The European Investment Bank (EIB), the European Union's financing institution, is advancing funding of EUR 13 million (1) to the Cairo-Amman Bank ("CAB"), which is headquartered in Amman, Jordan, but which has an extensive Branch network throughout Gaza/West Bank, for the part-financing of long-term investments being undertaken by small and medium-sized enterprises in the productive sectors of the Palestinian economy in Gaza/West Bank. The Operation comprises a Global loan of EUR 10 million on the Bank's own resources to be provided in the form of long-term credits, and EUR 3 million in the form of a conditional global loan to part-finance equity or quasi-equity investments by SMEs, the latter utilising risk capital resources out of the EU's Budgetary Resources, within the framework of the EU's MEDA programme of cooperation.

The SME projects are likely to arise in the fields of industry, services and tourism in due course, as the local conditions allow. The risk capital will be targeted at strengthening the capital base of private firms in the business and service sectors. The types of investment eligible will include those concerning start-up, modernisation / restructuring and the promotion of growth. As regards the equity and quasi-equity investments, the finance may take the form of ordinary shares, preference shares, convertible bonds or certificates and similar investments.

This is the second operation the Bank concludes with CAB, a dynamic commercial bank headquartered in Jordan, with extensive activities in Gaza/West Bank, where it has developed new activities and market niches in which it has gained a leading position.

Although the Palestinian financial sector had developed rapidly in the last few years, local SMEs have always found it hard to raise suitable long term funding from commercial sources. EIB funds are being provided to a well-managed Jordanian/Palestinian bank, which has built up a relationship with a wide range of enterprises. It is hoped that a return to more peaceful conditions in the Region will allow for a rapid take-up of the facility.

The European Investment Bank operates in the Autonomous Territories of Gaza and the West Bank in the framework of a Support Agreement, signed between the Palestinian Liberation Organisation (PLO) and the EIB in October 1995 in Gaza.

In this area the EIB has financed projects in tourism and industrial development, through financial support to large-scale investment, as well as global loans to the banking sectors operating in the area for on-lending to small and medium-sized enterprises. Economic and public infrastructures have also largely benefited from EIB funding.

(1) 1 EUR: 0.596700 GBP, 0.87650 USD.