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 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 and Tunisia, 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.
Access to skills also matters greatly. Low levels of financial literacy in the region, and the small percentage of companies that have international certification, are constraints on enterprise growth. They are areas where much can be done to boost the SME sector.
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. The first investment under the Programme was signed in 2016, extending 2 million Tunisian dinars to Microcred Tunisie.Expand to read more
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 2016, we undertook 404 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 2016, we provided €174 million for on-lending by partner financial institutions and signed 7 direct financing deals with SME clients in SEMED, for a combined finance value of €66.6 million. 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.Expand to read more
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.
2016 saw the first EBRD investment in a private equity fund focused on Egypt, for €19 million, as well as ongoing support for early-stage businesses through a €9.5 million investment in a venture capital fund dedicated to Egypt.
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 2016, we signed a Memorandum of Understanding with the government of Tunisia to introduce the programme there, including a plan for capital market reforms.
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 to 96 women-led firms through 124 advisory projects.Expand to read more
We have also made available a US$ 20 million credit line to the National Bank of Egypt for on-lending to women-led SMEs, as well as offering training, mentoring and networking opportunities that have reached over 500 female entrepreneurs.
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.We have also made available a US$ 20 million credit line to the National Bank of Egypt for on-lending to women-led SMEs, as well as offering training, mentoring and networking opportunities that have reached over 500 female entrepreneurs.
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.Expand to read more
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.
Helping a refugee-driven business in Jordan target new markets
With funding from the European Union, we helped Beirut Lights for Sanitary Paper Manufacturing, based in Jordan, to introduce a quality management system to expand their exports to new markets.
Beirut Lights for Sanitary Paper Manufacturing was a well-established company in Syria producing high quality hygienic paper. In 2012, the deteriorating political and economic situation in Syria forced the company to move; it re-established itself just outside of Amman in Jordan and now employs 45 people, more than half of them women.
Beirut Lights has always been a strongly export-driven company and continues to export 70 per cent of its production to neighbouring countries, selling the remainder in Jordan. But the company has big plans! They’re looking to enter new markets in the region, focusing on the UAE, Turkey and Saudi Arabia. But to do so, they needed an internationally-recognised quality management certification.
We helped the company work with a local consultant on a cost-shared project that helped Beirut Lights to introduce a quality management system compliant with ISO 9001:2015. The consultant began by assessing Beirut Lights’ whole production chain. Then, the consultant identified the gaps requiring attention, devised an action plan and prepared all the documentation the company needed. Now, the company is ready to go conquer new markets.
Helping an Egyptian metal canning producer access finance to expand production
With funding from the EU, we helped Europack, an Egyptian metal canning producer, to conduct a feasibility study and get the financing they needed to start a new plastic canning production line.
Established in 1997, Europack has one of the most specialised canning factories in the Middle East. Having achieved success in metal canning and seeing a growth opportunity in the market, Europack was looking to enter the plastic packing market by adding a new facility to its existing factory.
To do so, the company needed to increase finance for its planned expansion. We connected Europack with a local consultant specialised in finance to conduct a feasibility study, where they assessed the company’s business model, helped forecast revenue and expenses streams, identified Capex requirements and projected cash flows and developed a business plan. We also linked the company to an international adviser to bring international best practice in the areas of organisation and management, marketing and sales, finance and production processes to the company.
As a result, Europack successfully got a loan from the EBRD of € 1.5 million to start working on the expansion of its factory and its business.
Strengthening SME participation in public procurement
Participation rates in public procurement opportunities across the EBRD’s countries of operations are low, as rules and procedures are often complex and the resources needed to prepare a tender are considerable – with great uncertainty as to the outcome of the bidding process.
However, encouraging more SMEs to participate in public tenders increases competition and could offer more competitive prices. The EBRD works with governments across our countries to facilitate local SME participation in electronic tenders for small value public contracts, below €120,000.
We promote legal reforms to simplify small-value public procurement procedures to make these tenders approachable for local SMEs, through mechanisms such as reducing the bureaucratic burden for small businesses to submit a tender, enabling free of charge access to procurement opportunities through online publication of notifications and tender documents, and a free of charge online submission mechanism.
To sustain the impact, we also support the development of eProcurement tools, awareness raising and training for public sector purchasing entities and SMEs on these technologies.
Currently, we are assisting the Governments of Moldova, Mongolia and Tunisia in reforming their electronic procurement procedures with the support of Korea and the EBRD Shareholder Special Fund.