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‘Over 200 startups to benefit from early stage financing’

By JT - Jun 24,2017 - Last updated at Jun 24,2017

AMMAN — The World Bank (WB) on Friday announced a new project to promote entrepreneurship in Jordan by providing early stage financing to the small- and medium-sized enterprises (SMEs) that have proven to be the “engines” of job creation, a WB statement said. 

The new $50-million project aims to support over 200 innovative startups across the country, with the establishment of a private sector-managed funding facility, according to the statement.

The Innovative
Startups Fund Project will help launch the “Innovative Startups and SMEs Fund” (ISSF). 

The $50-million investment from the WB will be complemented by $49-million in co-financing from the Central Bank of Jordan, bringing the total working capital of the ISSF to $99 million, according to the statement. 

Along with providing early stage financing, the ISFF will encourage entrepreneurship with outreach to entrepreneurs from remote regions, underserved industries and underserved groups such as women entrepreneurs, the statement added.  

“Jordan’s business ecosystem is relatively well developed. There is no lack of innovative and creative ideas,” said Kanthan Shankar, acting director of the World Bank Middle East department. 

“However, startup creation is low due to some barriers in the business environment and access to finance. This project puts in practice the very first recommendation of the Jordanian Economic Policy Council to set up a fund to facilitate financing to innovative startups and SMEs in an effort to increase the level of startups with high-growth potential,” he noted.

The fund is expected to invest $50 million in approximately 200 Jordanian companies and provide around $3.5 million in investment support to partner investors, according to the WB. 

Investments in startups will be balanced between the three high risk enterprise stages categorised as: seed; early stage; and venture capital. 

Investments will be directed across all sectors, with a special focus on technology, media, telecommunications, service and in the agribusiness, pharmaceuticals, water, and green energy sectors, the statement said.

“One of the main reasons that discourages an investor from taking a stake in an early-stage company is the high transaction costs incurred to help make a young innovative company successful once it receives capital,” said Randa Akeel, senior financial sector economist and task team leader. 

 

“Evidence from similar World Bank projects in the region and elsewhere has shown that private investors can be attracted to contribute capital to companies that are at an earlier stage if they can share the risk and expand their portfolio,” he concluded. 

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