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OPIC approves $500m for SMEs in Egypt and Jordan A leading US government agency will fill the credit gap for Egyptian and Jordanian small and medium enterprises, who are vital for private sector growth
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, according to press release on OPIC website today The US government agency 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. “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” the release reads. According to the website, the project aims to transform how banks view lending to SMEs through technical assistance and training programs for both bank managers and SME management. The US sponsors of the project are two nonprofit corporations, CHF International (CHF) and the Middle East Investment Initiative (MEII). 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. 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. The new package comes one day afterthe World Bank approved a $200 million loan to support Egypt's Second Integrated Sanitation and Sewerage Infrastructure Project in four governorates: two in the Delta Region and two in Upper Egypt. Egypt announced last week it will not borrow from the World Bank and International Monetary Fund after revising its budget and cutting the forecast deficit, even though a loan had been agreed. In JuneEgypt's minister of finance announced on a $2.2bn World Bank loan at an interest rate of 3 per cent to be repaid over 18 years, after he reportedly requested up to $6.2bn in soft loans from the IMF and the WB. The news brought mixed reactions from economic commentators, many of who agree with Radwan on the necessity of further loans but worry about adding to Egypt's escalating foreign debt.
