BEIRUT: Seven months after Lebanon’s Central Bank announced that it would set aside $400 million for startups, the program is in full swing with the bank touting the initiative to encourage budding businesses and with local venture capital firms using it to fund new Lebanese technology companies.
“This helps banks take more risks. This has given them the incentive to take more risks and invest in funds like ours,” says Walid Manour, managing director of the Beirut-based VC firm Middle East Venture Partners, which two months ago announced a $50 million fund. In compliance with the Central Bank initiative it would invest $250,000 to $5 million in 15 to 20 companies.
The Central Bank circular 331, announced in August, aims to give a boost to local startups, giving them a greater incentive to set up shop in Lebanon, keeping their talent and money at home, by making funding more easily available. The $400 million in this new initiative is 75-percent guaranteed by the BDL for local banks, equity investment accelerators, incubators, funds and startups.
“These funds are dedicated only to Lebanese companies and Lebanese funds. Our objective is to create a technological digital sector in Lebanon. The risks of a bubble in this sector will be avoided because of the strict controls the banks and the Central Bank will [apply],” said Marianne Howayek, a BDL representative speaking at this week’s ArabNet Beirut’s conference.
The initiative is being hailed as a welcome development by those in Lebanon’s startup community who have long struggled to find funding for their new firms, leading many to go abroad to seek mentorship and financial backing. According to the 2014 Doing Business annual report issued by the World Bank, Lebanon ranks 120 out of 189 countries for its ease of doing business, lagging far behind other Middle East counterparts such as the United Arab Emirates and Saudi Arabia, two top destinations for Lebanese entrepreneurs.
“The world we live in is driven by technology and Lebanon is a country rich in human resources,” Howayek said, referring to the reasoning behind the BDL initiative. “ Lebanon only needs the means, and the Central Bank can offer initiatives. Governor [Riad Salameh] found that this sector is the one that could serve these objectives and increase competition in the Lebanese economy to create job opportunities.”
“The guarantee of the Central Bank will be granted solely to Lebanese SALs [societe anonyme libanaise], and it is a prerequisite that the main office and the main activity [be] in Lebanon,” she added.
“Our objective is to [introduce] the creation of this sector in the country. The Lebanese company can have branches outside Lebanon but not the contrary.”