Synapse Market Access Fund

The Synapse Market Access Fund (Synapse) is a registered institution with a 501(C)(3) status under the fiscal and administrative sponsorship of the Global Fairness Initiative (GFI). Synapse is committed to creating economic opportunity for the working poor by catalyzing the growth of inclusive financial markets and mechanisms in developing economies. By introducing innovative financing models and direct loan products to small producers in the agricultural sector, Synapse bridges the “Missing Middle” gap between micro-finance and commercial banking. Synapse’s investments are complimented by GFI’s initiatives, which are focused on building local capacity, strengthening market access, and eliminating regulatory barriers to enhance the value and potential return of the Synapse portfolio.

Program Objectives: Bridging Supply and Funding through Innovation in Asset-Based Lending

Bridging the Gap in Financial Expertise

Using techniques of asset-based commercial finance, Synapse’s model improves access to business credit for small and growing agricultural enterprises in developing countries that are not well served by banks or by microfinance institutions.

While bank products employing techniques of asset-based finance are available in many developing countries, they lack the capacity to serve Missing Middle borrowers. To close this capacity and access gap, Synapse partners with agricultural cooperatives, small and growing business, and equipment dealers in rural communities to transfer the technology of asset-based lending practices and provide necessary financing to key stakeholders.

Bridging the Gap in Equipment Supply

Through our work we have identified a need to involve and partner with US agricultural equipment manufacturers seeking financial models that would allow them to access new markets. As such, Synapse will leverage its political, trade, and commercial affiliations in the US and abroad to create and expand agricultural equipment sales channels to target areas.

Bridge Loans and Working Capital

Synapse will provide direct loans to cooperatives to increase working capital and streamline industries to facilitate larger and timelier stock purchases. These interventions help guarantee a market for producers of agricultural goods and ultimately reduce the overall risk of the portfolio.

Social Impact and Assessment: Scalability, Sustainability, Impact

Synapse is an impact investment vehicle that cultivates long-term financial relationships with scalable initiatives that strengthen the capacity of smallholder producers and entrepreneurs in rural communities. Candidates for funding in this model of “enterprise philanthropy” are measured by three fundamental criteria: scalability, sustainability, and social impact.

Synapse has been working in Kenya for the last three years and has documented valuable information necessary to test and launch its Missing Middle financing concept at a meaningful scale. Proof of concept will begin with Kenyan and Ghanaian rural co-operatives and equipment dealers. In the initial stages, as milestones are reached, Synapse will access endowment and investor financing to scale up and expand programs in East Africa to Ethiopia and other areas, especially those that experience chronic food security issues and sectors that gainfully employ women. In later stages, such as when a sufficient track record in a given region has been established, Synapse will have demonstrated that the program model works: that is, bridging the gap between microcredit and commercial finance is a lucrative and viable space for mainstream financial institutions. Their entry will permit Synapse to unwind positions and recycle capital into more needy areas.

Model: The Case for Asset-Based Financing in the Developing World

While lack of familiarity with non-cash transactions and lack of know-how are important barriers, lack of working capital to provide transactional credit is the fundamental impediment to a growing business’s efforts to access additional capital. This is clear as, in the developing world, a business with a desire to sell on credit appears to have little to no source of capital for such an activity. Synapse believes that borrowers can be well served by an infrastructure of nonbank, lightly-regulated credit providers—accounts receivable factors, purchase order lenders, inventory lenders, and equipment leases, among others. In this manner, Synapse will address the absence of a secondary market for payment of claims that normally arises from credit sales but, in developing countries, creates absence of capital for transactional finance.

In making a decision to extend financing, these external factors are more important to an asset-based commercial finance operation than the credit criteria -- including debt service capacity based on internal cash flow and balance sheet strength -- that are usually of concern to a commercial bank lender. Thus, asset-based financing can overcome obstacles that tend to inhibit capital flows, whether in traditional bank loans or equity investments.

Required Resources: Funding

To pilot the meaningful expansion of the Missing Middle financing concept, Synapse will require a total of $1,500,000 for agricultural equipment finance and an additional $300,000 for short-term working capital finance in each of its operating regions.

Approach and Performance:

This two-pronged approach addresses immediate capital equipment needs of farmers as well as chronic downstream market failures in markets for agricultural goods—thus reducing overall risk for each borrower and to the fund as a whole. The model indicates a return of principle in four years and, thereafter, an ROI that will appeal to commercial investors.

Impact Investments: Synapse seeks to access funding for loan capital in three tranches: $1,800,000; $300,000; and $300,000 as regional operations are rolled out. As an integral part of proving the model to future commercial investors, Synapse will reward first round and impact investors with a ROI of 5-6%. Also required are setup, evaluation, and monitoring costs for the first two years of which we seek philanthropic allocations amounting to 300,000.** In summary, we are seeking a total of $2,700,000 to reach all targeted regions and to strengthen the economic engines of emerging markets in Africa.

** A portion of this philanthropic allocation will be funded as part of Synapse’s endowment.

For more information about this project, please contact This email address is being protected from spambots. You need JavaScript enabled to view it..

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