Econostrum | Economic News in the Mediterranean

“Innovation is an opportunity for Lebanon”

Special edition no.15 : FEMIP

Written by Mélanie Houé, BEIRUT on Monday, October 26th 2015 à 09:39 | Read 768 times

Khater Abi Habib, President and CEO of the SME loan guarantee finance company, Kafalat, reviews the situation of innovation in Lebanon.

The teams of Kafalat study daily the demands of loan collateral which the Lebanese banks grant to SMES. (photo Beirut Energy Forum)
The teams of Kafalat study daily the demands of loan collateral which the Lebanese banks grant to SMES. (photo Beirut Energy Forum) Kafalat helps small and medium enterprises (SMEs) to access finance from commercial banks. What kind of projects are you dealing with at the moment?

Khater Abi Habib: Since its launch fifteen years ago, Kafalat has been providing SMEs with loan guarantees based on feasibility studies. We deal with requests from the agricultural, industrial, tourism, trades and hi-tech sectors.  

In Lebanon, the private sector is dominated by SMEs that are experiencing difficulties in accessing funding from commercial banks. Our guarantees therefore help them to secure the funding required for their launch. This support can lead only to increased investment, higher output and more jobs.     
Lately, we have been developing new programmes, including one co-funded by the European Union that targets innovation.  It offers a 90% guarantee to companies less than two years old. It was launched in 2006 and already accounts for 4.25% of our business with almost $90M (€79M) invested.
Which sectors do you support through this programme and to what extent?  

K.A.H: The target sectors remain those related to information and communication technology with mobile applications, software development, computer, mechanical or electronic equipment production and occasionally biotechnology and chemistry, albeit to a much lesser extent.
To apply, fledgling companies have to satisfy just one criteria: to be developing either a new product/service or a new production process. The amount of the initial loan can be up to $200,000 (€175,422).

For example, one of the firms benefiting from our guarantee designed a seed with rapid germination time that speeds up and increases the number of harvests. It has been a success and this SME is now exported to North America and Europe.

What are the main challenges for the innovation economy in terms of job creation?

K.A.H.: Our biggest challenge is infrastructure and services related to telecommunications and internet connections.
In the future, it would be interesting to link up university research institutes with the private sector. We could oblige the universities to work jointly rather than having each one developing their own research clusters. However, for the time being, the priority remains infrastructure. We have to invest as the sector shows promise.  

A female entrepreneur who received our loan guarantee in 2003 is now generating a turnover of $118M (€134M) and employs eighty people in Lebanon. Despite the fragile economic situation, innovation has proved that it can create jobs. 

Special issue : Developing and Funding Innovation in Southern Mediterranean Countries

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