AfDB supports the Franchising Sector in Egypt

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USD 40 Million to Finance the Franchising Sector Support Program

Tunis – 28 May 2009- Mandla Gantsho, Vice President in charge of Infrastructure, Private Sector and Regional Integration and H.E. Ahmed Ismail, Ambassador of Arabic Republic of Egypt in Tunisia, signed today a loan agreement for up to USD 40 million to finance the Franchising Sector Support Program in Egypt.

The Franchising Sector Support Program (FSSP) seeks to promote franchising in Egypt as an effective business strategy for private sector development and SME growth. The proposed FSSP will encourage the establishment and expansion of the local franchising concept, resulting in entrepreneurship development, economic growth, and job creation. The medium-term objective of the FSSP will be to establish solid local financial instruments and collaborative structures that address the current gaps in the franchising market. The Social Fund for Development (SFD), as the main coordinator and champion of small enterprise development in Egypt, is therefore an ideal partner to achieve these objectives.

The project has two interlinked components: (i) debt financing through a senior loan of USD 40 million to the Government of Egypt (GoE), channelled through SFD to local financial institutions (FIs) and onward to franchisees; (ii) capacity building of local stakeholders (SFD, Egyptian Franchise Development Association, Financial Institutions, consultants, lawyers, judiciary), with specific support to the SFD’s Franchising Unit, and with subsequent support to franchisors to ensure that sound local and foreign franchise concepts are developed and successfully applied to the Egyptian context. Franchisors will be selected on the basis of various eligibility criteria, including financial wherewithal. For example, one condition for project participation is that franchisors are required to meet concept developmental costs from internal resources.

Vice President Gantsho stated that “Egypt is an important member country of the AfDB, and has been benefiting from various Bank support interventions.” Vice President Ganthso added that “this project will assist in unlocking the growth potential of the franchising sector in Egypt, therefore resulting in faster growth in this sector and more jobs. The project will also assist in improving the levels of business processes, services and products in Egypt, hence improving quality standards and productivity.”

H.E Ambassador Ismail underscored the importance of AfDB’s investment into the Small and Medium Enterprises (SME) sector in Egypt through franchising and highlighted the long standing relationship between the Bank and Egypt. He also added that “the agreement signed is testimony of the importance of this collaboration, and the Franchising program will enhance the capacity of the Egyptian SME sector. H.E. the Ambassador concluded by wishing that “this Franchising support program should serve as a prototype for other countries to follow”

Overall, FSSP is a project with high development impact and high commercial visibility in that, it expected to create 375 franchise outlets, over 7,000 direct jobs, and to increase the number of SMEs operating in the formal sector. It will also bring technology transfer to SMEs, fostering increased productivity and export potential, thereby increasing government revenues.

The Bank promotes franchising, where appropriate, as a successful SME development model in Africa. The project will fill a gap in the financial services market by providing long-term funding that is not available from commercial sources on competitive terms. The Bank’s participation is vital in this program as it creates a comfort factor for SFD and commercial banking partners to support and promote franchising in Egypt.

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