Frontier markets can offer investors significant growth and income as part of a diversified investment portfolio. For decades the only practical way for investors who reside outside these markets to access them was via a fund. Emerging Crowd was set up to allow investors to invest directly in a carefully curated selection of companies in the world’s most exciting emerging and frontier markets.”

 

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