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EIB lends Lebanese banks $163M to boost SMEs

  • (The Daily Star / Mahmoud Kheir)

BEIRUT: The Vice President of European Investment Bank Philippe de Fontaine Vive expressed strong faith in Lebanese banking and financial institutions during a visit to Lebanon this week and signed four loans worth 121 million euros ($163.7 million).

“We came together in Lebanon during this difficult period ... to show that the Lebanese financial sector – and beyond that, the Lebanese economy in general – presents good investment opportunities,” de Fontaine Vive told a reporters. “It’s a clear signal that the EIB believes in the current dynamic and the success of the Lebanese financial sector.”

Byblos Bank and Fransabank each received loans worth 45 million euros from the the EIB.

The First National Bank of Lebanon will receive an equity injection of 11 million euros from the EIB in the form of preferred shares, and the private equity fund Euromena III will receive 20 million euros.

The equity investments in FNB and Euromena are co-financed by the European Union and the Spanish Agency for International Cooperation, AECID.

Byblos and Fransabank are to repay the loans in 12 years. The EIB did not specify an interest rate, but asked that the banks provide “the best conditions available” to companies receiving loans.

De Fontaine Vive said that while many banks seek EIB loans, Fransabank and Byblos bank stood out.

“ Byblos and Fransabank were the most active on negotiating with us,” he said.

For the equity investments, the EIB has committed to stay on with Euromena III and First National Bank for a period of at least seven years, but de Fontaine Vive said: “We are very pragmatic on his investment period because we want this to be a success. ... The conditions of the investment are not fixed.”

Moreover, de Fontaine Vive said that based on experience, the EIB had consciously decided against stipulating which sectors should benefit from the loans.

“A few years ago, we decided to emphasize the hospitality sector because we believe that the tourism industry is very important. We put conditions in place that made the process very bureaucratic. ... [Such conditions] make life more complicated and, in turn, the funds don’t pay out.”

The EIB insists that the loan recipients practice good governance and ensure that they adhere strictly to international standards.

De Fontaine Vive expressed concern, however, that the presidential vacuum would adversely affect the Lebanese economy, particularly small and medium-sized enterprises that the EIB hopes to reach with the new loans.

“For the time being, there is a need for the SMEs to be supported because there is lot of uncertainties in the market,” he said.

SMEs, he said, are often affected when “parliament is not in a position to deliver what is expected.”

Still, de Fontaine Vive said the EIB was encouraged by how Lebanese SMEs had weathered the economic crisis and regional instability.

“When you’re in the middle of a worldwide economic crisis, plus war in the neighborhood, you cannot expect the SMEs’ lending to be booming by definition,” he said. “On the contrary, I’m impressed by the capacity of the SMEs and the banking sector here in Lebanon to go through the crisis without disruption,” he said.

He added that all the EIB’s clients in Lebanon, both private banks and the Lebanese government, had repaid their loans on time.

“The Lebanese banks and the governor of the Central Bank know how crucial the financial credibility is for Lebanon.”

 
A version of this article appeared in the print edition of The Daily Star on June 12, 2014, on page 5.
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Summary

The Vice President of European Investment Bank Philippe de Fontaine Vive expressed strong faith in Lebanese banking and financial institutions during a visit to Lebanon this week and signed four loans worth 121 million euros ($163.7 million).

Byblos Bank and Fransabank each received loans worth 45 million euros from the the EIB.

The EIB did not specify an interest rate, but asked that the banks provide "the best conditions available" to companies receiving loans.

De Fontaine Vive said that while many banks seek EIB loans, Fransabank and Byblos bank stood out.

De Fontaine Vive expressed concern, however, that the presidential vacuum would adversely affect the Lebanese economy, particularly small and medium-sized enterprises that the EIB hopes to reach with the new loans.


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