In-depth with IFCs regional director for MENA

The corporation’s support to Egypt included a loan of up to $100 million in July to increase support to individuals and companies whose cash flows have been disrupted by the COVID-19 pandemic.

Arab Finance interviewed Beatrice Maser, IFC’s regional director for the Middle East and North Africa (MENA), to explore the corporation’s current and future plans as well as areas of interest in Egypt. Maser shared future estimates of regional GDP including that of Egypt, and discussed IFC’s means of support.

What industries are you keen on supporting in Egypt? And what’s the value of your portfolio in the country?

Egypt is a priority country for IFC in the MENA region and our largest market in the region. Over the last decade, we have invested and mobilized nearly $4 billion in the country, helping to improve infrastructure, create jobs, and combat poverty.

Our largest investment in Egypt so far has been in one of the largest solar parks in the world, the Benban Solar Park near Aswan. IFC helped marshal $838 million in financing for the project. We provided $202 million from our account, mobilized $490 million from other investors, and facilitated $146 million in financing from the Multilateral Investment Guarantee Agency – another member of the World Bank Group. The project will truly transform the power sector, setting an example for other countries on how to create new markets and opportunities.

In FY 2019/2020, we had a strong program in Egypt, committing over $400 million across several sectors. We provided a variety of advisory and financial products, and expanded our client base in the country. Among other projects, we provided and raised over $200 million for Humania, a private healthcare company, to support its expansion in Egypt.

We continued our focus on supporting innovation in the manufacturing sector, dolling out a $10 million equity package to Globaltronics, a high-tech enterprise, to help it expand the installation of digital prepaid and smart electricity meters in Egyptian homes. This supports government energy reforms to improve accuracy in billing, gives consumers more payment options, and provides them with better information about their energy use to encourage savings.

Focusing on startups, IFC has long supported Egypt’s entrepreneurs. What is the value of your investments in this area and where does the country’s startup sector stand?

Indeed, supporting entrepreneurship is one of our priorities in the MENA region and Egypt. We believe that innovative, forward-looking entrepreneurs hold the key to the region’s financial future. Supporting innovative start-ups, private equity funds, and accelerators across MENA is an important part of IFC’s strategy to create markets and leverage private investment to help governments reach their development goals.

Over the past several years, IFC has made quite a few large investments in technology companies in Egypt. We invested $10 million in Algebra Ventures, one of Egypt’s largest venture capital funds. We also committed $1.2 million in equity financing to accelerator Flat6Labs a few years ago, and in June 2020, as part of the IFC Startup Catalyst COVID-19 response, we increased our commitment to $2.5 million. Many of Algebra and Flat6Labs Cairo’s portfolio companies are innovating and providing critical services during the pandemic. Some examples are 3atlana, a mobile application that offers car services on the go and connects users to trusted service providers, or CreditGo, a payment aggregator for small businesses.

Beyond financing, we are also working with the private sector, the Egyptian government, and our donor partners to help create a start-up ecosystem in the country. For example, we are collaborating with the Venture Lab at the American University in Cairo’s (AUC) School of Business and supporting their events, including “The Sprint” - an innovation challenge aimed at providing Egyptian university students with an opportunity to learn about entrepreneurship and financial inclusion, while competing to win prizes.

Today, Egypt has a vibrant start-up scene and capital is much more plentiful than it has ever been before. A lot of new investment is coming in and we are also seeing increased attention from private equity funds.

In what way will Egypt’s $750 million green bond issue support the economy? And how can the country best utilize those financial instruments?

The green bond issuance came after years of work by the Egyptian government, marking a significant development for the country and a testament to its commitment to sustainability. These bonds will help unleash a flood of capital for companies that want to invest in solar energy, water efficiency, and a host of other planet-friendly projects – which is ultimately good for both businesses and the Earth.

We hope the new bond will kickstart the market for green financing in Egypt and we are ready to support the development of this key sector.

How are you supporting this sector?

IFC is one of the world’s largest financiers of climate-smart projects for developing countries. We started tracking the climate-smart component of our investment and advisory services back in 2005 and since then IFC has provided more than $28 billion in long-term financing and raised over $22.3 billion in mobilization through partnerships with investors globally. We were also one of the earliest issuers of green bonds, launching a green bond program in 2010 to help catalyze the market. As of June 30th, IFC has issued $10.4 billion across 172 bonds in 20 currencies.

