Central banks also called to increase support for Middle East start-ups
Founder and vice-chairman of the Dubai-listed logistics firm Aramex, Fadi Ghandour, and the World Banks International Finance Corporation (IFC) are setting up a new $75m venture capital (VC) fund aimed at supporting start-up technology companies in the Middle East.
The new fund will be launched in April and will be part of Ghandours company Wamda Capital, a fund that focuses on supporting entrepreneurs in the Middle East and North Africa (Mena) region.
The IFC will make an investment of between $10-15m in the fund and some institutional investors from outside the GCC have already expressed some interest in the fund.
The VC is being set up to tackle the problem of a lack of financing for start-up firms in the Mena region. Encouraging the creation of new businesses is seen as a vital means of reducing the high youth unemployment rates in the region and ensuring long-term economic and political stability.
A lack of jobs was one of the drivers for the regions political unrest in early 2011. It is estimated that 100 million jobs needed to be created by 2020 to cut unemployment levels.
Speaking at a media roundtable discussion in Dubai, Ghandour said the regions business environment needs to be improved.
Regional governments need to work with the private sector to make it easier to set up businesses, he said. I dont see any serious private-public engagement in addressing the issue of entrepreneurship and job creation.
Speaking on the sidelines of the event, he told MEED the regions central banks should also play a greater role in improving access to finance.
He praised the Lebanese Central Banks efforts to support smaller businesses and said other Middle Eastern countries should follow suit. Lebanons central bank provides guarantees on loans to small businesses via an organisation known as Kafalat.
I think Lebanons example is extremely successful, and if it is done in Lebanon I dont know why it cant be used somewhere else, he said.
I dont want governments to be throwing money at entrepreneurs without entrepreneurs understanding that when governments invest in you, or when you have venture capital, there is an expectation of returns. This is not about grants, but about investment that is sustainable.
Start-ups also face the challenge of attracting high-quality staff, he says.
There is no feeling of security among talented people to work in start-ups, he told journalists at the roundtable. He recommended introducing regulations for the creation of stock option plans in small companies, stating that these plans can help develop a sense of ownership among employees.
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