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International support helps Tunisia to facilitate financing for SMEs

Friday, October 24, 2014 > 09:20:39
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(Global Arab Network)

Small and medium-sized enterprises (SMEs) in Tunisia have long grappled with limited access to credit, but a spate of recent initiatives may help provide short-term relief, Global Arab Network reports according to OBG.

Tunisia’s democratic transition has proceeded at a much smoother pace relative to some of its neighbours, but the economy has not escaped unharmed. For SMEs – with their smaller balance sheets and capital reserves – this means that bank borrowing is crucial for riding out the uncertainty.

However, while the difficulties of accessing finance for SMEs are not new in recent years the process has become more problematic. Tunisia’s ranking in the “accessing credit” category of the World Bank’s “Doing Business” reports fell from 105th in 2013 to 109th in 2014. According to a study conducted by the Arab Institute of Business Managers (IACE) in late 2012 and launched in June 2013, around 66% of Tunisian SMEs believe that financial conditions imposed on them are increasingly difficult.

The Bank for Financing Small and Medium Enterprises (BFPME), which provides funding and support SMEs, says that only 20% of financing for SMEs comes from banks, with these firms self-financing more than 50% of their capital needs.

With some 15,000 SMEs in Tunisia representing as much as 97% of the economy in 2007, developing this sector is regarded as a crucial strategy to combat joblessness while facilitating growth and diversification of the economy – which means improving credit access for these small firms is key.

Challenging environment

More broadly, Tunisia’s political transition has also adversely affected basic procedures for businesses, especially for new firms. The Doing Business 2014 report says that start-up costs, procedures and bureaucratic delays have increased since Tunisia’s revolution. The country ranked 70th out of 189 economies for this indicator, down from a ranking of 63rd in 2013 and 51st (out of 185) in 2012.

New businesses must now complete 10 procedures to start their activities, relative to a regional average of eight and an OECD average of five. The cost of these procedures – which would be a bigger burden for smaller firms – is 4.7% of income per capita, compared to 3.6% in OECD countries.

New incentives

However, a number of regional and international donors have in recent months opened up new resources to help address the challenges faced by Tunisia’s SMEs and to increase their access to credit.

In February this year, the Italian government opened up a €73m credit line to facilitate the modernisation of Tunisian SMEs, promote private sector innovation, and encourage partnerships between Tunisian and Italian entrepreneurs. Firms pay 2.5% interest on euro loans, compared with 4.5% interest on the Tunisian dinar. Loans are extended for up to 10 years, with a maximum grace period of three years. This is the eighth line of credit that Italy has offered Tunisia since 1998, worth a total of €289m.

The European Investment Bank (EIB) also designated a €100m credit line for Tunisian firms, particularly SMEs, in June. This follows a previous credit line worth €100m signed in December 2012, which financed around 500 projects, enabling firms to maintain or create more than 2800 jobs.

In addition, the US-Tunisia Trade and Investment Council is in the process of negotiating a number of initiatives to promote trade between the two countries. Among the items on the agenda at a meeting held in mid-June was facilitating the involvement of SMEs in US-Tunisian trade.

In that same month, the World Bank’s Third Export Development Project announced it will devote $50m to encourage the growth of Tunisian exports in the Maghreb and sub-Saharan Africa, particularly from SMEs.

The Tunisian authorities have been taking a number of steps to increase the tools available to boost SME lending. Also in June, the BFPME established a TD100m (€42.8m) fund to help Tunisian SMEs in financial difficulties by way of loans and lending guarantees. The BFPME announced a partnership in February with the French public investment bank and SOTUGAR, the Tunisian Guarantee Company, to create four new financing tools to support SME development, creating further avenues for growth. (OBG)


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