Tel: +961 1 780200 Fax: +961 1 780206 P.O. Box 113-6194

Hamra, Beirut 1103 2100 Lebanon

Contact: Ms. Eva Dirany eva.dirany@iktissad.com

Mr. Thomas J. Jacobs Senior Country Officer – Lebanon, Middle East & North Africa

International Finance Corporation (IFC)

Lebanon Economic Forum Session III – Financing of SMEs and Means for Developing Resources and

Techniques

Beirut, Lebanon

November 28, 2012

Thomas J. Jacobs, IFC

Resources & Techniques for

Financing SMEs 2nd Lebanon Economic Forum,

November 2012

350 million Jobs

to cover population

growth

150 Million Jobs

to cover currently

unemployed

200 Million Jobs

to bring women's labor participation equal to men

1 Billion jobs

to move away from subsistence

agriculture

1.7 Billion Jobs Needed

The population will grow by roughly 2.5 billion people over the next 40 years,

taken together with existing unemployment, demographic and economic

shifts, all necessitating large increases in job formation…

Only economic growth will create these jobs & SMEs are key.

1.7 billion net new jobs needed

over the next 10 years

IFC Partners with FIs to Scale up Funding to SMEs

$1,601

$2,276

$3,230

$3,008

$5,166 $5,588

24%28%

28% 29%

41%

46%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

FY06 FY07 FY08 FY09 FY10 FY11

$ m

illi

on

Background on IFC's SME Related Investments

Other Private Equity and Investment Funds

Financial Markets (SME GTFP) Financial Markets (SME Non Trade)

% of IFC Own Account Investment Volume

IFC Financing Facilities

Equity/Quasi-equity

Strong sponsor

Attractive growth prospects

Identifiable exit

Loans

Medium to long term debt in LCY or USD, depending on market

Wholesale through local FIs for smaller projects

Syndications to mobilize financing package

Structured Finance

Guarantees, ABS, RSF, etc.

Funds

Typically with sector focus (eg, SMEs, green technologies, etc.)

Commercial Debt versus Private Equity

Banks & other lenders

•Protect depositors’ money

•Have fixed returns

•Protect against downside risks

•Seek Cashflow & Collateral

•Value stability & predictability

• Most appropriate for more mature SMEs

Commercial Debt versus Private Equity

Angels, Venture Capital, PE firms

•Risk takers seeking high rewards

•Variable returns based on growth, scale &

valuation at entry and exit

•Seek innovative & disruptive technologies

•Exit potential (IPOs, trade sales, puts)

•More appropriate for earlier stage SMEs

MobiNetS

Started by experienced entrepreneur

Developed unique network planning tool for

mobile telecom operators

Demonstrated “proof of concept” and some

initial commercial sales

Large market potential and global ambitions

IFC role: funding, corporate governance, first

institutional investor

IFC’s Approach to Equity Investments

• Minority ownership: less than 20%

• Flexible structures (convertibles, prefs, etc)

• Value-adding but “Passive investor”

• Board seats, shareholder agreements

• Long-term, patient equity investor holding 8 to 15 years

• Trade sale or public listing the preferred exit mechanism

• IFC’s equity provides additional risk mitigation

• Advisory services, debt facilities, access to IFC network

• Mobilization

Two Common Mistakes of SMEs Raising Equity

Focusing too much on valuation

Not recognizing that private equity is a

relationship business

Unemployment amongst Youth and limited financial inclusion of

Women remain key areas of concern in the region

SOURCE: IFC, Education for Employment Report, 2011 SOURCE: IFC. Strengthening Access to Finance for Women-Owned

SMEs in Developing Countries

Youth unemployment Women in Business

شكـرا ً

Merci

Thank You.