FINANCING FOR INNOVATIVE MSMES IN THE MENA REGION

In the Arab Republic of Egypt, banks follow a conservative lending approach for micro, small and medium-sized enterprises (MSMEs), which is reflected in a low loan-to-deposit ratio attaining approximately 45%. This is why a lot of Egyptian businesses operate in different modes of informality. To improve the situation, the KfW-funded “Financing for MSME II” project assists the Micro Small Medium Enterprise Development Agency (MSME-DA) by supporting financial institutions and developing financial products, i.e. lending, and thus opening the door to formal markets for start-ups in Egypt.

First, AFC elaborated a feasibility study measuring the viability of microfinance activities and suggested a design for two thematic financing windows under the KfW’s credit line with a focus on female entrepreneurs and borrowers, and green microfinance projects addressing climate, renewable energy and resource efficiency. Hereby, we targeted MSMEs operating as informal businesses or in remote and structural disadvantaged regions. In a market analysis, champions among NGOs and microfinance companies were identified having a strong potential for sustainable financing activities and the promotion for gender equality within the sector.

Secondly, AFC supported MSME-DA in the promotion of MSMEs via KfW credit lines on the one hand, for start-ups and on the other hand, for microfinance. In collaboration with MSME-DA internal credit line documents, policies and procedures were formulated to set up environmental and social management systems and to push innovations. We advised on the qualification and exclusion criteria as well as on individual loan applications. Additionally, we designed a special financial product prototype oriented to new business projects and start-ups. Later, two of the agency’s branches will pilot and implemented the product prototype.

In neighbouring Hashemite Kingdom of Jordan; 98% of companies are MSMEs employing around 70% of the workforce of the private sector. The MSMEs are forced to finance their investments through own capital, as only 10% of all bank loans are granted to them. To overcome this problem, the GIZ-funded I-FIN project dedicated to develop innovative approaches for the financial inclusion of growth-oriented MSMEs. Financial intermediaries such as banks, microfinance, insurance, leasing, crowdfunding and fin-tech companies, and payment service providers will be strengthened with regard to the provision of financial services for MSMEs, especially for women-led MSMEs. In the beginning, in order to identify those sectors of Jordanian economy which have the highest potential for the innovations financed via MSMEs, existing financial service offerings as well as main opportunities and barriers for MSMEs in accessing finance were analysed in a study.

The next step will be to select the most reliable and impactful partner financial service providers (PFSPs). Selected PFSPs will be accompanied to develop new financial services tailored to the needs of MSMEs, to adapt existing offerings and business model processes and design and test the prototypes. In addition, we assist the Central Bank of Jordan in introducing regulatory practices for alternative financing products e.g. leasing, factoring, crowd funding.

OUR WORK STREAMS IN I-FIN PROJECT IN JORDAN

Digitalisation

Digital banks

Focused on MSMEs

Alternative financing products

Leasing, factoring, crowdfunding, green finance, insurtech and loan guarantees

Expanded e-wallet services

Savings, merchant credit + store credit, insurance

Bank/MFI processes and loan guarantees (JLGC)

Market enabling technologies

Enterprise blockchain. digital identity, API managment and open banking

Alternative credit scroring

Alternative data (transaction data, social media), psychometric analytics

Vladislav Nimerenco Project manager vladislav.nimerenco@afci.de

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