Abraaj fund aimed at financing small businesses across region
Egypt’s Communications and Information Technology Ministry will invest $12m into a new fund launched by UAE private equity firm Abraaj Capital to stimulate the growth of small businesses within the region.
The ministry will invest $12m into the $80m Egypt Growth Capital Fund (EGCF), which is part of the $500m Riyada Enterprise Development (Red) fund launched by Abraaj in early 2010 to help bridge the funding gap that regional small and medium-sized enterprises (SMEs) currently face.
The EGCF is dedicated to investing in high-growth SMEs in Egypt and will have a specific allocation of $30m dedicated to information and communications technology (ICT) and ICT-enabled businesses. Of this $30m, the EGCF will be investing at least $6m in fostering start-ups and early stage companies that are matured.
The ministry said it will make the investment through its newly established Technology Innovation and Entrepreneurship Center (TIEC) and other affiliates.
‘We view technology and IT in particular, as a core investment theme for our fund with the potential to deliver strong returns to our investors,” says Mustafa Abdel-Wadood, managing partner of Abraaj Capital.
“Our collaboration with the MCIT and the TIEC is also intended to have a strong impact, not only on the Egyptian IT sector, but on the development of Egypt’s SME sector at large.”
“We have allocated $28m towards five companies we have signed up over the past two-three weeks,” says Tom Speechley, executive director of Abraaj Capital and chief investment officer of Red. “They are across a range of sectors, including healthcare, IT services, food, internet and media.”
The average ticket size of Abraaj’s investments will be $5m and it is in the process of “looking closely” at 15 other companies that it considers investment-worthy. It hopes to close five more deals before the end of 2010.
Middle East-based SMEs currently receive 8 per cent of regional bank lending, while Gulf SMEs receive just 2 per cent, according to a report released in October by the Union of Arab Banks and the Washington-headquartered World Bank.
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