“SMEs: Improving Growth and Containing Unemployment” JLGC - SME Conference November 24, 2014 Robert Dressen, Senior Banking & Financial Services Advisor, DAI

1 SME’s – THE CONTEXT Source: USAID JCP ATF team, the Economist Small firms are the lifeblood of a country’s economy USAID JCP Here in Jordan, USAID’s Competitiveness Program is trying something different For example, in EU Companies that are SMEs Value addedJobs 1 99% 42 58% 66% 34 SME Change in SME financing channels ▪ Banks ▪ Guarantee schemes ▪ Friends and family Traditional ▪ Non-financial institutions ▪ Crowd funding ▪ Insurance companies New (as cited in the Economist, 16 August, 2014)

2 OVERVIEW OF USAID JORDAN COMPETITIVENESS PROGRAM “The $45 million program will focus on increasing competitiveness initially in three “knowledge economy” sectors: ICT, Clean Technologies, and Healthcare & Life Sciences” “JCP aims to generate at least 40,000 well-paying jobs, increase foreign direct investment by $700 million and increase exports by 25% over the next five years” “Jordan Competitiveness Program (JCP) is a five- year program that is funded by the US Agency for International Development (USAID) and managed by Development Alternatives, Inc. (DAI)”

3 USAID JCP APPROACH SECTOR FOCUS – selected three business sectors with highest growth and employment impact - ICT, Healthcare, and Clean Tech MAPPED SOURCES OF FINANCING – angel/ VC, microfinance, leasing, SME bank, and corporate bank WORKFORCE DEVELOPMENT GAP ANALYSIS – demand and supply Enabling environment interventions Implementation plan Mapped sources of financing

4 Challenge 1 JORDAN’S ACCESS TO FINANCE CHALLENGES ▪ Bank loans account for the majority of financing for the economy ▪ SMEs account for 10% of bank loans Challenge 2 ▪ Angel and VC funding is limited and focused on technology Challenge 3 2 principal gaps for SMEs ▪ $50K-500K: early stage entrepreneur ▪ $500K-4,000K: growth capital to scale-up Challenge 4 Demand side ▪ Investment/ financing readiness ▪ Awareness ▪ Deal flow Supply side ▪ Limited investor pool ▪ High thresholds ▪ Unclear exits ▪ Bank’s criteria for collateral ▪ Interest rates ▪ Loan tenors Source: USAID JCP ATF team,

5 JCP ACCESS TO FINANCE INTERVENTIONS Supply Demand Angel/VC Investing SME Financing Bootcamp for new investors, training for existing angels, angel investor network, and crowdfunding trials Facilitation of deals using existing financing schemes, improve bankability of clean tech/ ICT/ healthcare transactions, and bank product development Investment readiness training and toolkit, business innovation center, and business plan competitions Awareness and match making sessions for Clean Tech, financing readiness training, and export readiness for ICT

6 WORKFORCE DEVELOPMENT CHALLENGES Demand Skills gap Innovation gap Information gap Supply Mismatch of skills of new graduates and the skills needed by companies; curriculum reform process does not keep pace with the rapidly evolving market place Lack of emphasis on new ideas, competitiveness and practical applications Weak career counseling and job placement services Centers of Excellence and Skills Development Programs, Career Development Centers, Entrepreneur Promotion and Internship Support, Monitoring & Evaluation Systems