What We Do

Pillar 1: SMEs via Financial Intermediaries

Finance

Banking in the MENA region is characterized by conservative lending practices. Credit risk is managed by minimizing exposure and imposing high collateral requirements making credit available only to large, highly capitalized businesses. Lending also tends to be short-term, ignoring the long-term capital requirements of borrowers. These practices hurt both SMEs and lenders.

Our Solution

MEII stimulates SME lending by providing local partner banks with partial loan guarantees and technical assistance to assess the viability of their SME clients and structure loans to meet borrower working capital and longer-term needs. To date, MEII designed and manages five loan guarantee facilities (LGFs) totaling $369 million in Palestine and Tunisia. Our LGFs are not intended to be permanent fixtures in the local economy – they are temporary (often 10-12 year) interventions intended to address local market bottlenecks and stimulate lending to SMEs. MEII’s strategy is to develop the SME underwriting experience of partner bank loan officers, and allow SMEs to develop a good track record and credit history so that banks and SMEs eventually interact on a bilateral basis and without the need for a third-party intermediary like MEII.

20130415145734
$
Million

In SME loan guarantee facilities

$
Million

In SME loan applications

$
Million

In approved loans

SMEs

That were considered too "risky" by banks

$
Million

In SME loan guarantee facilities

$
Million

In SME loan applications

$
Million

In approved loans

SMEs

That were considered too "risky" by banks

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Strategic Objectives

  1. Transform the SME culture to encourage financial transparency and disclosure.
  2. Provide SMEs with the tools and knowledge to understand their financial performance.
  3. Develop sustainable book keeping practices.
  4. Help SMEs that lack colateral to develop cash flow based business plans that present their bankability.
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Pillar 2: SME Technical Assistance

Knowledge and Education

Many SMEs in the region lack accurate and adequate financial statements. The reasons for poor financial transparency and inadequate disclosure among SMEs vary, but thorough analysis indicates that the problem is primarily attributed to lack of capacity and knowledge regarding how to organize and present information about their business. Most SMEs (especially small companies) have never been obliged to maintain accounting records, which in larger businesses are typically required by banks, regulators, and shareholders. Viable SME owners are keenly aware of the financial dynamics of their business; they know who owes payment, how much is owed to vendors, and whether or not the business is profitable. However, most SME owners suffer from a general inability to effectively communicate information in financial statements that are compliant with accounting standards. As a result, most SMEs are ill-equipped and insufficiently experienced to develop and manage relationships with external financing parties

Our Solution

MEII has developed Tamweeli Assist which is aimed at improving the accounting and financial literacy of SMEs. MEII believes that improved financial literacy leads to enhancing financial transparency and governance, which can facilitate better access to finance for SMEs and allow them to grow and hire more people. By developing the financial literacy and financial disclosure, SMEs can transparently present their bankability and cash flows to financial intermediaries, which in turn can better assess risk and underwrite loans.

MEII has also developed Tamweeli Academy which offers educational training tailored to the needs of businesses . The training courses are digital and / or face-to-face in a variety of themes and touching various fields such as accounting, finance and business management.

A Seasoned Business Advisor will visit the SME for up to one year to:

Understand the nature of the SME's business and assist with a business plan.

Develop a chart of accounts and configure the accounting software to meet the needs of SMEs.

Assist the SME with the loan application process, when requested.

Compile reasonable historical financial statements.

Pay the first year license for an off the shelf accounting software.

Develop a financial strategy and key financial indicators.

Develop financial projections.

Provide bookkeeping (intern) services for up to a year.

Ongoing review of financial performance (KMR).

SMEs

Trained by business advisors

Accounting software programs installed

Interns trained

%

Of the interns were employed post-internship

SMEs

Trained by business advisors

Accounting software programs installed

Interns trained

%

Of the interns were employed post-internship

Pillar 3: Tamweeli

Technology and Innovation

SMEs in the MENA region have limited access to capital, yet many of these businesses have the potential for growth which will generate significant economic benefits through increased productivity, employment, and economic stability. Banks in the region report that the poor quality of loan applications (lack of financial statements, business plans, etc.) is a serious impediment to due diligence. However, many SMEs lack the capacity and knowledge to organize and present their financial information. This weakness perpetuates a negative perception in the credit market resulting in prohibitively high collateral requirements and effectively restricting most small businesses from access to adequate credit.

Our Solution

In 2015, MEII launched the Tamweeli matchmaking platform in Palestine. Tamweeli is an innovative online platform that harnesses the security, speed, and simplicity of the internet to streamline the financing process for both financial intermediaries and SMEs by connecting businesses with financing requests to financial intermediaries, mainly banks and MFIs.

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How It Works

The FI makes an expression of interest on the platform, upon which the entrepreneur can grant full access or deny the request.

Upon granting the FI access, a non-disclosure agreement is automatically executed.

Once the FI is granted full access to the entrepreneur's records and identity, the parties transact on a bilateral basis.

Once the parties conclude a financial transaction, the FI pays MEII a success fee.

