Start-up support: Offering improved access to lending and fostering entrepreneurship

The potential of entrepreneurial activity to reduce graduate unemployment and drive Jordan’s economic growth has received much attention of late. Start-up companies have been struggling to get their ideas off the ground, but this could change with the emergence of new lending facilities in 2012. Meanwhile, increasing effort is being placed on equipping the country’s students with the sort of commercial acumen they need to become the business leaders of tomorrow.

Small and medium-sized enterprises (SMEs) make up 50% of Jordan’s GDP and 99% of its employment, but to date they have only received 10% of bank loans. The government is hoping to rebalance the figures somewhat through a $250m public-private loan guarantee programme funded by the US’s Overseas Private Investment Corporation. Launched in early 2012, the scheme incentivises private banks to lend to SMEs by offering to guarantee around 75% of their credit. Initial signs have been positive, with four major banks having signed up by March 2012. This follows in the wake of the $50m Jordan Growth Capital Fund, which was created in late 2011 with funding from the European Investment Bank and a $20m injection from Dubai’s Abraaj Capital.

LIMITED LENDING: The success of SME lending is yet to be guaranteed, however. “The SME portfolios of Jordanian banks have, to date, generally not been accessible to Jordan’s smaller enterprises,” Maher Al Mahrouq, director general of the Jordan Chamber of Industry, told OBG. He added that the Central Bank of Jordan has offered a loan guarantee scheme since 1994, but that its success has been limited.

Some believe that even the new schemes may not sustain the interest of banks, many of which remain risk-averse in these economically unsettled times. Others believe that some of the funding models used to develop entrepreneurship in Jordan need to be changed: “Many of the policymakers who allocate funding to support SMEs cannot distinguish between non-profit initiatives and private investment firms looking to make conventional profits,” Farhan Kalaldeh, executive director of the Queen Rania Centre for Entrepreneurship (QRCE), told OBG. “Furthermore, throwing money at the problem won’t solve it, unless we come apply a more comprehensive strategy to foster entrepreneurship.”

MAKING A DIFFERENCE: The QRCE is one of several institutions working to get entrepreneurs up and running. Established in 2004 with a focus on technology, it has helped to establish more than 25 high-growth start-ups, organised 10 national business competitions and conferences, and trained thousands of Jordanian students, young professionals and entrepreneurs. “The majority of our funding comes from the corporate social responsibility departments of multinationals and Jordanian private sector,” said Kalaldeh.

Complimenting such work, the Business Development Centre (BDC) provides capacity building, export development and advisory services to SMEs. Its US Agency for International Development-backed Tatweer Programme aims to enhance SMEs’ competitiveness via targeted financial grants, advisory services and links with larger firms and international markets.

Efforts are also being made to foster an entrepreneurial mindset among university students. QRCE’s DART programme has established entrepreneurship clubs at five universities round the country, and is set to expand to a further five by the end of 2012. The BDC also offers a range of programmes to boost the business savvy of students at several universities.

STARTING YOUNG: At schools, by contrast, such efforts are still in their infancy. Rashad Bibars, senior director of business development at the BDC, told OBG, “Jordanian schools, especially the public ones, lack a structure course that is embedded within schools’ curriculum to teach student business concepts and giving the students the chance to think about self-employability as an option upon graduation.” BDC hopes to work on this issue with the Ministry of Education and other stakeholders by providing Train of Trainers programmes for school teachers and coaching them to introduce this concept as a formal class within their curricula.


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The Report: Jordan 2012

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