Access to Finance for Women Owned MSMEs in Libya

MEDA Libya
Access to Finance
for Women Owned
MSMEs in Libya
Aladdin El-Haraty
6/1/2014

2 | P a g e
Contents
I. History/Background ...............................................................................................................3
II. Topical Areas ..........................................................................................................................5
III. Current Sources of Funding..............................................................................................5
i. Injazek..................................................................................................................................5
ii. Startup Weekend.................................................................................................................6
iv. MEDA................................................................................................................................7
IV. Expected future sources of funding.................................................................................9
i. Libya Enterprise..................................................................................................................9
ii. Islamic Development Bank..............................................................................................11
iii. Silatech...........................................................................................................................14
iv. Spark...............................................................................................................................16
A. Ignite Fund..................................................................................................................16
B. Loan Guarantee Fund...............................................................................................19
V. Recommendations..................................................................................................................20
i.Resolve political, legal, security, social, and cultural hindrances to SMEs in Libya ....20
ii. Urgency in the introduction of additional finance mechanisms in Libya ..................26
VII. Lessons Learned..............................................................................................................29
VIII. References.........................................................................................................................33

3 | P a g e
I. History/Background
The issue of funding for small and medium sized businesses (SMEs) is an extreme
challenge in Libya. Everyone in Libya wants to be a businessman or businesswoman,
but there are not real opportunities to receive any loans from the conventional and
nonconventional mechanisms at this time.
In the past the National Economic Development Board (NEDB) had formed a small
and medium sized business department whose role was to carryout nationwide
programs to train and support them with their startup need and with business loans
(Tekbali 2014).
“Qaddafi’s Baghdadi Mahmoudi government even announced LD 500 million to be
guaranteed by the Loans Guarantee Fund,” but with Libya’s corrupt leaders in place
nothing ever happened (Alazet).
After 42 years of dictatorship, Libyan entrepreneurship was seen as a means of
Libyans earning power and wealth, and that meant the possibility of new faces
challenging the status quo, and was a ruse to the socialist system guised to hinder any
and most Libyan businesses.
The system under Gaddafi did not allow for entrepreneurs to succeed, unless you
were connected to the family in some fashion. I asked Mr. Osama Zreba, branch
manager of the Ejama Al Arabi-Hai Andalus branch, and he noted that limited financing
opportunities for SMSE’s were available from the state owned Gumhuriya Bank, and at
times from private banks such as the Aman Bank or the Commercial and Development
Bank (Zreba 2014). Ashraf Hassan head of the SME loans department of the National

4 | P a g e
Commercial Bank (NCB) states “that NCB had signed an agreement with the then
Loans Guarantee Fund (LGF) in 2008. As a result, LD 100 million was set aside by NCB
for SME loans, including a section specifically for university leavers. The LGF was to
provide 70 percent of the grant/loan whilst the NCB was to provide the balance of 30
percent. However, since 2008 and out of the LD 100 million set aside, only six loans
were ever provided totaling a miserly LD 6 million” (Zaptia, “No mechanism to access
potential LD 40 bn available for SME loans – Libya Enterprise GM”).
In addition, Osama Ibrahim, the Central Bank of Libya’s (CBL) Research Centre
revealed “that the CBL had conducted a one year study in the “Risk of SME Loans”. He
admitted that over the years, large amounts of money had been disbursed by banks –
with little positive results in return. There was a lack of honesty and transparency by
loan applicants, with unrealistic business plans, revealing that over 65 percent of loans
granted were not used for their intended purpose. They were used to buy luxuries,
property, finance weddings or other personal expenditures ((Zaptia, “No mechanism to
access potential LD 40 bn available for SME loans – Libya Enterprise GM”).
I also interviewed Mr. Ramadan Zreba, the Libyan Development Bank accounting
manager located in the Swani area of Tripoli, and he stated that for large enterprises the
state owned Development Bank, provided loans to entrepreneurs for manufacturing and
large scale operations, but even now they have stopped providing financing to large
scale projects due to the security and political situation (Zreba 2014).
In 2010 the basic legal infrastructure for private-sector development was adopted
with 22 new laws changing fundamentally commerce, customs, income tax, stock
market, labor, communication, and land registry (Alazet).

5 | P a g e
Four a couple of years SME have started to be seen as potential growth engines
for Libya’s private sector in order to alleviate hydrocarbon dependency, kick-starts the
growth and helps in the rebuilding effort (Alazet).
Now three years removed from the Libyan revolution, and lending options are
few and limited for SMEs in general and even more so for female owned enterprises,
with most taking personal loans from family or friends. At the time of the writing of this
paper, and during the culmination of the research, the security and political stability of
Libya is at a crossroads with the hotly contested battle of who is deemed the Prime
Minister of the country, to the battle for Benghazi and against terrorists across Libya
ensues, the focus on SME growth and financing is on hold by many.
In my research I have researched alternative or informal sources of capital, ranging
from government initiatives, the private and public banking sector, civil society
initiatives, and international NGO funding as well, followed by a few recommendations
on how to open up financing by using new methodologies and options that were
previously not available in the MENA region.
II. Topical Areas
III. Current Sources of Funding
The current programs that I have researched to be ongoing in Libya, foreseeing the
security situation is stable are the following:
i. Injazek
Injazek is program that started in Jordan, and is supported by the UAE group,
Potential. They have partnered with Potential, Mazadah, and the Libyan Ministry of

