Econostrum | Economic News in the Mediterranean

EIB supporting venture capital to boost private-sector jobs in Southern Mediterranean

Written by Caroline Garcia, MARSEILLE on Tuesday, May 3rd 2016 à 16:00 | Read 994 times

In the next few months, an Egyptian investment fund to finance projects carried by local SMEs is due to receive the backing of the EIB. Others will follow.

Europe supports private employment in the south Mediterranean SMEs (photo: UE)
Europe supports private employment in the south Mediterranean SMEs (photo: UE)
Financiers operating in the Mediterranean countries want to push young people to set up their own businesses and offer them something other than a government job. To this end, the European Investment Bank (EIB) and the European Commission are setting up a venture capital scheme for the neighbouring southern countries.
This approach aims to bring together the state and private funding required to support private equity and venture capital funds as well as microfinance institutions and thus enable them to work with small and medium-sized enterprises (SMEs) and encourage private-sector job creation.

Algeria, Morocco, Tunisia, Egypt, Jordan, Lebanon and Palestine are all covered by this scheme, which includes three main effects. First, it tops up private equity funds, allowing them to invest in SMEs shares. Smaller local financial corporations are also being targeted in order to provide support and make up for their lack of access to international capital.
In addition, the EIB and European Commission are investing and lending to microfinance institutions and microfinance investment vehicles. The banks, credit unions and other intermediaries who benefit from this funding will be required to provide growth investment for the smallest businesses and for projects carried by low-income individuals.

Attracting private investors

"The Southern Mediterranean banks finance institutions and large companies but do not risk their money on projects carried by SMEs," explains Christian Lopez-Baillo, investment officer at the EIB. "By becoming a shareholder in these small companies, via investment funds, we allow them to grow and to access private funding and at the same time provide reassurance for the investors."

Eschewing no sector, priority is given to businesses that create the most jobs, particularly for young people who bear the brunt of the unemployment problems in the countries covered by the programme. The investments must also generate income. "We want to choose the projects so that they attract private financing and create leverage," says Lopez-Baillo.
The EIB's first pledge is expected in the next three or four months, with an Egyptian fund. Others will follow and involve other domestic funds, such as the multi-country sectoral or general funds. "These projects take time to put into place, but they will undoubtedly enable the investment funds to then work more efficiently with the small businesses," says the bank's representative.

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