|BLC to be the first bank to provide micro-credit loans to small businesses|
|Lender has received access to a credit line of four million euros from Spain
Banque Libanaise pour le Commerce (BLC) will be the first bank in Lebanon to provide micro credit loans to small businesses after receiving a credit line of four million euros from Spain.
The Spanish microfinance cooperation program a first of its kind in the Middle East region is an innovation in the Lebanese banking sector since its importance lies in the injection of liquidity “directly into the veins of the economy,” said BLC Chairman Shadi Karam. He added that Spain may raise the soft loan to BLC up to 10 million euros in the future if the program proved to be successful.
BLC Bank, which recorded $5.6 million in profit in 2003 after undergoing radical internal reforms, has decided to introduce the micro-credit concept as a part of efforts aiming at the modernization and the diversification of the offered services.
“As the success of this initiative depends on providing cheap financing to the micro-enterprises, it is imperative for the lending institution (BLC) to source out funds at low rates. For this reason, the management of BLC turned to outside funding agencies as costs of funds outside Lebanon are currently cheaper than the local market,” said the bank’s press release.
And the first agency to respond to BLC’s call was the Spanish International Cooperation Agency, which issued the 4 million Euro loan through Spain’s Official Credit Institute.
Through BLC Bank, the funds will be directly channeled into credits to the micro-entrepreneurs to finance their entrepreneurial needs in the form of working capital, acquisition of fixed assets and upgrading of facilities for production and commercial premises.
The amounts of the granted micro-credits will vary between $3,000 and $10,000, depending on the nature of the project.
According to the agreement, all the Spanish resources must be placed with eligible financial intermediaries before the end of the second year counted from the date of the loan disbursement. BLC Bank will freely determine the interest rate to be charged to eligible financial intermediaries, but it cannot exceed the maximum set limit of 7 percent. “This program will not only help Lebanon and its small enterprises, but will also create new job opportunities locally,” said Spanish Ambassador Miguel Carriedo. “We chose Lebanon as a first step for our microfinance cooperation program because of its strong Central Bank and financial sector,” he continued.
BLC Bank will thus channel the funds of the program to the extension of credits to financial intermediaries not regulated or supervised by the Central Bank. These financial intermediaries will be selected by BLC, according to the conditions and criteria established in the agreement.
BLC Bank was incorporated in May 1950, as one of the pioneer banking institution in Lebanon. Over three years ago, a series of mistakes committed by past mismanagement rocked the bank, which some bankers said burdened BLC with over $100 million in bad debts. In June 2002, the Central Bank acquired 95 percent of BLC by pumping $107 million in it, in an effort to help reconstitute its capital.
Karam, who was directly appointed by the governor of the Central Bank, Riad Salameh, in June 2002, was entrusted with the reorganization and restructuring of the bank. Ever since, BLC has achieved total turnaround results and met all Basel ratios before appointed dates. BLC launched several products in recent months such ascredit cards to increase its market share in Lebanon.
Beirut,03 01 2004
Tark El Zein
The Daily Star