6 | P a g e
Youth & Sports. The registration process as posted on their website is that the “idea be
unique, innovative, and owned by the individual/team participating. As this is not pure
financing option, it is a competition that is open to all young Libyans aged 18-35 years
old (Injazek).
The team can consist of various age groups, and those applying must not have a
business that has been running more than 2 years or more than $200,000 in profit
(Injazek). Their cash reward is $10,000, and includes a trip for five days to Dubai, and
visits to multi-national companies.
This program has been successful, and recently ended, but shows the vast
numbers of programs run by various Libyan ministries with no coordination. Applicants
may apply online and or visit the Ministry of Youth & Sports for any further information.
ii. Startup Weekend
Startup weekend has been a very successful business plan competition that pits
various teams to pitch their idea over the course of the three days, essentially over the
weekend.
The program calls for teams to compete in writing up business plans, and
presenting their ideas, and judges decide on the most potentially successful project.
Cash prize amounts depend upon the number of sponsors and event organizers, but
range from 5,000 to 25,000 Libyan dinars.
It has been successfully implemented in Tripoli, and spun off into programs for
Benghazi, Misrata, and shortly to Sebha. There are plans to hold additional in the near

7 | P a g e
future. The limitation is that the financing is normally provided in a competition format,
and not in a formal lending or finance mechanism. Applicants for the event must register
and join a team, and the key is to look out for any upcoming events.
iii. Wamda Capital Fund
The Wamda Capital Fund invests in early stage start-ups in the MENA region.
The fund is industry-agonistic, investing in both tech and non-tech-focused start-ups.
Wamda also supports startups beyond financial investment, helping them grow and
maximize their potential. They have now selected their first round of ventures that
include recruitment, resale, and other innovative programs, but claim to also fund
normal start-ups as well. The applicant can visit the Wamda website to complete a
startup profile, and complete the necessary application material to be considered for
any upcoming funding opportunities.
Unfortunately there is not a Libyan group selected from the group, but the fund is
open for Libyans to apply and obtain funding via a stake in ownership (Wamda).
iv. MEDA
The Mennonite Economic Development Associates (MEDA) has established an
SME program that focuses on providing assistance to female SMEs in the hope of
stirring the Libyan private sector, and increasing job opportunities in the process
(MEDA, “Libyan Women Economic Empowerment (LWEE) project profile.”). Its history
is unique, being “founded in 1953 by a group of Mennonite business professionals, we
partner with the poor to start or grow small and medium-sized businesses in developing

8 | P a g e
regions around the world,” but their first investment was a dairy farm named “Sarona” in
Paraguay in 1954 (MEDA).
The USAID sponsored program Libya Women Economic Empowerment (LWEE)
is a great addition to the Libyan SME landscape. MEDA’s strong history in working in
various areas across the world is welcomed, having strong experience internationally in
assisting those in need, and assisting them in creating their ideas into reality, and allow
them to change their surroundings. At the start of compiling this research, I was
unaware of the timeline of their events, and returned back to capture MEDA as a current
financing mechanism in Libya.
The LWEE project “will address some of the constraints women-owned
enterprises face in a five step approach:
1. Entrepreneurship and Business Training: Offer formal in-class training and
practical hands-on coaching needed for women entrepreneurs and business owners to
take businesses to the next level.
2. Business Plan Competition: Women who complete the training will be eligible
to win personalized training and a matching grant.
3. Intensive Training, Mentoring and Networking: Winners of the competition will
get further training and one-on-one mentoring on topics specifically related to their
business sector to polish their plans and boost the effect of their matching grant.
4. Businesswomen SME Matching Grants Fund: Plans with good potential for
revenue growth and job creation will be awarded $2,500-$7,500, matched 1:1 by
themselves, to increase their capital.
5. Capacity Building of Local Partners: Improve their financial and business
capacity as service providers to businesses, specifically women, in the private sector.
(MEDA, “Libyan Women Economic Empowerment (LWEE) project profile.”)
These are all welcome steps as there are not any other international organizations
specifically supporting women entrepreneurs in Libya at this time, and MEDA is filling an
important void.

9 | P a g e
Through the program “210 women entrepreneurs with job-creating opportunities for
an additional 700 individuals, is jointly funded by USAID and MEDA supporters and is
implemented in partnership with three local organizations: Phoenix, Libyan Women
Forum and Consultants Alliance” (MEDA, “MEDA women’s empowerment project in
Libya sees first graduates.”). 20 candidates completed a month-long business training
course, as MEDA “received 300 applications for the 20 spots” for the first training
program, and when it began stirred interest in many new future entrepreneurs. On June
19th 2014, MEDA Libya continued its work by holding a grants ceremony, that handed
out 150,000 LYD in matching grants, and these matching grant meets the amount of
money being invested by the participating business women (Zaptia, “MEDA grant
ceremony hands out LD 150,000 in matching grants.”). MEDA is doing solid work, and
with the media buzz, and also strong network and management team, the LWEE
program looks to soar even further.
Applicants interested in applying for future programs may visit the MEDA Libya
webpage or contact the office for more information.
IV. Expectedfuture sourcesof funding
i. Libya Enterprise
Established in 2012 to assist SME’s in Libya, this Ministry of Economy department
stated that they do provide grants as well as training, but have not started officially
providing financing at this juncture, primarily due to the political and security instabilities
in Libya.

