Microfinance for democracy in the Middle East

Source : CPI Financial et OPIC

Although China has embraced capitalism without giving up the single-party system, the idea persists, especially within the American government, that the market economy and doing business can help strengthen democracy. The US federal agency OPIC (Overseas Private Investment Corporation) walks the talk by announcing a loan guarantee programme and loan financing to small businesses in Jordan and Egypt. Both countries’ local banks will share $ 500 million in loan guarantees.

This new project fulfils the announcement made last March by American Secretary of State Hillary Clinton during her trip to the Middle East after the Arab Spring, to provide up to 2 billion dollars’ support for the region’s economy. The region has 2 million formal small and medium-sized enterprises (SMEs) – “formal” in that they are registered with the authorities, only half of them having a bank account – according to a recent study by the IFC and the MacKinsey management consulting firm.

“In providing credit to Egyptian and Jordanian SMEs, the project is expected to catalyse growth, expand employment and support the region’s progress toward democratisation. It also aims to transform how banks view lending to SMEs through technical assistance and training programmes”, states the press release from OPIC, which works with the USAID agency and two NGOs, CHF International (CHF) and the Middle East Investment Initiative (MEII).

This article is part of the special report: