IFC, EIB, and AFD Support Small Businesses and Mobilize Investment in MENA Published on: 05/06/2013
Amman, Jordan, May 24, 2013
IFC, EIB, and AFD Support Small Businesses and Mobilize Investment in MENA
Amman, Jordan, May 24, 2013—IFC, a member of the World Bank Group, the European Investment Bank (EIB), Agence Française de Développement (AFD), and the European Commission through the Neighborhood Investment Facility (NIF) are working together to provide funding for small and medium enterprises (SME) in the Middle East and North Africa.
IFC is establishing the MENA SME Facility in partnership with the World Bank, International Financial Institutions and donors. Investments of $150 million from each of IFC and EIB, $50 million from AFD, and Euro 24 million from the NIF will help establish the MENA SME Facility, which will expand access to finance for small businesses. IFC will lead the implementation of the facility, which is expected to help support job creation across the region.
The facility will mobilize an additional $350-400 million in investments through risk sharing arrangements with local banks to support the SME sector. A strategic focus on Morocco, Tunisia, Egypt, Lebanon, and Jordan will help banks mitigate the risks of an unpredictable investment climate. It will also help create jobs in countries where youth unemployment is particularly high. That is especially important in a region that will need to add about 75 million positions over the next decade just keep up with population growth.
“The European Investment Bank is happy to foster this innovative risk-sharing joint instrument as a response to the Deauville Partnership,” said Philippe de Fontaine Vive, Vice President of the EIB. “Economic growth led by private sector development remains the cornerstone of any equitable strategy and job creation in the region. It is also fully in line with the European Neighborhood and Partnership instrument objective, which above all encourages investment and private global trade.”
The NIF investment, channeled through the EIB, is the first contribution to the junior tranche of the facility and is key to the financial balance of the initiative.
“SMEs are a driving force of economies and by sharing the risk of lending to SMEs with local banks, the facility will help to improve SME access to finance,” said Hervé Breton, AFD Director in Amman. “This initiative results from an increased coordination among development financial institutions active in the region, facilitated by the action of the European Commission through the NIF.”
Dimitris Tsitsiragos, IFC Vice President for Europe, Central Asia, the Middle East and North Africa, said, “Banks shy away from lending to SMEs because of the belief that it is too risky. The SME facility will help provide risk sharing guarantees to financial intermediaries to help encourage SME financing. This in turn will help to encourage banks to lend to SMEs and support enterprises that create jobs at the base of the pyramid and support private sector led growth.”
SMEs in MENA countries represent about 80 percent of all business, and make up close to 40 percent of employment in some MENA countries. But SMEs in the region suffer from a severe lack of access to finance, with few business able to secure loans due to a stifling legal and financial framework. A technical assistance component of the facility in partnership with the World Bank, is designed to improve the regulatory environment for small businesses. It also helps banks better understand the benefits of lending to SMEs and assists them in developing new products, like loans tailored to entrepreneurs with little collateral.
IFC, a member of the World Bank Group is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. In FY12, our investments reached an all-time high of more than $20 billion, leveraging the power of the private sector to create jobs, spark innovation, and tackle the world’s most pressing development challenges. For more information, visit www.ifc.org.
About the EIB
The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its member states. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. It is the leading financial investor in the Mediterranean via the Facility for Euro-Mediterranean Investment and Partnership (FEMIP), which was established in October 2002. FEMIP provides practical support for economic and social development in the Mediterranean with the aim of improving living conditions in partner countries. At the end of 2010, this commitment represented a total investment of more than €12 billion. For more information, please visit www.eib.org/femip
About the Agence Française de Développement
The Agence Française de Développement (AFD) is a public development finance institution that has been working to fight poverty and foster economic growth in developing countries and French overseas communities for 70 years. It executes the policy defined by the French government. AFD is present on four continents where it has an international network of 70 agencies and representation offices, including nine in the French overseas communities and one in Brussels. It finances and supports projects that improve people’s living conditions, promote economic growth, and protect the planet, such as schooling for children, maternal health, support for farmers and small businesses, water supply, tropical forest preservation, and the fight against climate change. In 2012, AFD approved €7 billion to finance activities in developing countries and French overseas communities. The funds will help get 10 million children into primary school and 3 million into secondary school; they will also improve drinking water supply for 1.79 million people. Energy efficiency projects financed by AFD in 2012 will save nearly 3.6 million tons of carbon dioxide emissions annually. For more information, please visit www.afd.fr
About the Neighborhood Investment Facility
The Neighborhood Investment Facility (NIF) brings together grant funding from the European Commission and European Union member states, and loans from European public finance institutions. It supports infrastructure projects in the transport, energy, social, and environment sectors as well as private sector initiatives (in particular SMEs) in the EU neighborhood region. To benefit from the NIF, a project has to be submitted by a European public finance institution and to be co-financed by two or more European institutions. To date, the NIF has contributed €417.7 million to infrastructure and private sector projects, leveraging a total project volume of more than €14 billion in the European southern and eastern neighborhood.
Riham Mustafa, IFC
Phone: +20 2 2461 4230
Sabine Parisse, EIB
Phone: +352 621 45 91 59
Magali Mévellec, AFD
Phone: +33 153 444 031