After several years of operating SME loan guarantee facilities, MEII seeks to leverage its operating and risk management experience to become a direct source of capital to small medium enterprises (SMEs) in the MENA region. MEII, along with a group of like-minded, development-oriented investors, will expand access to finance and financial products to Missing Middle SMEs, that require financing in the range of 50,000-1 million USD and have established track records of operations in the region. MEII’s success (measured by both the number and value) of distributing and recovering debt products underscores the opportunity to profitably enable Missing Middle SMEs who otherwise lack sufficient collateral to obtain commercially available financing. To meet the needs of Missing Middle SMEs MEII is developing a direct finance facility (DFF) for the MENA region, with initial launch in Jordan.
MEII will create a more customized suite of products that traverse the entire capital structure that is required for this sizeable market segment. Capital deployed in this market must be specifically tailored to meet the unique cash flow needs characterized by these businesses. From a development perspective, the MEII’s Direct Finance Facility should be in a position to support any entrepreneur with a viable business, so long as the structure of the investment provides the necessary capital at a return proportionate to the risk.
In aggregate, debt instruments alone will neither provide entrepreneurs with patient and flexible capital, nor compensate for investor risk. By incorporating equity based financing or debt products that behave like equity (quasi-equity products), the MENA Facility will use a “solutions-based” approach to capital needs.