The main obstacle facing Palestinian SME’s and inhibiting their growth and development is their limited access to capital. Local banks usually require guarantees that can reach up to 200% of the loan value. With such extreme requirements, SMEs are unable to get the funds needed to develop their businesses. Therefore, and to solve this daunting problem facing all Palestinian SMEs, the Loan Guarantee Facility (LGF) aims to help small businesses by providing loan guarantees to local banks.
LGF is a partnership between the Palestine Investment Fund (PIF), US Overseas Private Investment Corporation (OPIC), local banks, and the Middle East Investment Initiative (MEII), which is the manager of the Facility. LGF’s size is US$228 million and is solely dedicated to SMEs in Palestine. Lending banks are provided with loan guarantees to secure the loans that they give to SMEs which encourages these banks to give more loans to these SMEs. In addition, the LGF encourages banks to provide loans to businesses on more flexible terms. PIF’s commitment to the facility is US$50 million in loan guarantees.
The following figures provide more details on LGF’s current portfolio size, and allocation by sector and geography.
Portfolio Allocation by Sector
Portfolio Allocation by Geographic Area