The Palestine Investment Fund (PIF), a publicly owned investment fund which aims to strengthen the Palestinian economy through key strategic investments, and private equity group Abraaj Capital announced the first closing at US$15m of a US$50m venture capital fund.
The vehicle will focus on investing in small- and medium-sized enterprises (SMEs) across a range of sectors and stages of maturity.
According to a press release, although SMEs represents the backbone of the local economy, accounting for more than 95% of enterprises in the Palestine, 84% of private-sector employment and 55% of gross domestic product, the sector is still underserved in terms of access to capital and degree of institutionalization.
Given the above, the fund will provide capital for growth and expansion, as well as leverage managerial, operational, strategic know-how and regional networks.
It will also help strengthen corporate governance.
The initial commitments from the sponsors – PIF and Abraaj, a private equity group operating in the Middle East and North Africa, with offices in six countries – will be supplemented by funds raised from investors in further closings planned later this year.
Abraaj, through its dedicated SME investment-management platform – Riyada Enterprise Development – will manage the fund, which is expected to make 20 to 25 investments over the next four years.
The new vehicle complements PIF’s Loan Guarantee Facility (LGF), which has facilitated more than US$50m of financing for over 200 SMEs by providing loan guarantees to the lending banks.
In parallel with the investment activities, the manager intends to implement a number of corporate social responsibility (CSR) initiatives adhering to the United Nations Principles for Responsible Investment.
As part of a commitment to create a supportive eco-system for SMEs, the sponsors will also establish a programme (called Bidaya, Arabic for ‘start’), which will provide entrepreneurs with mentorship through Abraaj’s network of partners, professionals and academics.