10 | P a g e
Most of their current programs are entrepreneurship training courses. They do have
a separate Women’s division, and they recently had a jewelry workshop training
program. OECD is working with them to establish an SME strategy with five separate
components dealing with establishing the legal and legislative framework for such as
strategy.
The OECD in partnership with Libya Enterprise and working with the Ministry of
Finance have started in 2013, a plan to review the current setup of SMEs in Libya.
During the 2013 OECD Libya Enterprise meeting, the Abdulghasem Mrabet, Strategic
Partner Manager, at Libya Enterprise led the discussion on the financial sector.
The discussion surrounded the lack of finance opportunities due to the way the
banking sector in Libya is setup, the “Central Bank owns most of Libya’s commercial
banks and is also the regulator (OECD, “SME Development Strategy in Libya-Mission
Report: Tunis-Tunisia-9-11 December 2013”), thus with no set SME guidelines or vetting
process for the public banks to follow, obtaining financing is extremely difficult. In
addition the “huge collateral requirements for start-ups can at times reach 150%,” but
the “government has created a body to guarantee loans up to 70% (OECD, “SME
Development Strategy in Libya-Mission Report: Tunis-Tunisia-9-11 December 2013”).
The meeting hinged upon the fact that with “low levels of financial
intermediation”, the credit to the private sector is a mere 17% of GDP, which clearly is
not much (OECD, “SME Development Strategy in Libya-Mission Report: Tunis-Tunisia-
9-11 December 2013”). The problem also lies in that most of the financing, was for

11 | P a g e
“working capital rather than long-term investment projects (OECD, “SME Development
Strategy in Libya-Mission Report: Tunis-Tunisia-9-11 December 2013”).
I contacted the Libya Enterprise dept, and spoke to Ms. Honida Mhani, project
assistant, and who also attended the December 2013 meetings with OECD.
She stated that there has not been any funding provided yet to SMSEs as of yet in
Libya, but stated that they have “signed a memorandum with Gumhuriya’s Islamic
financing department (Mhani).”
In addition Libya Enterprise is working with OECD on the feasibility study, and that
all such studies are to be “reviewed by the Lending Guarantee Fund, and who study the
proposals, and then approve the projects as appropriate (Mhani). The average funding
would be up to two million Libyan dinars for small enterprises, and from two to five
million Libyan dinars for medium sized enterprises (Mhani). As things progress,
interested entrepreneurs may visit the Libya Enterprise offices, and keep posted by
reviewing their website for more information.
ii. Islamic Development Bank
I conducted research on OECD’s plan and in addition to Libya Enterprise’s signing of
a finance agreement with government-owned Gumhuriya Bank; the Islamic
Development Bank (IDB) has a separate SME plan for the MENA region. The IDB
report on Libya’s past & current plans, are very detailing to what the future may hold for
female entrepreneurs.

12 | P a g e
The IDB through its “private sector arm Islamic Corporation for Private Sector
Development, has established an SME programme, both regionally and in Libya, which
aims to enhance access to finance for fast-growing SME’s that contribute to job
generation, economic development and stability” (OECD, “Project proposal for the
MENA transition fund-SME Development Strategy for Libya).
One of the IDB SME program’s main objectives is “to develop strong and
sustainable institutions for SME finance and consulting, both to local companies, local
start-ups, and SME investors interested in Libya” (OECD, “Project proposal for the
MENA transition fund-SME Development Strategy for Libya). The IDB in conjunction
with the OECD, whom will provide technical assistance to the SME development fund,
will work on addressing the funding gap in the Libyan SME sector (OECD, “Project
proposal for the MENA transition fund-SME Development Strategy for Libya).
In addition it will provide critical “technical assistance for the establishment of a
Libyan SME financing bank” (OECD, “Project proposal for the MENA transition fund-
SME Development Strategy for Libya). In addition it will provide “technical assistance for
the establishment of venture capital fund for SME projects and start-ups” (OECD,
“Project proposal for the MENA transition fund-SME Development Strategy for Libya).
Before such a mechanism is to be established, “it requires its own diagnostic study, a
development strategy, a legal framework, and assistance in the implementation of the
strategy,” and starts at the beginning of the vetting process” (OECD, “Project proposal
for the MENA transition fund-SME Development Strategy for Libya).

13 | P a g e
It also yields substantial input for the SME development strategy, in particular as
finance is often identified as the major obstacle to company growth and investment. It
has been designed to complement the planned project to set up an SME development
fund, with assistance from the Islamic Development Bank under the aegis of the Libyan
Ministry of Economy” (OECD, “Project proposal for the MENA transition fund-SME
Development Strategy for Libya).
The initiative will complement other relevant donor-funded projects, which includes
the Libya Enterprise SME initiative, and other projects (OECD, “Project proposal for the
MENA transition fund-SME Development Strategy for Libya). The Islamic Development
Bank (IDB), through the Islamic Corporation for Development of the Private Sector
(ICD) has already established a regional SME Programme, to address the challenges
faced by SMEs, and it is hopeful that its entry into Libya will solve the problem of
financing (OECD, “Project proposal for the MENA transition fund-SME Development
Strategy for Libya).
As a member country of the IDB, Libya is a beneficiary of this initiative which
focuses, among other things, on strengthening SMEs’ access to finance. This is
reflected in Component 5 of the project proposal, which will be implemented by the
OECD in collaboration with the IDB. The SME Programme, led by the IDB, would be
part of the strategy to be implemented by the OECD (OECD, “Project proposal for the
In addition, the SME Programme covers other areas such as entrepreneurship
education and training and business support services. Once the proposed strategy for

14 | P a g e
SME development is implemented, providing support services and reinforcing
entrepreneurship skills, through the SME Program, will be necessary to boost SME
development, and in turn will have strong candidates who will be better able to utilize
the IDB financing in a careful and measurable manner (OECD, “Project proposal for the
As the project is in its developmental stage, applicants are requested to follow up
with Libya Enterprise on any new developments, and to obtain an updated timeline on
the project.
iii. Silatech
Silatech planned to enter and provide various programs in Libya earlier but with the
security and political situation, they have decided to startup activities later.
Silatech has coordinated various programs in Libya such as partnering “with the
Libyan National Transitional Council and the Benghazi Local Council in organizing the
first Libyan Youth Leadership Forum, held in Benghazi January 11 and 12, 2012”
(Silatech 2012). Over 300 Libyan youth and government officials met with various
representatives of Arab & international civil society organizations during the two day
conference, and Silatech also served as knowledge partner for the event (2012).
In addition from November 18th-24th 2013, Silatech hosted the first Global
Entrepreneurship Week every held in Libya, with the event being held in Benghazi, the
event was lead by Khalid El Mofti, general manager of Tataweer Research (Gulf Times
2013). He presented “an overview of opportunities for innovation driven SMEs, and

