Finance for SMEs
A 10 year strategy to support investment in SMES- especially those that are focused on key sectors and export driven growth
Objectives
Maximising access to credit for SMEs by designing a credit guarantee scheme and ensuring the scheme has the maximum impact to support the overall objectives of the Programme. Evaluating the environment to identify existing and potential impediments to effective SME financing.
Innovation, long-term investments, transparency and international best practices are essential conditions to ensure sustainable economic growth, particularly in economies in which small and medium enterprises constitute the bulk of private sector activity.
Such enterprises, in the Lebanese economy, are often unable to exploit their full potential due to their difficulty in accessing finance that satisfies either their long term investment or short term working capital requirements. Furthermore, investment in innovation through research and development funding is minimal and the sources of finance are limited to a few credit instruments.
This component aims at facilitating access to finance by SMEs and start ups through developing and improving existing and alternative sources of finance. In doing so we will focus on two main actions:
· Promotion of innovative enterprises with a strong growth potential.
· Ensuring best practices in current bank lending to SMEs and start ups.
The programme is working in three main areas:
· A new guarantee scheme managed by KAFALAT that facilitates access to finance to SMEs and start ups through guarantees and through eliminating the required collateral.
The development of innovative financing instruments that will reduce excessive dependence on credit financing while relying more on equity especially for long term financing. The programme will act as a catalyst role by encouraging partnerships and long term commitment among stakeholders. New financing tools for SMEs could include:
- Equity based financing
- Export oriented financing
- Risk-based (rather than collateral-based) loan approval process
· The promotion of best practice in bank lending to SMEs and start ups. The programme will identify bottlenecks in current practices, and assist through a series of practical initiatives, including training, to promote deeper and sustainable collaboration between enterprises and financial intermediaries.
The programme will participate in the steps for introducing the Basle II new risk procedures. We will also participate in international initiatives aimed at improving the Lebanese economy.
The success of the programme’s initiatives is closely associated with active collaboration by all stakeholders, mainly the financial institutions, private sector, research institutes, entrepreneurs and international institutions. In order to ensure participation the SME Support Unit welcomes the contributions of the financial community, and anyone wishing to comment or contribute should in the first instance contact:
What we plan to do
Cluster 4 OWP
Cluster 4 AWP
Progress to Date
· A Memorandum of Understanding with KAFALAT has been signed on 6 December 2005
· The Agreement will release 40 million Euros in loan guarantees to established companies and to start ups, with the EU and KAFALAT directly contributing four million euros each to the scheme.
The main features of the scheme are:
o No collateral is being asked for in the new schemes
o Increased loan guarantee to LL600 million for existing companies and LL300 million for start ups
o Level of guarantee has been raised to 85% for existing enterprises and to 90% for start-ups
o Start ups can go directly to KAFALAT for the guarantee
o Companies need to register in order to qualify
o The scheme is open to all commercial banks
· A review of the financial environment is taking place to:
o Identify strengths and shortcomings in accessing finance in Lebanon
o Elaborate new possible financing schemes and tools
(coming soon)
Announcement
Reports
Events