Equity funds for SMEs
The US Agency for International Development ( USAID) announced a partnership with the Abraaj Group and the JS Private Equity Management at the second US- Pakistan Business Opportunity Conference in Dubai. The USAID said it will provide seed investment of $ 24 million each to capitalize the funds. Both the Abraaj Group and JS Private Equity Management have committed to match or exceed the seed funds with investments of their own, as well as private funds raised from other limited investors. “Pooled funds will initially be $ 100 million which we expect will grow manifold into hundreds of millions of dollars in investment for small and medium businesses,” an official statement issued by the USAID said. “In addition, the Pakistan Private Investment Initiative is expected to demonstrate that investing in growth- focused enterprises can generate real profits for investors. This demonstration effect is expected to attract more investment into the enterprise sector through establishment of additional private equity funds,” the USAID statement said. The entry of the two new players in the market will boost the nascent private equity industry in the country and take the number of these funds to three. At least one such fund, Cyan, backed by the Dawood Hercules Group as an anchor investor is already in the field. The anchor investor has committed $ 50 million and plans to raise $ 150 million from other investors. The private equity funds work by identifying dynamic businesses with growth prospects and investing in them to expand their market share, innovating product and service lines, and ultimately create jobs and increase incomes. Without access to capital, Pakistan’s businesses cannot play a critical role in expanding the economy and creating jobs. Each fund will invest in wellrun Pakistani companies with growth potential. Companies that receive investments will also receive professional management consulting services to strengthen their governance, sales, marketing and overall business operations. The funds will last for 10 years: a five- year window to make investments and a five- year holdingand- liquidation period that closes out the fund’s operations. Still the volume of exports under the GSP facility represents only a fraction of the total American imports from Pakistan. Pakistan exported $ 3.6 billion worth of goods to the United States in 2012, yet only 5.7 per cent of that amount took advantage of the duty- free treatment available, according to US officials.