Workshop on Financial support to investors in industrial zones

Workshop on Financial support to investors in industrial zones

October 12, 2015

Dr. Ali Shaath, CEO of PIEFZA

Briefing of the three existing industrial zones (BIE, JAIP and GIE) and JIFZ (developers, donors, signed contracts…etc.)
More than 2000 workers are currently employed at the three industrial zones
Developer responsibility is mainly to develop the onsite infrastructure.
JAIP – 1st investor is Palolea - Haytham Kayyali (7 licenses completed and now is ready to receive the first PRIDE Grant)
Incentives that can be provided to investors that are willing to establish their businesses in industrial zones – (i) onsite and offsite infrastructure at international standards that support factories to produce; (ii) facilitate obtaining the required licenses (5-7) depends on type of industries; (iii) movement and access – raw materials and export of goods; (iv) financial incentives (grants, loans, revolving funds, and other mechanisms that provide easy and facilitated loans…etc.). Banks in Palestine are high risk averse and do not provide the necessary support that businesses need to expand and grow. Collective support by all parties is much needed.

Nihaya Hirzallah, Head of Financial Services Department at PIEFZA

Provision of financial incentives to investors is important. Investors face key challenges at the political and economic levels. Land in IZs is owned by the government and cannot be owned by the investor. Banks require collateral and the land cannot be used as collateral. So PIEFZA identifies financial incentives that will help investors to make their positive decision to invest and be able to compete in the global market. 
Incentives that are provided / can be provided by PIEFZA:  (i) offsite infrastructure through self-financing, loans, and/or grants; (ii) Tax and customs exemption (ex. Ethanol - $1/liter instead of NIS120) for industrial sector as explained in the investment law; (iii) The government does not apply VAT on materials used for exports; (iv) Reduced electricity fees (NIS0.5 / Kilowatt) for industries; (v) OSS for investors and provision of Business Development services.
Grants – PRIDE Grant by JAIP: US$2 million seed money committed and made available in 2011. JAIP investors will receive financial grants and incentives amounting to up to 50% of the cost of equipment and/or construction. The grants will help investors by reducing the start-up investment costs.
Aim of this workshop is to propose new financing mechanisms that can be considered and developed by key partners; and (ii) link businesses with available financing mechanisms.

Nadeem Asfour, AFD

French Grant to the PS (In the framework of the Financial Protocol signed between the French government and the Palestinian Authority on April 8th, 2010, a grant of 10 million Euros was allocated to the promotion of privately-owned local companies in the Palestinian Territories with a priority for projects in the Industrial Zone of Bethlehem. The operating agreement was signed between the Palestinian banks (Arab Bank, Cairo Amman Bank, Bank of Palestine, Al Quds Bank, & The National Bank) and the French Bank Natixis on June 3, 2010. The grant is directed to establish Palestinian privately-owned companies as a financial support for their development to purchase French machinery and equipment. (Facilitate loans from local banks to Palestinian private companies or French-Palestinian joint-ventures, especially small and medium enterprises.)

Open to all Palestinian economic sectors with a special focus on projects located in the Bethlehem Industrial Park. Small and medium size Palestinian companies and French-Palestinian joint-ventures are eligible to this program. COFACE Overseas Investment Insurance will be made available as a guarantee for French companies to cover their investments in joint-venture projects with Palestinian partners in the Bethlehem Industrial Park. The grant covers all economic sectors such as Tourism, Health, environment, IT and Agriculture.

32 projects have been financed so far. French Equipment only will be funded. No support will be provided for non-French equipment: (i) 35% for businesses not located inside the BIE (ceiling up to .5 m euros); (ii) 50% for businesses located inside BIE (ceiling up to 1 m euros)

Loan Guarantee Scheme – AREZE – up to 50% up to 2 million euros (another program by the French government). Bank of Palestine is part of this program.

