A $30 million loan
to support innovative SMEs

Loans to be guaranteed by Kafalat

The Parliament has approved a loan worth $30 million, provided by the International Bank for Reconstruction and Development (IBRD), the first of five member institutions which compose the World Bank Group, in order to support innovation in Small and Medium Enterprises (SMEs).

The loan is part of a program that consists of two main parts. The first is entitled Program of financing innovation in SMEs (iSME), which provides donations to qualified SMEs to support their preparation and development of innovative ideas, strategies, studies, and work plans, in addition to financing approved investments in the qualified institutions.

The second part is related to managing the project of the concerned SMEs, where support should be guaranteed to establish a project management unit and ease the administration and execution of the project. The support may cover, for instance, the provision of materials and consultancy services, including auditing financing additional cost expenses, training and other expenses.

The loan program will be under the supervision of Kafalat. “Kafalat will create an investment vehicle to invest in innovative startups and SMEs,” said Yolla Sarieddine, Head of Credit. The investment’ vehicle will have a manager, in addition to at least three employees for auditing, and accounting.

Through the investment vehicle, Kafalat will cooperate with local venture capital funds for investment. “No banks are involved. Banks may only advise SMEs as to how to deal with this investment vehicle to get access to financing,” said Sarieddine.

No interest rates are to be paid by the SMEs. To apply, candidates may submit an application to the investment vehicle, whose manager will study the application and transfer it to the investment and grant committees. “These committees consist of voluntary specialists from abroad, who will assess the applications,” said Sarieddine.

The applications are then submitted to BDL for its information. The Ministry of Finance will pass the flow of money to the investment vehicle to do its investments.

“Eligibility is determined on a project by project basis,” said Sarieddine. “The investment vehicle will study the SMEs cash flow, branding, marketing, and other criteria. It will focus on how the SME will turn an innovative idea into a commercial endeavor.”