Friday, July 01, 2011
WASHINGTON, D.C. – Making significant progress toward fulfilling Secretary of State Hillary Clinton’s pledge of U.S. investment support for the Middle East and North Africa (MENA), the Board of Directors of the Overseas Private Investment Corporation (OPIC) approved $500 million in financing to support lending to small businesses in Egypt and Jordan. The project is the result of a cooperative effort between OPIC and the U.S. Agency for International Development
(USAID), which will provide grant funding and technical assistance to the initiative.
During her March trip to Egypt and Tunisia, Secretary Clinton announced
that OPIC would provide up to $2 billion in financial support to catalyze private sector investment in the MENA region. Intended to encourage partnerships between U.S. and Arab businesses, 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.
Today’s project represents significant progress toward fulfillment of the OPIC commitment in the region. 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. 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.
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.
“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 Ms. Littlefield. “We are extremely pleased to be able to make such significant progress so quickly toward the realization of the Obama Administration’s pledge.”
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.”
The U.S. sponsors of the project are two nonprofit corporations, CHF International
(CHF) and the Middle East Investment Initiative
USAID has agreed to provide approximately $11 million in grant funding in Egypt and up to $9.7 million in Jordan to cover CHF’s and MEII’s operating expenses. USAID is also expected to support technical assistance to lenders and their downstream borrowers through other grant resources.
CHF and MEII have a track record of successfully executing similar projects with OPIC. The OPIC-supported loan guaranty facility in the Palestinian territories, for example, has delivered approximately $62 million in lending through bank selection and credit standards developed and implemented by CHF and MEII.
CHF’s mission is to serve as a catalyst for long-lasting, positive change in low- and moderate-income communities and works in 27 countries around the world. 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. MEII has led efforts to establish a loan guarantee program in the Palestinian territories.