15 | P a g e
called for more flexible government strategies to help promote the sustainability of these
ventures” (Gulf Times). Attendees included Reem El Soussi, an activist who promotes
female entrepreneurship, Tarek El Gheryani of Libya Enterprise, and Amr Farkash,
general manager of Reiyada (Gulf Times).
At the conclusion of Libya’s first Global Entrepreneurship Week on November 24th,
2013, “the Benghazi Startup Cup, a business model competition co-organised by Think
Creative and Silatech that aims to help entrepreneurs transform their ideas into viable,
sustainable businesses” was held (Gulf Times). Silatech was the host country partner,
and official sponsors included the Benghazi City Council and the Embassy of the
Netherlands.
“Despite the struggles we are going through in Libya now, our country is full of young
people who are ready and willing to work hard to build a new Libya,” Silatech Libya
Country Representative Zeyad bin Halim said (Gulf Times). He added, “A new
movement of creative, positive entrepreneurs is what we in Libya need, and we are
proud that Silatech and our many partners have been able to give this movement a
strong boost through Global Entrepreneurship Week (Gulf Times).”
I spoke to Amr Farkash, who is President of the Libyan NGO, Reiyada, and the
selected partner for Silatech in Libya. He stated that with the current situation needing a
focus on security & safety they were notified by Silatech Director Dr. Tarik Yousef, to
hold off any programs or activities.
Silatech has forged great connections with countries such as Jordan, Qatar, Yemen,
and Tunisia, and it is hoped that their work continues across Libya, to spur

16 | P a g e
entrepreneurship further, and perhaps they may begin work soon, provided the security
and political situation improves.
iv. Spark
A Dutch based NGO, Spark was one of the first international organizations to
begin working in Libya. They initially started the Benghazi Entrepreneurship Center,
where they provide training & seminars. I spoke to Mazen Al Kassem, the Libya Country
Manager, and he noted that “unfortunately, with the current situation in Benghazi we are
working to a minimum,” and do not have plans to work elsewhere in Libya at this time
(Al Kassem). They are open to working further in Libya, but as Mr. Al Kassem noted, ‘as
we are a non-profit organization, we need funding in order to implement our projects” (Al
Kassem).
When asked what specific financing is available specifically to female owned
SMEs he stated, “From my experience in Benghazi for the past couple of months, these
alternatives are very scarce” (Al Kassem).
In addition, he noted that, “the that the African Leadership Academy organizes
every year the Anzisha Prize to support social entrepreneurs from all African countries,
but not necessarily women” (Al Kassem). He emphasized that at under the “SPARK
Benghazi Entrepreneurship Centre project, we award money prizes and disburse small
grants to aspiring women entrepreneurs”, and noted that, other than the above, “I
haven’t heard of any additional initiative targeting women in the Eastern part of Libya”
(Al Kassem). A review of the Spark website provides more insight on the types of funds
that may become available soon in Libya.
A. Ignite Fund

17 | P a g e
Mr. Al Kassem notes that the Ignite Fund is planned for Libya in the near future.
Spark notes on its website that it is the investment advisor to the Ignite Fund, which
“aims to be an impact investment vehicle operating in post conflict countries such as,
but not limited to: Afghanistan, Burundi, Ivory Coast, Kosovo, Iraq, Liberia, Libya, Mali,
Myanmar, OPT, Rwanda, Serbia, South Sudan, Somalia, Yemen, and other Post
Conflict Countries (Spark).
The Spark website goes on to indicate that, “IGNITE Fund targets countries
where SPARK already has significant local infrastructure,” and they include Libya, even
though local infrastructure does not exist, due to the security concerns in Benghazi
(Spark). The intent of the fund is to provide “loan, convertible debt, equity and quasi
equity investments to promising businesses which are looking to grow their operations”
(Spark). In addition, the IGNITE Fund also provides technical assistance and mentoring
in addition to financial support. Our goal is to support today’s fledgling innovator who
just might create the next great, scalable innovation that can promote peace and
stability in fragile states while offering investors risk-adjusted financial returns (Spark).
Since 2006, SPARK, “has supported over 250 small and growing businesses
(SGBs), in coordination with local partner banks in each country, through a loan
guarantee program offering up to 15,000 Euros to each SME (Spark). Those “few who
successfully completed the loan guarantee programme require additional larger funding
to scale their businesses,” yet in Libya the loan guarantee program does not seem to be
setup in Libya, due to the current security situation (Spark). As is the case in Libya, “the
local financial market is not ready or willing to provide the necessary funding to support
these businesses,” those that have developed “a good track record in respect to

18 | P a g e
SPARK’s loan guarantee programme, the IGNITE fund intends to “close that ‘pioneer
gap’” (Spark).
The fund has targets the following sectors:
Agribusiness, BPO, Education, Energy, Healthcare, Light Manufacturing, Housing, ICT,
Logistics, Retail, Tourism/Hospitality, Transportation, Water & Sanitation,” and specific
sectors based on the country (Spark).
The IGNITE fund targets post conflict countries such as Libya, Afghanistan,
Burundi, Ivory Coast, Kosovo, Iraq, Liberia, Mali, Myanmar, OPT, Rwanda, Serbia,
South Sudan, Somalia, and Yemen (Spark). The intent is to improve “government
security: local compliance, community development”, as well as improve “individual
security: jobs created, access to basic services, equality & fairness” (Spark). Yet
Spark’s success in Libya has been hindered again not only by the security situation in
Benghazi and Eastern Libya in general, but also from the political instability the nation
has faced with the GNC and the PM’s office being contested, thus causing a delay in
developing a loan guarantee scheme, and partnering with local banks in Libya.
The investment structure deals with debt, equity, debt to equity convertibles, and
quasi-equity that add warrants, allows for minority positions on equity deals, protect
default risk of early stage businesses, and allows for the facilitation of investment exits
(SPARK). The investment criteria of the fund are intended to create the following
impacts:
Sustainable employment, improvement of income, access to social services,
reduction of barriers to higher quality of life, equality and fairness, and inclusiveness of
marginalized populations (Spark).

