FEMISE Seminar: Kafalat facilitates access to credit for Lebanese SMEs

Khater Abi Habib presented the Kafalat initiative on December 5th 2016 (Beirut) at a seminar organized by Femise on the theme of “Unlocking the Potential of the Private Sector in South Med Countries”.

Khater Abi Habib presented the Kafalat initiative on December 5th 2016 (Beirut), photo FEMISE

Since its creation in 2000 in Beirut, the financial enterprise Kafalat has supported 16,500 projects of Lebanese SMEs. It reassures bankers through the provision of guarantees, allowing SME’s and start-ups to benefit from bank loans in order to develop, create wealth and ultimately jobs. Alongside the European Union, the World Bank and the Lebanese government, Kafalat has also designed new programs to support innovation. It has become a role-model for countries of the Mena region and was presented during the Femise seminar in Beirut.

After 16 years of civil war, the banking system did not provide the Lebanese economy with adequate access to credit. “We founded Kafalat in 1999 after observing a phenomenon of real distortion of the banking sector. At the time, the main beneficiaries of loans had their headquarters within or near Beirut. Only the trading and service sectors could benefit from access to credit. For the sake of inclusiveness, we also wanted to help all the remaining SMEs in the country.

Since its creation, Kafalat has defined priority sectors: industry, agriculture, tourism, crafts and new technologies “, says Khater Abi Habib, Chairman of Kafalat and of the National Institute for the Guarantee of Deposits and shareholder at 75%. About 25% of the capital of Kafalat belongs to 40 Lebanese companies.
Kafalat examines entrepreneurial projects that are transmitted to it by banks. “In 88% of the cases we agree on providing a guarantee after a pre-emptive analysis. Our 30 experts then re-examine the projects and we respond within ten days, “said Khater Abi Habib.

In recent years, Kafalat has adapted its programs through partnerships with the European Union and the World Bank. Kafalat Innovant, is aimed at innovative start-ups of less than two years. “We provide a guarantee of up to 90%. In fact, the bank reduces its exposure to 10%. The ceiling is $ 200,000, but the average loan is generally under $ 75,000. We have helped create an enabling environment for innovation. Many start-ups are joining the country’s incubators, “says Khater Abi Habib.

Support from the European Union and the World Bank

In 2006, the Lebanese government received a loan of $ 30 million from the World Bank. The management of this loan was entrusted to Kafalat, the originator of the ISME program. “10% of this amount is given to researchers, students in the form of endowments. The remaining 90% is allocated to SMEs in the form of ISME fund holdings alongside venture capital and seed companies. We then enter the capital of companies, “says Khater Abi Habib.
After the glorious years of 2010/2011, when 1500 cases and 2 million dollars were guaranteed per year, Lebanon was affected by the war in Syria and Iraq, halving the number of guaranteed projects. However, Kafalat remains confident and the concept could even spread in neighbouring countries. Before the war, Syria had shown interest in the guarantee mechanism. Discussions are now ongoing with the UAE.

The private sector at the heart of Femise focus

Pr. Patricia Augier, Femise Coordinator and President of the Scientific Committees of Femise and Institut de la Méditerranée ©NBC

The ideas presented in Beirut will feed into the 2017 Femise Euromed report, which will focus on the private sector in the countries of the Mediterranean basin.

This report will be edited by the team of Institut de la Méditerranée under the direction of Pr. Patricia Augier, Femise Coordinator and President of the Scientific Committees of Femise and Institut de la Méditerranée.

Article produced in partnership with Econostrum.

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