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$100m fund to develop SME sector

Updated December 25, 2013
- File Photo
- File Photo

LAHORE: Abraaj Investment Managers, a leading private equity based out of Dubai, on Tuesday partnered with the Small and Medium Enterprise Development Authority (Smeda) to create a fund to help small and medium businesses access capital and launch several other initiatives to boost growth in this crucial but largely neglected sector of the economy.

The partnership between Smeda and Abraaj was formalised under a memorandum of understanding (MoU) that will be effective for the next 18 months.

Abraaj has created the Pakistan focused fund with a capital of $24m provided by the USAID-sponsored Pakistan Private Investment Initiative. JS Bank is the other Karachi-based company, which was given the same amount of money under the initiative to start another fund to support SMEs.

Both the firms are required to match the amount provided to them by the US for starting the investment funds by raising funds from the market or equity contributions. Overall, almost $100m will be available with the two firms for investment as equity partnership with the small to medium sized companies requiring technical and financial support to grow.

The agreement between Smeda and Abraaj plans to set up an SME assistance fund, launch an information campaign highlighting the benefits of institutional capital and private equity, identify potential investee companies beyond the top three cities in Pakistan and utilise Smeda’s business development services for capacity building of SMEs.

Speaking to Dawn, Smeda chief executive officer Ahmad Nawaz Sukhera said the lack of access to capital has long been a constraining factor for the SMEs growth and Smeda has been trying to support this sector through institutional collaboration with local and international private firms and development finance institutions.

He said the creation of the enterprise development fund will go a long way in creating new enterprises and prepare leading companies in the SME sector for listing on stock exchanges to raise funds and grow big.

“We at Smeda are building partnerships with organisations for increasing investment through various channels. Abraaj’s investment fund will provide the SMEs the much-needed access-to-capital stimulus. This partnership will pave the way for the private equity financing to play a major role in the growth of the sector”.

Abraaj has extensive experience of entrepreneurship ecosystem development across global growth markets.

“We are very pleased to bring this experience to bear in partnership with Smeda to create new avenues for entrepreneurs to access capital and lead the way for future domestic investments in Pakistan,” Abraaj representative Tabish Gauhar said.