19 | P a g e
In addition the following business criterion is considered when selecting viable
investments:
“Successful completion of SPARK training programs, business Incubation
program with successful track record of loan repayments, commercially viable and
scalable business model, strong management team, strong governance, growth or
expansion stage of business life cycle”(Spark).
B. Loan Guarantee Fund
This is a SPARK fund that assists young entrepreneurs, in any country, is to access
finance in order to start their businesses, as in most cases this is the most challenging
part in starting a business (Spark). The fund was started the fund so that entrepreneurs
“start their business with support services from SPARK’s programmes and are then
enabled to take out a regular loans at an existing local financial institutions” (Spark).
Then SPARK makes pre-arrangements with specific FI’s to get better conditions for
the loans, accommodated to the entrepreneurs (Spark). The loans typically “range
between 5,000 and 10,000 euros,” and runs “for 2 to 3 years with half year grace
periods, and have 5%-15% interest rates depending on the financial investment”
(Spark). The program is currently open in a few post conflict countries, and the “fund
runs very well with an approximate default rate of 7%”, and those using the fund “are
showing very good growth results, and creating many new jobs.”(Spark).
The hope that the current political & security situation stabilizes and that such funds
are able to be provided via Spark.

20 | P a g e
V. Recommendations
i. Resolve political, legal, security, social, and cultural
hindrances to SMEs in Libya
As we have reviewed current & future financing mechanisms available in Libya,
the road ahead is long and arduous road, and the main problem faced in Libya is the
government’s inability to draw up a system in which to access up to 40 billion LYD in
potential SME funding that is available. For quite some time political hindrances such as
the battle for who is the legitimate Prime Minister (PM) lasted months, before the
Constitutional Court declared that the newly voted on PM Ahmed Maetig was
unconstitutional, thus returning the interim PM Abdullah Thini to power. The
government’s operations were at a standstill, as Mr. Maetig, nominated his own cabinet,
and eventually by force took over the Prime Minister’s offices. While PM Thinni, took to
traveling to Eastern Libya, where the security situation was tense, as there the
Operation Dignity was taking place, where retired General Khalifa Hafter’s troops, whom
they self declared were Libya’s actual and only official army, were pitted against Ansar
Al Sharia, and other extremist groups.
It will be necessary to have a smooth handover as the newly elected House of
Representatives are set to officially takeover the parliamentary role from the General
National Congress (GNC) in August 2014. The political instability caused by a divide in
public opinion, on whether the GNC should be terminated and that they have exceeded
their mandate, or if they should continue in their parliamentary role, truly delayed any
potential work that the Ministry of Economy or Libya Enterprise could complete, as at

21 | P a g e
times the government was at a complete standstill, and not high level decision making
was taking place.
This coupled with the Eastern oil ports being taken over by Ibrahim Jhadran and
his large contingent, crippled Libya by creating millions of dollars of lost revenue, and
despite claims from a few months ago that the situation has been resolved, it still
lingers, and will affect how Libya’s upcoming budget will look, and thus lessen the
amount of funds possible to support SMEs.
In addition it is of great importance that the new Parliament in conjunction with
the appropriate ministries, make the necessary legal and administrative changes to
open up the prospect of access to finance across Libya. The OECD & Libya Enterprise
have teamed up to develop an SME strategy that includes amendments to the banking
laws. Component 3 of the strategy focuses on the “necessary legal framework, as part
of the implementation of the strategy, proposing amendments and, if appropriate, a
separate SME law” (OECD, “Project proposal for the MENA transition fund-SME
Development Strategy for Libya). The framework will be “based on international good
practices, in particular from OECD members, other countries in the MENA region, and
other countries facing the same economic challenges” (OECD, “Project proposal for the
Providing access to finance is not possible if the legal framework is not there to
protect the loan guarantor & holder, and develop a mechanism that allows for
transparency, security, and the appropriate monitoring & evaluation to ensure success
of the funded SMEs. During a one day workshop held in Tripoli on June 26th, 2014, “the
General Manager of Libya Enterprise (LE), Abdalnasr Abouzkeh, has criticized the fact

22 | P a g e
that despite the availability . . . of a potential LD 40 billion for the provision of SME
loans, the government was still unable to come up with a mechanism to access this”
(Zaptia, “No mechanism to access potential LD 40 bn available for SME loans – Libya
Enterprise GM”). He went on to add that, “SME funds need the cooperation of all Libyan
sectors, including banks,” and that the role of SMEs in job creation was taken as given
and therefore so was their contribution to GDP” (Zaptia, “No mechanism to access
potential LD 40 bn available for SME loans – Libya Enterprise GM”).
In addition regarding the specific subject of access of SMEs to bank finance,
“Abouzkeh again bemoaned the fact that Libyan banks had LD 40 billion available for
loans and credit, yet the state was still unable to find mechanisms to activate this”
(Zaptia, “No mechanism to access potential LD 40 bn available for SME loans – Libya
Enterprise GM”). The banking sector urgently needed guarantees in the form of
legislation in order to gain access to this dormant liquidity (Zaptia, “No mechanism to
access potential LD 40 bn available for SME loans – Libya Enterprise GM”).
In addition, SME funds have been created by Libya Enterprise, and are
distributed across Libya’s five main cities, and were created to operate in a Sharia-
compliant banking system, and therefore were ready for the implementation of Islamic
banking, nominally set for 2015 (Zaptia, “No mechanism to access potential LD 40 bn
available for SME loans – Libya Enterprise GM”).
Another problem is the needed reform regarding the “current practice of banks
demanding a guarantor for a loan applicant’s salary, Abouzkeh said that Libya
Enterprise would, under the new Funds’ rules, act as the loan’s guarantor – but only for
approved SME projects” (Zaptia, “No mechanism to access potential LD 40 bn available for

