The European Investment Bank (EIB) is making available up to ECU 25 million (1) in risk capital (2) facility for financing private Egyptian undertakings engaged in modernisation and restructuring. The funds will be channelled as equity capital through the following local financial intermediaries: Export Development Bank of Egypt, Industrial Development Bank of Egypt, Misr International Bank, Egyptian Finance Corporation and National Société Générale Bank.
The purpose of this facility is to provide Small and Medium Enterprises (SMEs) in Egypt, wishing to modernise, restructure, develop their existing business, and operating in the industrial, agro-industrial and service sectors, with innovative equity and quasi-equity funding products. The funds will strengthen the financial base of the SMEs and allow them to grow and develop exports and jobs.
The remuneration of the investment will be based on the operating results of the company, and is to be reimbursed in Egyptians pounds, at the end of the operation. The financial instruments which will be used include: ordinary shares, preference shares, convertible bonds, investment certificates or any other financial instrument whose return is linked to a company's performance.
The European Investment Bank (EIB) was set up in 1958 under the EC Treaty to provide loan finance for capital investment furthering EU objectives. It participates in the implementation of EU co-operation policies towards third countries that have co-operation or association agreements with the Union. In the Mediterranean region, the EIB operates under the new Euro-Mediterranean Partnership, which complements the EU Member States' own bilateral co-operation policies.Under the Partnership arrangements, the EIB is committed to lend up to ECU 2 310 million between 1997 and 2000 for investment projects in 12 non EU-Member Mediterranean countries.This loan brings total EIB financing since 1978 in Egypt to some ECU 1.3 billion. Particular emphasis is being given to supporting industrial development, through financing large scale industrial schemes, as well as global loans to the Egyptian banking sector for on-lending to small and medium sized enterprises investing in medium to long term productive projects. Economic and public infrastructures have largely benefited from EIB funding.
(1) The conversion rates used by the EIB for statistical purposes during the current quarter are those obtained on 30 September 1998, when ECU 1 = EGP 3.74,GBP 0.69, USD 1.13.
(2) In addition to loans from its own resources, the EIB also deploys risk capital assistance from EU budgetary funds. A long-term financing instrument, risk capital is a means of tailoring remuneration and repayment clauses to the performance of the project financed, while at the same time consolidating the capital base of the promoter. To date, more than ECU 40 million in risk capital of which more than ECU 25 million has gone to the Middle East) - principally in the form of global loans to local banks - has been directed towards establishing or underpinning some 180 joint ventures, serving to create around 13 000 jobs and mobilising over ECU 600 million in new investment.