Economic context

SMEs in the southern and eastern Mediterranean (SEMED) region provide around 55 per cent of employment (two-thirds in Egypt and Jordan), contributing around 45 per cent to GDP. This is significantly less than comparable figures in EU economies, where the SME share of GDP averages 60 per cent.

Access to finance is an important issue in parts of the SEMED region. Both Egypt and Jordan show high levels of credit constraints, with more than two-thirds of the smaller firms that need a loan stating that their loan application was rejected or that they were discouraged from applying. In Morocco, Tunisia and West Bank & Gaza, over a third of firms report the same problems. Meanwhile, informality and a lack of audited data can often prevent smaller businesses from being perceived as creditworthy by local banks.

The business environment also matters greatly. World Bank Doing Business rankings are relatively low compared to other countries in the region, with Lebanon being the lowest ranked country (133 out of 190).

Boosting financial inclusion

Small businesses in the SEMED region often face major constraints on growth, such as limited financial literacy, as well as barriers to obtaining finance. Through our large-scale SEMED MSME Financial Inclusion Programme, we provide funding, risk sharing and technical assistance to partner financial institutions in Egypt, Jordan, Morocco and Tunisia, improving financial inclusion to support SME growth. A key investment under the programme in 2017 was a €40 million loan to the Union Internationale de Banque (UIB) in Tunisia, which will provide financing to small and medium-sized enterprises in the country.

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The EBRD also offers access to advisory services and know-how across all four countries to help small businesses become more bankable, through projects in areas such as strategy, financial management, marketing and quality management. In 2017, we undertook 529 advisory projects in the SEMED region. In Tunisia, we have the Programme d’Appui à la Compétitivité des Services (PACS), which is dedicated to strengthening the service sector.

Lastly, we are working with policy-makers and stakeholders on legal and regulatory reform in areas such as leasing and factoring to expand the financing options available to SMEs.

Providing customised financing solutions

In 2017, we provided €214 million for on-lending by partner financial institutions. For our direct lending and co-financing of SMEs, we identify local and regional market leaders with strong growth prospects and provide financing tailored to their needs. The EBRD also helps them prepare to make the most of the investment and put in place the corporate governance and financial management standards that can take their businesses to the next level. And we offer business advice so these clients can build value within their enterprises.

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2017 also saw a €15million equity investment in a private equity fund aimed at supporting SMEs in Egypt, Morocco and Tunisia. This will allow for equity and quasi-equity investments across all three countries to boost the competitiveness of dynamic SMEs. Access to finance in local currency is also crucial as it protects SMEs from the risk of foreign exchange fluctuations. In January 2016, we launched the SME Local Currency Programme, which makes available local currency lending through local partner financial institutions and directly to businesses. The Programme also works with governments to improve local capital markets. In 2017, we signed a Memorandum of Understanding with the government of Morocco to introduce the programme there, including a plan for capital market reforms. Tunisia also participates in the programme.

Promoting women’s entrepreneurship

In Egypt, our Women in Business programme is assisting women-led SMEs to obtain the know-how and finance they need to grow. Since launching the programme in 2014 we have provided business advice as well as offering training, mentoring and networking opportunities that have reached over 500 female entrepreneurs.

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In 2017, we also launched a new US $80 million financing framework for Women in Business in Egypt and signed the first transaction underneath, a US$20 million credit line with QNB Alahli. The EBRD is working with the Social Fund for Development (SFD) on this programme in Egypt, while strengthening the capacity of the SFD to provide non-financial business development services in support of their national mandate to develop the micro and small enterprises in Egypt.

Supporting enterprises led by refugees

As part of the EBRD’s response to the refugee crisis, we are helping enterprises led by refugees in Jordan to access finance, advice and vocational training.

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In 2017, two training courses were carried out in Jordan to provide core entrepreneurial skills for mixed groups of Jordanian and Syrian women looking to start a business. We are also supporting entrepreneurs who wish to establish businesses. And we are working with business organisations and non-governmental organisations, enabling them to provide more robust services in their local communities, and building the resilience of the private sector.