Key challenges

Many countries in the southern and eastern Mediterranean (SEMED) region present some of the most difficult environments for SMEs among the economies where the EBRD invests. In Egypt and Jordan in particular, few firms seem to have a bank loan or line of credit, according to the BEEPS V survey. Similarly, both countries show high levels of credit-constrained firms, with more than two thirds of firms needing loans reporting that their loan applications were rejected, or that they were discouraged from applying.

The share is lower in Morocco and Tunisia, but still at a significant level with over a third of firms reporting the same problem. Compared to other EBRD regions, the legal framework for bank lending appears particularly weak, as does the availability of non-bank financing options.

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, for the provision of financing to small and mediums-sized enterprises in the country.

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The EBRD also offers access to advisory services and know-how across those 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 policymakers and stakeholders on legal and regulatory reform in areas such as leasing and factoring, in order 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 €15 million 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 crucial as it protects SMEs from the risk of foreign exchange fluctuations. In January 2016, we launched the SME Local Currency Programme, which makes local currency lending directly available to businesses through local partner financial institutions. 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, training, mentoring and networking opportunities to over 500 women 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 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 while building the resilience of the private sector.