“SMEs: Improving Growth and Containing Unemployment”

JLGC - SME ConferenceNovember 24, 2014

Robert Dressen, Senior Banking & Financial Services Advisor, DAI

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SME’s – THE CONTEXT

Source: USAID JCP ATF team, the Economist

Small firms are the lifeblood of a country’s economy

Small firms are the lifeblood of a country’s economy

USAID JCPUSAID JCPHere in Jordan, USAID’s Competitiveness Program is trying something different

For example, in EU

Companies that are SMEs Value added Jobs

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99%

4258% 66%

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SME

Change in SME financing channels

Change in SME financing channels

▪ Banks

▪ Guarantee schemes

▪ Friends and family

Traditional

▪ Non-financial institutions

▪ Crowd funding

▪ Insurance companies

New (as cited in the Economist, 16 August, 2014)

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OVERVIEW OF USAID JORDAN COMPETITIVENESS PROGRAM

“The $45 million program will focus on increasing competitiveness initially in three “knowledge economy” sectors: ICT, Clean Technologies, and Healthcare & Life Sciences”

“JCP aims to generate at least 40,000 well-paying jobs, increase foreign direct investment by $700 million and increase exports by 25% over the next five years”

“Jordan Competitiveness Program (JCP) is a five-year program that is funded by the US Agency for International Development (USAID) and managed by Development Alternatives, Inc. (DAI)”

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USAID JCP APPROACH

SECTOR FOCUS – selected three business sectors with highest growth and employment impact - ICT, Healthcare, and Clean TechSECTOR FOCUS – selected three business sectors with highest growth and employment impact - ICT, Healthcare, and Clean Tech

MAPPED SOURCES OF FINANCING – angel/ VC, microfinance, leasing, SME bank, and corporate bankMAPPED SOURCES OF FINANCING – angel/ VC, microfinance, leasing, SME bank, and corporate bank

WORKFORCE DEVELOPMENT GAP ANALYSIS – demand and supplyWORKFORCE DEVELOPMENT GAP ANALYSIS – demand and supply

Enabling environment interventionsEnabling environment interventions

Implementation planImplementation plan

Mapped sources of financing

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JORDAN’S ACCESS TO FINANCE CHALLENGES

▪ Bank loans account for the majority of financing for the economy

▪ SMEs account for 10% of bank loans

▪ Angel and VC funding is limited and focused on technology

2 principal gaps for SMEs

▪ $50K-500K: early stage entrepreneur

▪ $500K-4,000K: growth capital to scale-up

Demand side

▪ Investment/ financing readiness▪ Awareness▪ Deal flow

Supply side

▪ Limited investor pool▪ High thresholds▪ Unclear exits▪ Bank’s criteria for collateral▪ Interest rates▪ Loan tenors

Source: USAID JCP ATF team,

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JCP ACCESS TO FINANCE INTERVENTIONS

Supply Supply

DemandDemand

Angel/VC InvestingAngel/VC Investing SME FinancingSME Financing

• Bootcamp for new investors, training for existing angels, angel investor network, and crowdfunding trials

• Facilitation of deals using existing financing schemes, improve bankability of clean tech/ ICT/ healthcare transactions, and bank product development

• Investment readiness training and toolkit, business innovation center, and business plan competitions

• Awareness and match making sessions for Clean Tech, financing readiness training, and export readiness for ICT

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WORKFORCE DEVELOPMENT CHALLENGES

DemandDemand

Skills gapSkills gap

Innovation gapInnovation gap

Information gapInformation gap

Supply Supply

• Mismatch of skills of new graduates and the skills needed by companies; curriculum reform process does not keep pace with the rapidly evolving market place

• Lack of emphasis on new ideas, competitiveness and practical applications

• Weak career counseling and job placement services

• Centers of Excellence and Skills Development Programs, Career Development Centers, Entrepreneur Promotion and Internship Support, Monitoring & Evaluation Systems