In MENA, we have supported green bond issuances in Lebanon and Morocco and are currently working to support the first private sector green bond issuance in Egypt. We have also worked with Egypt’s Financial Regulatory Authority on a legal framework for green bond issuances.

IFC launched a three-year advisory program to increase opportunities for women’s employment in Egypt. Can you tell us more about this program and how it works?

Empowering women and closing the gender gap are top priorities for IFC in Egypt. The program you mentioned builds on years of work with partners from both the private sector and the government to help companies tap into the country’s large and underutilized pool of female talent. This work is becoming even more critical now as private sector companies navigate the challenges brought by COVID-19. Only 24% of working-age women participated in Egypt’s labor market in 2019, compared to 75% of men. Evening out those numbers is critical for economic growth, as the country’s gross domestic product (GDP) could rise by 34% if women and men participated equally in the economy.

The program will help create family-friendly, flexible workplaces to make Egyptian businesses more resilient, agile, and inclusive. That’s especially important now as the world adjusts to the new normal of remote work.

We are already working, under the program, with several leading companies such as healthcare provider Integrated Diagnostics Holdings and retailer Metro Markets to collect gender-disaggregated human resources and company data and analyze gender gaps in their workforce to help close these gaps.

IFC invested up to $20 million in the direct investment fund, SPE AIF I, that focuses on Egypt and North Africa. Which sectors will benefit the most?

In our partnership with SPE, we aim to support small- and mid-cap companies across various sectors, providing them with the capital they need to survive the pandemic and, eventually, grow.

This year, we closed several transactions providing financing to private equity funds focused on MENA and Egypt. In October, we also invested $25 million in LCP Fund II, an Egypt-focused private equity fund managed by Lorax Capital Partners. This fund focuses on mid-cap companies in several sectors, including consumer goods and financial services.

We aim to bring more private capital into Egypt’s private equity market. This will increase its competitiveness, diversify the investor base, and, ultimately, improve access to capital for mid-cap Egyptian companies, which can become drivers of job creation and sustainable economic growth.

How have you been supporting Egypt since the beginning of the pandemic?

Our focus is on helping Egypt’s private sector navigate the pandemic and recover from its economic and financial impact. Globally, IFC has already committed $4 billion from its $8-billion fast-track COVID-19 facility, which aims to sustain businesses and preserve jobs amid the pandemic.

In Egypt, we deployed trade finance through the fast-track COVID-19 facility to help businesses import crucial commodities, such as food and manufacturing inputs. We also provided investments to support better healthcare services across the region, providing and mobilizing over $286 million in financing to help build new hospitals in Egypt, Morocco, Jordan, and Iraq.

Also, we significantly increased our advisory program both in Egypt and in the region, quickly moving to online platforms and virtual delivery. We organized over 40 virtual webinars on financial stress testing, portfolio management, and non-financial services, reaching about 1,000 financial institution participants and 2,600 small and medium enterprise participants across MENA. These are all services essential to addressing the challenges posed by the ongoing crisis.

When do you think regional economies will start to bounce back? What’s your forecast for Egypt compared to its peers?

The MENA region faces a dual shock from the COVID-19 pandemic and the decline in oil prices with the most devastating impact being on the poor and most vulnerable. Due to this, the World Bank expects MENA’s GDP to contract by 5.2% this year before rebounding in 2021.

If we look at Egypt, it is one of the few countries with a positive growth rate, although the World Bank forecasts it to slow down in FY 2020/2021 before rebounding in FY 2021/2022.

The challenges brought by the COVID-19 pandemic underscore the need to further advance reforms to strengthen the private sector, which has the potential to become a strong driver of job creation and prosperity.

What can you tell our readers about your future projects in Egypt?

In Egypt, we focus on three key areas—integration, inclusion, and employment. We are working to ramp up our program here to help contain the impact of the crisis, support resilience and recovery, and open up new opportunities for private sector investment. We are ready to further increase our work by providing direct investment and advisory solutions to private companies and support the government’s efforts to move forward with reforms in key sectors.