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Mon 1 Apr 2013 01:45 PM

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World Bank backs Abu Dhabi SME credit fund

International Financial Centre backs Gulf Capital fund with US$20m investment

World Bank backs Abu Dhabi SME credit fund
Gulf Capital CEO Karim El Solh.

The World Bank’s private sector development institution, International Finance Centre (IFC), has backed an Abu Dhabi-based fund to support the growth of small and medium-sized businesses with a US$20m investment.

The funding injection brings total investments in Gulf Capital’s Credit Opportunities Fund to US$215m, positioning it as the largest such credit fund in the Middle East.

Established in 2011, the pioneering fund provides much needed liquidity and growth capital in the form of mezzanine financing to SMEs in the MENA region and Turkey unable to access bank finance to help them expand.

It targets growing companies with strong prospects to create jobs.

Gulf Capital CEO Karim El Solh said more than a dozen institutions had contributed to the fund and US$60m already had been provided to three companies.

Gulf Capital, a leading alternative investment company, aims to raise US$300m for the fund and to invest in 12 SMEs.

Backing from the IFC, an arm of the World Bank, would provide a great boost for the reputation of the fund, El Solh said.

The IFC is the largest global development institution focused exclusively on the private sector. With a US$48.8bn portfolio, it helps developing countries achieve sustainable growth by financing investment, mobilising capital in international financial markets and providing advisory services to businesses and governments.

“More than the quantum of the cheque, it’s the prestige of being backed by the IFC and the World Bank,” El Solh said.

“We’re the only credit fund they’re backing in the Middle East. We hope to leverage that to achieve more fundraising to reach our ultimate goal of US$300m.”

El Solh said the fund was much needed because the region lacked financial support for promising SMEs.

SMEs made up only 2 percent of total bank loans in the Gulf.

“That’s the lowest rate in the world; even Africa at 6 percent has a higher percentage of funding to SMEs,” El Solh said.

“On the other hand SMEs are the biggest creators of jobs, with half of all jobs in the region created by SMEs. [They also contribute] one-third of GDP.

“So it’s very important to provide growth capital so they can grow and create more employment.”

The Dubai-based bourse NASDAQ Dubai also is planning to launch the region’s first equity market dedicated to SMEs to help provide easier access to capital.

Acting CEO Hamid Ali told Arabian Business last month the new exchange could be ready by the end of the year.