23 | P a g e
SME loans – Libya Enterprise GM”). This would ease some of the red tape Libyan
entrepreneurs’ face, and “Libya Enterprise would guarantee both the Funds’ and banks’
rights and the LE Funds would in effect act as a tool for banks to invest their dormant
finances, Abouzkeh explained” (Zaptia, “No mechanism to access potential LD 40 bn
available for SME loans – Libya Enterprise GM”).
The past process was implemented under the Ministry of Economy, and provided
reimbursement to commercial banks in the case of business failures, but would be very
long, anywhere from 6-7 years (OECD, “Project proposal for the MENA transition fund-
SME Development Strategy for Libya). OECD’s review of SME strategies in the past
also indicated, “even with the new 5 regional funds which are funded by the national
budget, the same problem will remain in the sense that these funds give 25 per cent in
equity and guarantee the rest in the form of loans from commercial banks” (OECD,
“Project proposal for the MENA transition fund-SME Development Strategy for Libya).
OECD in conjunction with the International Development Bank (IDB) will work to
increase access to finance for SMEs, and one of the objectives of the IDB SME
program is to “develop strong and sustainable institutions for SME finance and
consulting, both to local companies, local start-ups, and SME investors interested in
Libya (OECD, “Project proposal for the MENA transition fund-SME Development
Strategy for Libya). The focus will be to provide “(a) technical assistance for the
establishment of venture capital fund for SME projects and start-ups, (b) technical
assistance for the establishment of a Libyan SME financing bank” (OECD, “Project
proposal for the MENA transition fund-SME Development Strategy for Libya).

24 | P a g e
OECD/IDB’s work on this component “can be considered horizontal, as it
requires its own diagnostic study, a development strategy, a legal framework, and
assistance in the implementation of the strategy”, and for this reason, component five
starts at the same time as component one” of the project (OECD, “Project proposal for
the MENA transition fund-SME Development Strategy for Libya).
This work will help to provide input, best practices, and insight on the
development of the SME development strategy, “in particular as finance is often
identified as the major obstacle to company growth and investment” (OECD, “Project
proposal for the MENA transition fund-SME Development Strategy for Libya). This
program “has been designed to complement the planned project to set up an SME
development fund, with assistance from the Islamic Development Bank under the aegis
of the Libyan Ministry of Economy” (OECD, “Project proposal for the MENA transition fund-
SME Development Strategy for Libya).
In a study led by academic Emhamad Elmansori, from 2012, which is still
relevant today, “shows that nearly three quarters of Libyan SMEs say a shortage of
financial resources is a major barrier to innovation (Tripoli Post). Yet it is the social and
cultural hindrances that must be combated within Libya, if we are to become a society of
innovators, we have to begin shifting how the population thinks of enterprise and
entrepreneurship. Dr. Abushagor, the newly elected House of Representatives member,
who spoke at the June 26th 2014 workshop, “stressed that the right eco-system was
needed for SME funding – starting with adequate incentivizing legislation” (Zaptia, “No
mechanism to access potential LD 40 bn available for SME loans – Libya Enterprise GM”). He
added to “that it was necessary to have the right infrastructure and research centres

25 | P a g e
and universities working on SMEs and financing as well as engendering the right culture
regarding successful SME champions” (Zaptia, “No mechanism to access potential LD 40
bn available for SME loans – Libya Enterprise GM”). In addition this includes adding well
trained and experienced professional staff to assist in managing SME’s to ensure
success.
El Mansouri also stresses on the need to implement five recommendations for
SMEs in Libya to prosper:
1. Create an independent body to help provide access to funding from public and
private sectors
2. Open the channels of communication to encourage funders to
support SMEs
3. Raise national awareness of the importance of innovation and entrepreneurship
for economic development
4. Initiate special programmes and schemes to improve the effectiveness of
business incubators
5. Make development agencies, such as development banks, key players in
establishing sponsorship of SME incubators
He is right on point, as we need to increase awareness, and create a new psyche
that permeates in Libyans, to make them aware of the benefits of entrepreneurship and
the change it will have on the Libyan economy. The independent body he recommends
maybe a good option, as currently Libya Enterprise is under the Ministry of Economy,
but with the 2012 mandate is managed together with various ministries, and there are
political strangleholds on what they can and can’t do in this capacity.
Also, by solidifying and strengthening business incubators, and also regionalizing
them to distribute the wealth of information and SME services & resources is a welcome
recommendation, and currently although Libya Enterprise is set to start SME funds in
five cities, innovation and how the incubators will operate is not known, and this is a
pertinent question, as usually Libyan ministry programs and projects fail to due to a lack
of solid public management overview. Finally, by having for example a Libya

26 | P a g e
Development Agency, which would work to prioritize and guide development, including
aiding in the development of SMEs may be something to consider.
In addition Libyan society in regards to women is still somewhat behind in some
aspects, as Mr. Elmansori notes that “another barrier to innovation was a lack of women
running SMEs due to cultural, religious and family reasons” (Tripoli Post 2). Libya is
open to women’s rights when it comes to the openness and freedom to work, but many
families are against activities outside the home, and have strong rules that limit outside
activities for female members of their family.
This type of mentality must change, and an awareness campaign must be
administered to note the need for women to become a stronger fabric of society, and I
would argue that they already are, but they need to have more rights, and protection. In
fact based on local research, one can simply walk into any ministry or place of work,
and will find the majority of employees physically at work, are female employees. In
addition from an Islamic perspective there is nothing holding back women to become
entrepreneurs, but again it is a cultural matter, that should be addressed.
ii. Urgency in the introduction of additional finance
mechanisms in Libya
The need to introduce additional finance mechanisms such as venture
capitalism, angel funding, crowd sourcing, and seed capital funding is a necessity now
in Libya. As discussed above, groups such as Wamda do provide venture capital
support, but mostly to high tech startups, yet the need and demand is high in
developing, strengthening, and solidifying a venture capital fund in Libya.

