PIF launches ‘Esnad’ emergency lending program in support for Micro and Small enterprises

Bethlehem/PNN/

The Palestine Investment Fund (PIF) has launched its emergency lending program ‘Esnad’ for the support of non-bankable Micro- and Small enterprises through MFIs. The program aims at enabling eligible businesses access the needed liquidity for maintaining their operations and retain their workers and employees during the state of emergency that Palestine is living under as a result of the COVID-19 pandemic, and supporting those enterprises through the recovery phase the day after of the pandemic.

It is expected that ‘Esnad’ program would benefit more than 2,500 enterprises throughout the West Bank, Jerusalem, and Gaza. Upon its successful completion, the program is expected to support the retention and creation of more than 5,000 jobs based on lending and beneficiary rates of current PIF programs.

The Chairman of PIF Board of Directors Dr. Mohammad Mustafa said: “the Initiatives of the Government and those of the Palestinian Monetary Authority to encounter the economic consequences of the Corona pandemic are highly appreciated. The decision of the Board of Director of PIF to launch “Esnad” aims at empowering the Micro Financing institutions to enable them to play their role, and as a complementary effort to those of the Government and the PMA, and in accordance of the role of PIF”.

Dr. Mustafa stressed that succeeding in dealing with the economic consequences of the pandemic require harmony and complementary efforts by all relevant parties.

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He added ‘the launch of this initiative was driven by PIF’s recognition of the importance of this sector for the Palestinian society and economy in light of the current pandemic that has had its toll on our country. While SMEs constitute more than 90% of our Palestinian economy, they are facing major risks rendering them vulnerable to becoming one of the most hardly hit by the pandemic. For some of these projects and enterprises, this has meant inability to maintain operations or retain employees.’

Dr. Mustafa added : ‘As such, and based on PIF’s commitment towards playing an important role in our national economy through its various programs and projects, we announce today the launch of ‘Esnad’ emergency lending program to support MSEs with a total budget of USD$25 million.’

‘Esnad’ aims primarily at empowering MSEs to access needed cash to allow them to continue operating during the state of emergency, while preparing for the return back on track during the post-pandemic recovery phase.’

‘Esnad’ program has two main components: the first component is a USD$15 million lending program and shall be implemented through partner MFIs in two phases.

The first phase consists of $5 million dollars and will be implemented immediately. This phase aims at giving loans to micro small businesses, up to $20,000 per enterprise. This phase will be implemented through soft-term loans with new features compared to lending mechanisms that are currently in place for this sector with MFIs. These new features include the possibility of giving loans for income-generating activities, including operating capital (operational expenditures), fast-tracked process of review and approval of loan requests, reasonable and competitive interest rates, as well as a grace period of up to six months, provided that the loans are repaid over a period of 24 months without fees, commissions, or hidden interest rates.

‘Esnad’ program will thus enable non-bankable micro and small enterprises to borrow money amounting to 3-4 month -worth of their operational expenditures to compensate for cash shortage that enterprises are facing in terms of their operations, retention of their current employees, and enhance their ability for an accelerated recovery once the lockdown is lifted.

This phase will be implemented in collaboration with The Palestinian Banking Corporation which will focus its activities in Jerusalem, and with Vitas-Palestine for Lending to cover West Bank and Gaza Strip governorates.

The second phase, expected to be launched in the second half of this year with a total budget of USD$10 million, aims at preparing SMEs for the post-pandemic recovery phase and resumption of operations, assuming that the emergency state related to the pandemic will end by the end of this year.

The goals of this phase involve primarily the availability of recovery-phase loans dedicated to income-generating and production activities to finance expansion and purchase of equipment as well as general operational expenditures. The Loan size in this phase can reach up to $100,000 by borrower. This phase will be implemented in collaboration with PIF Financial institutions partners.

The second component of ‘Esnad’ program envisages additional loans guarantee scheme of a total amount of USD$10 million, that will be announced later and developed in collaboration with other financial institutions.

Mr. Jamal Haddad, the Director General of Palestine for Development Foundation (PsDF) which is PIF’s social investment and CSR arm and the entity responsible for overseeing the implementation of ‘Esnad’ program, said: ‘PIF has relied on available information confirming that the majority of MSMEs depend on MFIs for their funding, due to the fact that the majority of those institutions are not bankable. The lending portfolio of MFIs has exceeded USD$263 million dollars by the end of 2019. The loans are distributed among more than 75,000 active borrowers, including in Gaza, with 34% of the loans given to women and more than 45% to youth. While MSMEs employ 80% of the total labor force, yet they receive only 15% of the total loans and facilitations in Palestine.

Mr. Haddad added : ‘it is expected that lending and financial institutions will be reluctant or reserved in giving loans to MSMEs during or even post the current pandemic and gradual return to work for reasons that we understand due to the fact that this segment might entail the highest risk for them. All of these considerations pushed PIF to establish a facility that would provide financial resources to MSMEs through launching ‘Esnad’.’

Mr. Haddad added: ‘Esnad’ program will target non-bankable Micro and Small enterprises, including those working in the informal sector, who suffer in terms of the small-size capital and accessibility to finance.

It is noteworthy is that over the past years, PIF has delivered several programs and initiatives that focus primarily on supporting MSMEs by strengthening the capacities of MFIs in Palestine to expand their base of beneficiaries, increase number of loans, geographical reach, and economic sectors included in their programs. PIF’s support to these MFIs comes through direct lending, or loan guarantee programs which cover the majority of MFIs operating in Palestine such as ACAD, Reef, and Ibdaa’. Other forms of support to MFIs take the form of investments in their capital such as the case of Asala Foundation for Lending and Development, Faten for Lending and Development, Ijara and Pal-Lease companies for financial leasing, in addition to ‘Ibtikar’ Fund for support of startups in ICT and innovation.

It is worth mentioning that all of these programs have had a tangible impact on MSMEs and the national economy in general as they helped provide support to approximately 6000 MSMEs thus the creation and retention of tens of thousands of jobs. Among these programs is the Program for Economic Empowerment of Palestinian refugees in Lebanon, the Youth Program ‘Ibda’’, the Jerusalem Matching Grants Facility MSMEs in cooperation with the EU, and others.