WASHINGTON, April 10, 2015 - A new US$50 million assistance package to Jordan will enhance access to finance for micro, small and medium enterprises (MSMEs). The project approved today by the World Bank’s Board of Directors will reach out to underserved governorates and marginalized segments of society and increase financing for start-up businesses.
The Jordan MSME Development for Inclusive Growth Project – is a five-year undertaking that is largely geared to rural parts of Jordan, where living conditions are modest at best. This project will leverage support from the Arab funds, specifically the Arab Fund for Economic and Social Development (AFESD), which will provide parallel financing of US$50 million. Through improved financial intermediation, the project will enhance the creation of private sector job opportunities, contributing to inclusive economic growth and supporting poverty reduction efforts.
“Over 1500 entrepreneurs living across Jordan will directly benefit from this project. It aims at encouraging more Jordanian women and youth to start MSMEs in Jordan, where such businesses account for 71% of all employment,” said Ferid Belhaj, Director of the World Bank’s Middle East Department. “As such, this project has tremendous potential to boost prosperity across Jordan.”
The new financing will scale up the well-performing parent project, namely the Micro, Small, and Medium Enterprise Development for Inclusive Growth Project (US$70 million), which came at an opportune time in Jordan in the aftermath of the recent economic and political developments in the region, and the associated economic slowdown and rising unemployment and poverty. Over 6,000 MSMEs benefitted from the operation—59 percent of which are located outside Amman, 85 percent of which were women and 47 percent of were youth-initiated.
MSMEs growth is constrained by various factors, including timid financing by conservative and risk averse commercial banks. The challenge is dual: commercial banks' systematic search for secure lending, and MSMEs lack of capacity to develop viable business plans and operate on the basis of predictable cash flow. This project aims at mitigating the impact of these two constraints, and open the way for further development of this growing industry.
“MSMEs grow at faster rates once provided with sufficient funding, and a conducive environment, this is why it is critical to support their growth,” said Sahar Nasr, World Bank Lead Financial Economist and Project Team Leader. “The parent project has shown commendable success, creating jobs and sustaining economic growth. We believe that the additional financing will achieve a greater impact on ground, through innovative financing mechanisms; outreach venues; and more effective targeting to underserved segments of society.”