27 | P a g e
Also, as is the case with some Libyans, the need to establish an angel fund is
very important, as it allows big Libyan companies, businessmen, and successful
entrepreneurs to support, mentor, and take a stake in new innovative ideas and
progress them into reality. This would really bring new services to the Libyan market
and allow for a stir in the market, and would allow for women SMSEs to succeed,
flourish, and increase their market share.
In addition to angel funding, we know how successful Kickstarter and other crowd
sourcing tools have been, and it seems that the Middle East and Libya in particular
doesn’t have anything of that level yet. This this does not preclude Libyans from not
using Kickstarter, Fundme, and other similar crowd funding sites. In fact many of the
most used sites are open to many countries, and open to even social projects. Yet the
problem lies in that when using such international sites, they are not focused on the
Middle East and North Africa, and thus the level of interest and the level of funding is
not great.
Yet there is now the introduction of crowd funding and crowd investment sites
such as Zoomaal and Eureeca that have been very successful. In fact Zoomaal, the
Arab world’s only crowd funding site, is launching its Creativity Competition, sponsored
by the international development organization Hivos” (D’arc Taylor). In fact
“any crowd funding campaign that begins or ends between October 1st and November
1st will be eligible to win up to $10,000 to put towards the realization of your idea”
(2014). Again projects based in the “Arab world are likely to get more traction on
Zoomaal than they would on international sites like Indiegogo or Kickstarter, just as a
project in America would likely find more support on Indiegogo” (D’arc Taylor).

28 | P a g e
One entrepreneur states her first campaign with “Indiegogo “didn’t put us in front
of the right audiences,” but with Zoomaal “you get in touch with people who care about
Arab creativity as much as you do” (Curley). She continues that, “I feel [with Zoomaal]
we have a real shot at getting this project funded” (D’arc Taylor). In addition to the
popularity of Zoomaal, the crowd investment site, there is Eureeca, the region’s crowd
investment platform, could also be a strong source to tap into for Libyan entrepreneurs.
One example is startup “SearchinMENA, a B2B marketplace, founded by Syrian
entrepreneur Salim Akil, has just raised $140,000 USD, the largest round yet to be
secured through Eureeca, the region’s crowd investment platform” (Curley). In addition
“Nabbesh, a skills exchange community led by Loulou Khazen and Rima Al-Sheikh,
used the platform mostly for exposure and buzz, reaching its modest goal of $100,000
USD within 12 days, while also raising money from institutional investors” (Wamda
2014). Another example “Harir.com, a design and home goods flash sales site, raised
$50,000 USD in 8 days,” and shows how successful the site has become in the region.
Again with the finance mechanism being as it is in Libya, it may be the right
opportunity for Libyan and specifically female SMEs to tap into financing from the crowd
investment scene. “Eureeca’s team members are the first to admit that preparation is
essential for success on the platform”, and this may be something that will be a
challenge to Libyan entrepreneurs using such a platform for the first time (Curley). They
also advise, that “if you don’t already have a network of potential funders to reach out
to, you might as well not launch a crowd investment campaign,” and “you have to tap
into the first and second levels of your own network of friends, family, and clients, who
will typically form 30-40% of your funding target,” to be successful (Curley).

29 | P a g e
In addition to crowd funding, crowd investment, Libya needs more traction in the
area of venture capitalism and seed financing, whereby an investor purchases part of
the business, an affluent individual such as a Husni Bey, who would provide capital for a
business start-up, usually in exchange for convertible debt or ownership equity. Or
even the development of a venture capital fund in Libya that would earn money by
owning equity in the companies it invests in, which usually slants towards more
technologically based startups may be a boon for Libya.
In the end, Libyan SMEs have new areas to tap into for financing, but with any
new platform or technology, they will have to gain insight on how to become successful
in selling their idea via crowd funding or crowd investment. It is too early to tell whether
MENA investors will be too keen on investing in Libya, with the current political and
security instability.
VII. Lessons Learned
The political & security situation in Libya has caused for a delay in bringing about
financing mechanisms via Libyan private & public banks. “A majority of women business
owners meet their businesses’ capital needs through private sources, such as personal
savings, family and friends (52 percent)” (Vital Voices 12). In fact “a far lower
percentage of women business owners meet their capital needs through a business or
commercial bank loan at 18 percent, with only 10 percent of cases involving equity
capital, equipment financing or leasing, or a business line of credit” (Vital Voices 12).
These results reflect that relatively few women business owners apply for
commercial financing from financial institutions or outside investors. Instead, they