Financial Intermediaries are registered

Entrepreneurs registered on Tamweeli

$
Million

 Pending financing requests on Tamweeli

$
Million

In SME loans facilitated

Financial Intermediaries are registered

Entrepreneurs registered on Tamweeli

$
Million

 Pending financing requests on Tamweeli

$
Million

In SME loans facilitated

20130415144717

Our Solution

MEII is seeking to leverage its accumulated experience and is committed to raising the Sharaka Fund in order to create jobs, reach a greater number of entrepreneurs and businesses, and fundamentally transform SME access to finance in the MENA region. The principal rationale for the Fund is to address a market failure to provide adequate and appropriate financing to feed growth in MENA’s SME sectors and introduce new financial products that better suit the needs of the “Missing Middle” SMEs. Risk capital has two fundamental characteristics: (i) it does not require 100% collateral coverage (and certainly not 200%); and (ii) it is risk sharing, meaning that the investor shares in both the downward and upward performance of the investee. All VC and PE investing is risk capital, but not all risk capital need be VC or PE in the conventional sense of these terms. These SMEs a financial instrument that is a hybrid of bank lending and venture capital, one that takes more risk than a bank but less risk than a venture capital fund.

Pillar 4: Missing Middle SMEs

Addressing a Market Gap

According to the IFC, only 20% of MENA SMEs have a bank loan or line of credit, largely due to excessive collateral requirements. While MEII has successfully expanded SME lending in the countries in which it operates, the organization has also learned that improved bank lending is only part of the answer to address the substantial financing gap of the “Missing Middle” SMEs – those businesses that are too large for microfinance or family investment, but too small to attract traditional financing (banks) and risk capital (private equity). In our experience, however, when these “Missing Middle” businesses – SMEs that require capital ranging from $100,000 to $3 million – are given access to well-structured capital, they tend to grow, hire new employees, and stimulate additional economic activity in their communities

20130312102941
Pillar 4: Missing Middle SMEs

Addressing a Market Gap

According to the IFC, only 20% of MENA SMEs have a bank loan or line of credit, largely due to excessive collateral requirements. While MEII has successfully expanded SME lending in the countries in which it operates, the organization has also learned that improved bank lending is only part of the answer to address the substantial financing gap of the “Missing Middle” SMEs – those businesses that are too large for microfinance or family investment, but too small to attract traditional financing (banks) and risk capital (private equity). In our experience, however, when these “Missing Middle” businesses – SMEs that require capital ranging from $100,000 to $3 million – are given access to well-structured capital, they tend to grow, hire new employees, and stimulate additional economic activity in their communities

20130312102941

Our Solution

MEII is seeking to leverage its accumulated experience and is committed to raising the Sharaka Fund in order to create jobs, reach a greater number of entrepreneurs and businesses, and fundamentally transform SME access to finance in the MENA region. The principal rationale for the Fund is to address a market failure to provide adequate and appropriate financing to feed growth in MENA’s SME sectors and introduce new financial products that better suit the needs of the “Missing Middle” SMEs. Risk capital has two fundamental characteristics: (i) it does not require 100% collateral coverage (and certainly not 200%); and (ii) it is risk sharing, meaning that the investor shares in both the downward and upward performance of the investee. All VC and PE investing is risk capital, but not all risk capital need be VC or PE in the conventional sense of these terms. These SMEs a financial instrument that is a hybrid of bank lending and venture capital, one that takes more risk than a bank but less risk than a venture capital fund.

20130415144717
20130415144717
Pillar 4: Missing Middle SMEs

Addressing a Market Gap

According to the IFC, only 20% of MENA SMEs have a bank loan or line of credit, largely due to excessive collateral requirements. While MEII has successfully expanded SME lending in the countries in which it operates, the organization has also learned that improved bank lending is only part of the answer to address the substantial financing gap of the “Missing Middle” SMEs – those businesses that are too large for microfinance or family investment, but too small to attract traditional financing (banks) and risk capital (private equity). In our experience, however, when these “Missing Middle” businesses – SMEs that require capital ranging from $100,000 to $3 million – are given access to well-structured capital, they tend to grow, hire new employees, and stimulate additional economic activity in their communities

20130312102941

Our Solution

MEII is seeking to leverage its accumulated experience and is committed to raising the Sharaka Fund in order to create jobs, reach a greater number of entrepreneurs and businesses, and fundamentally transform SME access to finance in the MENA region. The principal rationale for the Fund is to address a market failure to provide adequate and appropriate financing to feed growth in MENA’s SME sectors and introduce new financial products that better suit the needs of the “Missing Middle” SMEs. Risk capital has two fundamental characteristics: (i) it does not require 100% collateral coverage (and certainly not 200%); and (ii) it is risk sharing, meaning that the investor shares in both the downward and upward performance of the investee. All VC and PE investing is risk capital, but not all risk capital need be VC or PE in the conventional sense of these terms. These SMEs a financial instrument that is a hybrid of bank lending and venture capital, one that takes more risk than a bank but less risk than a venture capital fund.

The fund will employ locally-based teams of investment professions

They will target entrepreneurs and SMEs:

From any sector with a viable business that shows real growth potential

That require capital between $100,000 to $1.5 million

Where the structure of the investment will  provide the necessary capital at a return proportionate to the risk

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