WASHINGTON, July 14, 2011 – Micro, small and medium enterprises (MSMEs) in the Middle East and North Africa are key to driving employment for millions of young citizens but businesses on the smaller end of the scale in this region have some of the lowest levels of access to finance in the world. Today’s approval of a $50 million loan to Tunisia marks the launch of a World Bank facility designed to address this.
The World Bank Group’s MSME Facility is expected to channel over $500 million to Middle East and North Africa (MENA) countries over the next five years including support from the International Finance Corporation, regional partners such as the African Development Bank, and donors.
“This regional facility, a partnership with a number of development institutions, is a strong and timely response to a MENA-wide lack of access to finance and jobs and is a critical pillar of the World Bank's Arab World Initiative,” said Shamshad Akhtar, Vice President for the MENA region at the World Bank. “SMEs in the region have enormous potential to create much-needed employment opportunities for a growing, young and increasingly impatient population. A dynamic, open and growing MSME sector can create jobs and open up access to market opportunities at a rate that keeps pace with this growth. We urgently need to start this engine and creating access to finance is critical.”
Akhtar pointed out that only 10 percent of MSME expenditures in the MENA region are financed by bank lending. But as important as turning this trend around was ensuring that money flowed to MSMEs in an atmosphere of fair regulation, transparency and good governance, she said.
To this end the World Bank will make financing and risk-sharing instruments available to partner MENA governments through the MSME facility and, jointly with the International Finance Corporation (IFC), a comprehensive package of technical assistance will be offered to governments, regulators, financial institutions, and to MSMEs. Innovative and high potential enterprises will be linked with growth capital, markets, and know how.
IFC, the private sector arm of the World Bank Group, will invest up to $150 million in the facility that will make it easier for SMEs to access financing and create opportunities and jobs. Additionally, it will offer a comprehensive package of advisory services to governments, regulators, financial institutions, and MSMEs to support the growth of this sector.
IFC is also collaborating with other international financial institutions, including those in Europe, to support the new facility and to provide a comprehensive response to the challenges in the region.
“There are up to 20 million SMEs in the Middle East and North Africa, and millions of young people facing unemployment. But in their efforts to grow, these companies face numerous challenges, including red tape, a lack of access to finance and insufficient training resources. With this facility we want to demonstrate that unlocking the potential of SMEs can have a great effect on the growth of regional economies, and job creation” said Dimitris Tsitsiragos, IFC Vice President for Eastern and Southern Europe, Central Asia, Middle East and North Africa.
Tunisia is the first country to borrow under the new facility, with loans to other MENA countries anticipated in the near future.
“Tunisian MSMEs face a difficult operating environment right now while Tunisian banks face liquidity constraints,” said Douglas Pearce, team leader for the facility. “The World Bank loan is designed to ease financial constraints of otherwise creditworthy enterprises during this period, to sustain and grow employment, and to support an expansion of Tunisia’s MSME sector.”
MSMEs are the backbone of the Tunisian economy, estimated at making up more than 97 percent of Tunisian enterprises and accounting for a large share of total employment. The World Bank support will also contribute to the Tunisian government’s objective of improving governance so that the financial sector can more effectively play its catalytic financing role and contribute to growth and job creation through MSMEs.