30 | P a g e
access financing as individuals, drawing first on personal networks to meet their
businesses’ capital needs. (Vital Voices 13).
Libya Enterprise’s plan to begin to implement their five SME funds will start in
2015, but we will soon see if this timeframe will still be the case, or will a political or
security hiccup cause the implementation schedule to be altered, thus delaying further
SME financing and possible economic advancement for Libya. Abdalnasr Abouzkeh,
General Manager of Libya Enterprise (LE) said “that the issue of developing and
promoting SMEs “is no longer a matter of contention. It is a necessity” (Zaptia, “Access
to SME finance workshop held in Tripoli”).
He added, that “the number of Libyan state-sector employees, the percentage of the
state budget that is allocated to state-sector salaries and subsidies, which exceeds 60
percent”, and diversification of the economy is needed (Zaptia, “Access to SME finance
workshop held in Tripoli”). Abouzkeh added that “if a small portion of this annual budget
spent on salaries and subsidies were to be spent on loans or guarantees of loans to
SMEs, it would have a strategic effect on job creation, private sector enterprise, taking
youth away from a dependency culture and away from arms” (Zaptia, “Access to SME
finance workshop held in Tripoli”). Libyan banks have the “liquidity and the willingness
to provide finance, and “all that is needed is for the state to provide the legislation to
guarantee the rights of all parties” (Zaptia, “Access to SME finance workshop held in
Tripoli”).
International organizations such as MEDA & Spark have already begun to
provide technical, educational, and financial support to Libyan SMEs, as well as

31 | P a g e
government sponsored programs such as Injazek & Libya Enterprise, but more is
needed.
What happens in the next few months may hold the key to Libya’s SME future, as
we have seen that the IDB has its own SME program for Libya, the OECD is working
with Libya Enterprise and the Libyan government to draw up a strong SME strategy,
with all the necessary underpinnings such as the pertinent legal protections and
potential legislation to provide a solid and stable mechanism where all are protected,
but allows for SMEs to tap into the large sums of stagnant money in Libyan banks.
The MENA region is witnessing a renaissance when it comes to new financing
mechanisms such as crowd funding & crowd investment, and the time is ripe for Libyan
SMEs to garner interest and obtain funding for local projects via these new
methodologies.
The upcoming handover of parliamentary power in August from the GNC to the
House of Representatives will signal a new start and era, yet time will tell whether they
will select a new Prime Minister or whether the Prime Minister Thinni stays in his
caretaker status. In addition, the next six months to one year will also determine how
stable Libya will become as the House of Representatives supports the Constitutional
Committee’s work on establishing Libya’s constitution. From there it will lead to the final
results of how soon a permanent parliament and when a Prime Minister or President is
elected.
The significance of this is that the new permanent parliament and Prime Minister
will stay in their positions for four years, and will bring stability to Libya, as currently
there is a uncertainty among Libyans, as they have witnessed the nomination of

32 | P a g e
numerous Prime Ministers, and have gone on to have various elections for the GNC,
Constitutional Committee, local government, and now the House of Representatives. If
the Libyan people are not confident in their future, then how does this bode for those
looking to invest in Libya from abroad?
The future looks bright, funding is available, investors are optimistic, and now it
will come down to the final stretch to see where Libya will land, and how successful
SMEs will become once key financing is available.

33 | P a g e
VIII. References
Alazet, Laure. “Entrepreneurs in Africa, hopes and Mirages: Focus on Libya.” Association of
African Entrepreneurs, 20 July 2013. Web. 1 June 2014.
Al Kassem, Mazen. Interview by Aladdin El-Haraty. 4 June 2014.
Curley, Nina. “The secret sauce for running a successful crowd investment campaign.” Wamda,
16 January 2014. Web. 25 May. 2014.
D’arc Taylor, Stephanie. “6 tips for successfully crowd funding your creative project.”Wamda, 20
Sept. 2013. Web. 25 May. 2014.
Injazek. 2014. About Us. Web. 10 June 2014. <http://www.injazek.com>
“Libyan Women Economic Empowerment (LWEE) project profile.” MEDA, 2013. Web. 21 May.
2014.
“MEDA women’s empowerment project in Libya sees first graduates.” MEDA. 2013. Web. 22
May. 2014.
Mhani, Honida. Interview by Aladdin El-Haraty. 2 June 2014.
Middle East and North Africa Transition Fund. “Project proposal for the MENA transition fund-
SME Development Strategy for Libya. OECD, April 2013. Web. 1 May. 2014.
“Poor financial resources hold back innovative SMEs in Libya.” Tripoli Post, 17 March 2014.
Web. 1 June. 2014.
“Ready for Growth: Solutions to Increase Access to Finance for Women-Owned Businesses in
the Middle East and North Africa.” Vital Voices, 2013. Web. 10 May. 2014.
“Silatech helps build Libyan civil society.” Silatech, 11 Jan 2012. Web. 1 May 2014.
“Silatech hosts first Global Entrepreneurship Week in Libya.” Gulf Times, 26 Nov. 2013. Web. 1
May. 2014.
“SME Development Strategy in Libya-Mission Report: Tunis-Tunisia-9-11 December 2013”
OECD, 2013. Web. 25 May. 2014.
Spark. 2014. “Ignite Fund.” Web. 10 June 2014. <http://www.spark-online.org/solutions/ignite-
fund>.
Startup Weekend. 2014. Web. 11 June 2014. <http://www.startupweekend.org>
Tekbali, Salam. Interview by Aladdin El-Haraty. 5 June 2014.
Zaptia, Sami. “Access to SME finance workshop held in Tripoli.” Libya Herald, 24 June 2014.
Web. 24 June. 2014.

34 | P a g e
Zaptia, Sami. “No mechanism to access potential LD 40 bn available for SME loans – Libya
Enterprise GM.” Libya Herald, 26 June 2014. Web. 26 June. 2014.
Zaptia, Sami. “MEDA grant ceremony hands out LD 150,000 in matching grants.” Libya Herald,
19 June 2014. Web. 26 June 2014.
Zreba, Osama. Interview by Aladdin El-Haraty. 25 May 2014.
Zreba, Ramadan. Interview by Aladdin El-Haraty. 2 June 2014.

Access to Finance for Women Owned MSMEs in Libya

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Access to Finance for Women Owned MSMEs in Libya

Similar to Access to Finance for Women Owned MSMEs in Libya (20)

Access to Finance for Women Owned MSMEs in Libya