TNB, the National Bank:

Available Programs:

Retail – land, cars…etc.
Projects – Agriculture (plastic houses in the Jordan valley); special needs; women empowerment; Net Ketabi; projects inside BIE)


Collateral – It is difficult to secure and provide. TNB considers feasibility studies and business plans

Two available funds:

Machinery without interest rate
Cash with interest rate

The Italian Cooperation:

SMEs development (loans) - more than 10 years. New design: less than US$100 K and more than US$100 K. Banks and Leasing companies. No conditions apply on loans less than US$100 k. The ceiling is up to 2 million euros. 50% of the loan to buy Italian equipment (before it was 60%). Grace period and maturity will vary from one company to another and this will be agreed between the company and the Bank. The only condition is that the company should be registered. The Bank can make decision without going back to Ministry of Finance as previously required.
Start Up Palestine – will support micro enterprises through collaboration with micro finance institutions (up to 30K euros)

Bank of Palestine (

US$ 200 million to finance SMEs and provide business development services – started in August 2015. US$15,000 up to 2,100,000 per company


Provision of all types of credit facilitates to the owners of small and medium-sized enterprises, such as: commercial stores, all types of work-shops, restaurants, beauty salons, kindergartens, factories, hotels, commercial centers, agricultural projects, craftworks and others.
Financing of working capital (merchandise, raw material) and fixed assets (machines, equipment, commercial transportation, production lines).
Financing all enterprises, whether new or recently established.
Provision of multiple options for financing based on the needs of the business.
Percentage of financing up to 85% of the price of merchandise or fixed asset of new enterprises.
Repayment period up to seven years.
Appropriate grace period based on the nature of the business up to one full year.
Cash flow is required up to 5 years

Quick decision making

Lending to SMEs is 30% of total Bank loans (US$274 million). A unit was established for SMEs development at Bank of Palestine and staff members are trained. A special team of the employees of Bank of Palestine works in the field and communicates with the owners of enterprises to answer their inquiries and provide them with all needed consultations. BoP is the only Bank that provides business development services in Palestine. Bank of Palestine provides a consultancy Toolkit which offers tools, templates, advice, and access to experts to help enterprises grow and reach their full potential. Samples are included on their website for developing a feasibility study and business plan.

Customs exemption to machinery

Investor experience is key to approve/disapprove the loan– at least 5 years of experience in the area of investment is required for financing

Requested collateral is in alignment with those required by the PMA.  

Discussion – Part 1

Provision of 140 amperes power supply is the responsibility of the developer and the investor will be responsible for securing the remaining (cost connection). Electricity fees are the same for all types of industries per the most recent cabinet decision that was approved in September.
Suggestion: 2.5% paid by the PA government to electricity companies should be paid to factories.
Suggestion: PVCs use by investors should be encouraged. Currently investors are required to pay roof rent if the investor plans to install PVC on factory roof.
Electricity fees in Jericho are less than remaining WB cities - 0.44 NIS per Kilowatt.
The Government looks into identifying ways to reduce water fees for factories that are located inside IZs.
There are no available soft loans to tap on by Palestinian businesses
Suggestion: Banks to consider feasibility studies more seriously in approving loans
Dr. Ali - France – COFAS – Identify an appropriate mechanism to implement COFAS similar mechanism in Palestine (BIE)

Palestine Market Development Program (PMDP)

September 2013 – September 2018

Palestinian Market Development Program (The PMD Programme is a joint initiative of the UK Department for International Development (DfID) and the European Union (EU) developed in cooperation with PNA (MoNE).

The PMDP will specifically focus on improving the competitiveness of the Palestinian products and services by:

Sharing the risk with the private sector to procure business services to develop new products and explore new markets (matching grants for individual firms or group of firms);
Identifying and addressing the root causes of market failures within specific sectors;
Strengthening private sector investment through PIPA, train and place commercial representatives in key international markets and mobilize the Palestinian Diaspora.     

Grant Ceiling:

US$50,000 max for individual firms
US$100,000 max for group of firms
US$70,000 max combined per company

Cost Sharing Mechanism between 25% and 75%:

50% for new product and existing market;
50% for new market and existing product;
25% for existing product and existing market; and
75% for new product and new market

Grants Eligibility Criteria

Palestinian companies in West Bank, Gaza, East Jerusalem or area C.
The project supports PMDP objectives.
The Applicant is aware of PMDP share percentages.
Project expenses do not include capital items (fixed assets) or recurrent expenses (operational cost). It mainly provides technical assistance such market research; packaging; software that would improve productivity; trademark registration and patents; identifying agents and sales people in external markets; promotion support; …etc.
Start-ups eligible as long as proponent has a business track record.
The project is not in trading [wholesale/retail], a restaurant or in illicit areas such as gambling, alcohol…etc.
The project does not adversely affect the environment.

