WASHINGTON, DC: The Overseas Private Investment Corporation (OPIC), the US government’s development finance institution, allocated $500 million to support lending to small businesses in Egypt and Jordan, according to a statement.
The project is a cooperation between OPIC and the US Agency for International Development (USAID), which will provide grant funding and technical assistance to the initiative.
The US sponsors of the project are two nonprofit corporations, CHF International (CHF) and the Middle East Investment Initiative (MEII).
Present in 27 countries, CHF currently operates 13 finance programs monitoring and managing over $200 million of microfinance and SME-lending finance assets. MEII partners with public and private organizations to make credit and business financing more available in order to stimulate economic activity and create jobs.
During her March trip to Egypt and Tunisia, Secretary of State Hillary Clinton said that OPIC would provide up to $2 billion in financial support to catalyze private sector investment in the MENA region.
She said the OPIC initiative would prioritize support for small and medium-sized enterprises (SMEs) and grant projects fast-track approval to mobilize capital quickly. OPIC President and CEO Elizabeth Littlefield joined Secretary Clinton on the trip.
OPIC will guaranty loans by local banks to SMEs, microfinance institutions, non-banking financial institutions and other approved borrowers under a loan guaranty facility that will provide up to $250 million each for Egypt and Jordan.
“The facility will target the shortage of SME credit availability in Jordan and Egypt, removing an important impediment to private sector growth,” the statement read.
According to a recent study by the International Finance Corporation and McKinsey, there are between 1.9 and 2.3 million formal SMEs in the MENA region, and although more than half of them maintain bank accounts, most do not have access to credit, it added.
“In providing credit to Egyptian and Jordanian SMEs, the project is expected to catalyze growth, expand employment, and support the region’s progress toward democratization. It also aims to transform how banks view lending to SMEs through technical assistance and training programs for both bank managers and SME management,” the statement read.
“As Secretary Clinton said in March, one of the best ways to support the transformation in Egypt and Jordan is to support small businesses — they are the universal engine of economic growth. The OPIC project approved today achieves precisely that, by providing the long-term credit that is essential for stability, growth and job creation in the MENA region,” said Littlefield.
USAID Administrator Rajiv Shah said, “By strengthening the private sector in the Middle East, we help increase entrepreneurial activity and generate new jobs. We are committed to working with the governments and people of Egypt and Jordan to improve economic conditions and build the framework for long-term, viable growth that expands economic opportunity for all.”
OPIC provides investors with financing, guarantees, political risk insurance, and support for private equity investment funds.
