Abraaj Capital, Palestine Investment Fund Launch $50 Million Private Equity Fund for Palestine SMEs
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 announce the first closing of a US$50 million private equity fund dedicated to Palestine.
The private equity fund will focus on investing in small- and medium-sized enterprises (SMEs) in Palestine across a range of sectors and stages of maturity. Abraaj is the largest private equity group in the Middle East and North Africa, with offices in six countries.
With a first closing at US$15 million, the private equity fund is the first of its kind dedicated to the Palestinian economy. The initial commitments from the sponsors – PIF and Abraaj – will be supplemented by funds raised from investors in further closings planned later this year.
SMEs account for more than 95 per cent of enterprises in Palestine, 84 per cent of private-sector employment and 55 per cent of gross domestic product.
Although SMEs are a critical backbone of the local economy, the sector is underserved in terms of access to capital and degree of institutionalization. The private equity fund will give access to much needed capital for growth and expansion, as well as leverage managerial, operational, strategic know-how and regional networks. It will also help strengthen corporate governance.
Abraaj, through its 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 fund complements PIF’s Loan Guarantee Facility (LGF), which facilitates financing for SMEs by providing loan guarantees to the lending banks. LGF has facilitated more than US$50 million of financing to more than 200 SMEs in the last two years.
PIF is the largest and most dynamic investor in Palestine, with US$800 million in assets under management. It aims to build a strong economy by developing strategic projects in vital sectors, such as SMEs, real estate, energy, telecommunications and finance, while maximizing long-run returns for its ultimate shareholder – the people of Palestine. PIF has an unrivalled track-record in partnering with leading international, regional and local institutions, and attracting foreign direct investment to Palestine.
The private equity fund with Abraaj is the first investment vehicle managed by Riyada Enterprise Development, Abraaj’s recently launched investment platform dedicated to SMEs.
Abraaj has seeded the Riyada platform with US$50 million of its own capital. As Abraaj builds its SME platform out across the Middle East and North Africa, the size of the regional SME fund is expected to increase substantially to about US$ 700 million through Abraaj’s established regional and international partners, and investors.
The Riyada platform marries the largest single source of long-term capital dedicated to entrepreneurs in the region with an investment strategy specifically tailored to the SME segment.
It also addresses the biggest issue facing regional SMEs today other than access to finance, namely institutional support, including back-office functionality, improved governance, and access to top-tier human talent and mature business networks.
Abraaj has permanently relocated several of its senior investment professionals into Riyada and will establish a presence in the Palestinian city of Ramallah to support the private equity fund. Together with selective additional hires, Riyada will – in due course – comprise 25 to 30 full-time investment professionals.