Application Evaluation Criteria

Technical approach
The proposed project shows clear outcomes and in-line with PMDPs goals and objectives
The project builds the competitive capacity of the beneficiary in a tangible manner
Company implementation capacity
The project implementation plan is clear and concise regarding activities, timing and budget
Additionality: The project would likely NOT proceed without PMDP grant support or be severely delayed or curtailed

Project that consider women participation, environmental issues, working in marginalized area and have impact on pro-poor will have better chance to get grants.

Marwan Badawi, Arab Islamic Bank

SMEs Loans

SMEs Unit is established and the Bank plans to open a branch in Bethlehem Industrial Estate.  


Financing operating capital;
Financing fixed assets and machinery;
Financing industrial, commercial, services, and agricultural sectors;
Loan tenure up to 5 years and grace period up to 6 months;
Collateral – personal to land/building collateral;
35% contribution from the business owner;
Up to US$200 K per company;
Feasibility study is considered in approving/disapproving the loan;
Existing projects or new projects but with the relevant experience in the investment area.

Palestinian Commercial Bank (  

Palestine Commercial Bank offers a variety of banking products & services. The Bank products serve all economic sectors. The Bank provides the following services: personal banking (personal, housing, and student loans) and corporate banking (trading and loans of small and medium sized).

SMEs banking: economic feasibility and cash flows are required.

Mora project up to 500,000; 8% IR; payment period up to 5 years; grace period up to 12 months; 50% personal contribution; feasibility study with cash flow analysis; 13 Required documents

Sharakat Investment Fund (

Sharakat Investment Fund launched in 2013 (USD 150 million). Sharakat Fund’s mandate is to facilitate the channeling of equity and debt capital in a sustainable and commercially sound manner into the MSMEs space in Palestine, aimed at promoting the MSMEs sector’s development and growth. To achieve this goal, Sharakat can engage in a diverse set of investment activities that range between direct and indirect equity investments to direct and indirect loan provisions and loan guarantee schemes. 

Sharakat targets specific vital economic sectors, such as industry, agro-business, tourism, IT, microfinance, health, education, renewable energy in addition to certain geographic areas, including Jerusalem and Dead Sea and Jordan Valley region. Despite the initial focus on certain sectors and geographic areas, Sharakat Fund is open to considering opportunities in various other sectors and geographic areas.                 

Additional Criteria: 1. Existing MSMEs (fair value less than US$ 20 million) based in Palestine, with a small allocation (10% to 20% of total funds) to greenfield projects that have compelling and complete business plans, clear growth potential, and competent and capable management. 2. Competent, experienced, credible and open minded management teams. 3. Profitability track record (or potential) and healthy financial position (or potential for turnaround). 4. Acceptable legal structure and clean legal and tax status. 5. Strong potential for growth and development. 6. Strong potential for developmental impact. 7. Possibility and clarity of exit after no more than five years of disbursement (for both investments and loans.)

Sharakat’s investment ticket size ranges from USD 0.2 million to USD 3 million for a stake between 15% and 40%

So Far, Sharakat invested in 11 companies.

Sharakat adds value to portfolio companies through the following means:

Providing capital investments
Assisting in strategic planning
Applying corporate governance models
Engaging portfolio companies in new networking opportunities
Providing companies with technical and organizational support
Cooperating with the companies to accelerate growth and share risks

Sharakat invests in established and start-up MSME’s with high potential for growth and expansion.                          

Additional Programs of PIF:

Ibtikar Fund – IT
Ijara – Islamic Finance
Al Quds for financing
Grants for East Jerusalem

VITAS: Different types of programs (

MICRO financing (US$ 20 m)
Complementarity role - for those who are not qualified to receive loans from Banks
VITAS was launched in January 2015 – 8 branches in West Bank and Gaza
Personal (improving housing conditions, buy home furniture, education, health and marriage), youth and project loans: 32,000 loans and more than 9000 projects
Project loans: Max ceiling US$30,000 with repayment period up to 7 years
Youth loans: up to US$5000 with repayment period up to 3 years and a grace period of 3 months.

PalLease (

Established in early 2006, PalLease is the first and largest leasing company in Palestine, offering simple financing solutions and a flexible alternative to bank loans and bank leasing. With PCMA accredited lease products, PalLease provides auto and large equipment leasing, corporate fleet leasing and office equipment leasing.