Small- and Medium-Sized Enterprises (SMEs) account for over 80% of the enterprises in the Middle East and North Africa (MENA) region, and contribute a similarly high percentage of the region’s jobs. In comparison with larger firms, SMEs provide greater benefits to society in terms of job creation, and as a result, poverty alleviation.
Unfortunately, SMEs in the Arab world are too often hindered by a lack of access to three important requirements to grow and prosper—financing, business development services, and access to trade and capital markets. To help catalyze job creating industries in the region, Silatech partners with various investment platforms to provide SMEs with much-needed risk-sharing capital and business development services. To date, Silatech’s SME Unit has projects in Qatar, Tunisia, and Morocco, with plans to extend to other countries in the region.
Silatech employs a three-pillar framework to give SMEs access to what they need to grow and thrive in today’s competitive global economy.
1. Access to Finance
Businesses need investment capital to grow. However, due to their perceived risk, SMEs in the Arab world face countless obstacles accessing capital from commercial banks. Lack of access to finance opportunities presents a serious problem for SMEs in the region.
To help bridge the finance gap, also referred to as the “missing middle,” Silatech’s SME Unit is developing partnerships with select country-level SME equity funds, with the goal of creating job opportunities for young Arabs by ensuring that SMEs have adequate financing to support their. Silatech focuses on countries with a healthy pool of SMEs, and on sectors and enterprises with the best potential for high growth and job creation. By providing seed and growth capital to invest together with our socially conscious equity fund partners, we work to open up access to finance for SMEs and spur the creation of sustainable, quality jobs.
2. Access to Business Development Services (BDS)
Access to capital alone is not enough for SME success, though. Financing needs to be accompanied by Business Development Services (BDS) that provide companies with the knowledge and tools they need to compete. In the Arab world, Business Development Services are minimal, and in many areas virtually nonexistent. Silatech’s SME Program works to alleviate this gap by providing SMEs with quality BDS.
Through its Innovation Management via Mentoring and Advisory (IMMA) program, Silatech provides Business Development Services to Small- and Medium-Sized Enterprises through a comprehensive 10-point system. The IMMA program is supported by Silatech’s first technical assistance facility (TAF).
3. Access to Markets
Access to finance and BDS is essential, but without access to regional markets, the growth potential of SMEs is constrained to their domestic markets. To help give SMEs access to the wider markets they need for long-term growth and expansion, Silatech is developing innovative new programs that will facilitate access to trade as well as junior capital markets.
Silatech’s SME Unit is developing a variety of initiatives to help give SMEs access to markets.
By forming sector-focused clusters of Silatech-funded SMEs—first on a national level and then across the MENA region—advantageous linkages can be built among complementary SMEs throughout the region. These SME Clusters will allow SMEs to benefit from mutual comparative advantages, and to gain access to new regional markets
Export Readiness Programs
Export Readiness Programs will provide guidance to SMEs regarding product design, productivity, and marketing for regional and international customers, as well as help them to establish their regional and international buyers’ database. By helping SMEs attain certified international standards, these Export Readiness Programs will thereby open up previously inaccessible regional and international markets for trade.
Investment in Equity Funding Platforms
Silatech collaborates with reputable public and private sector financial partners to invest in country-level SME equity funds in selected countries. So far, Morocco, Tunisia and Egypt have been countries of focus. Within each country, a diverse portfolio of SMEs in high growth industries receives investment designed to spur job creation.
Silatech’s approach to equity funding is to act not only as an investor, but also to play the role of a “social investor,” governing and mobilizing the funds to optimize the social and economic benefits delivered to each country. Once a track record of job creation, social and economic benefits is established, Silatech will then replicate its most impactful country level structures in regional models that will cover a wider geographical area, and serve the wider Arab world.
Over a five-year period (2011-2016), Silatech aims to unlock access to financing for over 200 SMEs across the Arab world, generating at least 15,000 sustainable jobs, and at least twice that number of indirect jobs.
MarocInvest PME Croissance Fund
Along with other public and private co-investors, Silatech is investing in this country level fund. The fund invests equity and quasi-equity in Moroccan SMEs that create quality jobs, have innovative business models or provide innovative products and services.
TunInvest Croissance FCPR Fund
Along with other public and private co-investors, Silatech is investing in this country level fund. The fund invests equity and quasi-equity in Tunisian SMEs that create quality jobs, have innovative business models or provide innovative products and services.