A look at the IFC's new $400m fund for SMEs in the Arab world
Support for
small businesses continues to pour into the Arab world.
Last month, the International
Finance Corporation (IFC) announced the development of a
private fund designed to support small and medium enterprises
(SMEs) in the Middle East and North Africa, seeded with close to US
$400 million in assets.
The fund, named MENA SME Facility, will see the IFC and
the European Investment
Bank (EIB) eachl contribute a total of US $150 million,
while the Agence Française de
Développement (AFD) will add US $50 million, and the
European Commission, which will contribute EUR 24 million through
its investment vehicle Neighbourhood
Investment Facility (NIF).
Critically, the new fund will also galvanize local lending to small
businesses, signing agreements with a number of local banks to
provide an extra amount between US $350 and 400 million in
support.
“The fund will allow banks to give more loans to the SME sector and
benefit from the human capital capabilities in the region”, said
Mouayed Makhlouf the director of IFC in the MENA, when speaking
about the importance of the fund to entrepreneurs and startups in
the region.
The new investment fund will focus on Egypt, Lebanon, Morocco,
Tunis and Jordan, where
studies have indicated that SMEs are vital to economic
growth; in Egypt, for example, SMEs constitute 70% of the national
economy. Scaling businesses will also be crucial for creating new
job opportunities in the region, which will need between 80 and 100
million new jobs in the next decade simply to maintain current
unemployment rates.
“When startups grow, they become small and medium enterprises, and
they will need funding to guarantee sustainability. However,
the rate of companies that have a revenue source or that received a
loan in the MENA does not exceed 8%, which is the lowest rate in
the world,” added Makhlouf.
This fund is not the only one bringing foreign investments to the
startup sector in the region. Lately, the region witnessed the
launch of a similar fund in Egypt called the
Egyptian-American Enterprise Fund, which will offer startups a
total of $US 1 billion through American government support.