Punjab unveils investment vehicle for SME financing

Will work through private equity and venture capital investments

Our Correspondent May 20, 2018

LAHORE: The Investment Climate Reform Unit (ICRU) at the Planning and Development Department Punjab has unveiled a Specialised Investment Vehicle (SIVs) to provide ‘access to finance’ for small and medium businesses in the province.

The investment vehicle would work through several modes such as direct investments of private equity and venture capital.

“It is a step in the right direction to structure a truly exceptional and workable investment vehicle designed both structurally and operationally with all safeguards, governance and risk mitigants in place that are critical for success,” said P&D Board Punjab Chairman Mohammad Jehanzeb Khan. “This is a very robust structure and based on international experiences we are confident this will be a resounding success with a very wide impact,” he added.

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In addition to private equity and venture capital investment fund, other modes of finance have also been included in the structure, which is meant to suit the needs of the recipient SMEs and target companies. The funds/SIVs are designed to be a single overarching entity, which will provide a structured or standardised mechanism for the government to launch multiple funds.

“This fund will act as a centre of excellence for access to finance initiatives at the provincial level,” said HBL Asset Management Unit Chief Executive Officer Farid Ahmed Khan, while unveiling the idea behind the pioneer SIV.

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The fund will be a perpetual entity and not a project for a specific time period and would serve the purpose of financial inclusion on a continuous basis. This will operate for profit with a double bottom line and plough back its profits into the fund, thereby increasing its sustainability and impact, he explained while talking on the uniqueness of this vehicle.

Risk mitigation strategies have also been incorporated in this vehicle, covering a wide range of risks, such as credit / default, liquidity, business and uncontrollable systemic risks, which could have had an adverse impact on the functioning of this fund.

The private equity and venture capital investments as well as other modes of finance in the fund/SIV will target crucial and vital sectors of the provincial economy, such as agriculture, livestock, and social sectors like healthcare, education and transportation.

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Research will also be supported by way of this fund/vehicle with special emphasis on women and youth empowerment, job creation, training and skill development.

Published in The Express Tribune, May 20th, 2018.

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