USAID’s Pakistan Private Investment Initiative is helping local investment firms to support the SME sector to grow and thrive
ISLAMABAD – The U.S. government is investing Rs 15.6 billion in Pakistan’s dynamic small and medium-sized business in partnership with three investment funds under the Pakistan Private Investment Initiative (PPII) programme.
Pakistan Private Investment Initiative (PPII), a program of the U.S. Agency for International Development (USAID), is capitalizing on the expertise of these investment funds to make investment decisions that will, spur economic growth, and generate profits for investors.
The USAID program has provided 2,496 million Pakistani rupees for each fund, for a total contribution of nearly 7.5 billion Pakistani rupees, and the three funds have each matched or exceeded the USAID contribution.
The PPII consists of the Abraaj Pakistan Fund, the Pakistan Catalyst Fund, and the Boltoro Growth Fund, three professionally managed investment funds that provide equity capital for Pakistan’s fast-growing small- and medium-sized businesses.
The USAID Mission Director for Pakistan John Groarke has announced that that all three private equity funds established under the PPII are making investments.
“The PPII design is unique in partnering with local investment firms to support the SME sector to grow and thrive,” Groarke said. “With the matching contributions from the three partner investment firms, PPII is eventually going to make more than 15.6 billion Pakistani rupees in equity financing available to selected SMEs. This clearly demonstrates the interest of private equity firms and the value of investing in Pakistan.”
By partnering with the private sector, the U.S. government is capitalizing on the expertise of these investment funds to make smart investment decisions that will spur economic growth and generate profits for investors. Ideally, PPII’s three funds will serve as a model for successful investment in Pakistan’s SME sector and will spur the development of a robust private equity industry in Pakistan.
The CEO of the Pakistan Catalyst Fund, Asad Shafqat said, “The SME sector can be a tremendous engine for employment and GDP growth in Pakistan.”
Ali Saigol, CEO of the Baltoro Fund said, “The Pakistan Private Investment Initiative has successfully aligned USAID’s development objectives with private investor interests, thus establishing a sustainable platform that will support SME growth for decades to come. We hope this will serve as a template for future public-private partnerships.
What is Pakistan Private Investment Initiative?
Announced in 2013 by the USAID, Pakistan Private Investment Initiative (PPII) is a partnership between USAID and three private equity management partners to create three private equity funds to invest in small and medium enterprises (SMEs) with high-growth potential.
USAID contributed $72 million and each management partner; i.e. Abraaj Pakistan Fund, the Pakistan Catalyst Fund, and the Baltoro Growth Fund, secured matching funds, making approximately $150 million available for investment.
How PPI spurs economic growth and generate profits for investors?
In Pakistan, SMEs employ an estimated 80 percent of the non-agricultural workforce, according to the Small and Medium Enterprise Development Authority of Pakistan. SMEs have the potential to grow into larger businesses, employing a higher number of workers, but many have difficulty accessing capital, particularly as Pakistan’s banking sector often prefers to lend to larger corporations or to the government.
By helping its investees to improve their corporate and internal business governance practices and to conduct transparent financial reporting, PPII is transforming them into ideal candidates for further future investment. PPII’s objective is to serve as a catalyst for expanding the use of private equity in Pakistan.
In addition, by establishing multiple investment funds managed by professional fund managers, PPII will serve to enlarge the pool of capable private equity investment professionals, strengthen the business enabling environment for small business, make capital available for SMEs, and promote domestic and foreign investment and lending in SMEs.
PPII is a great example of how the U.S.-Pakistan relationship is evolving beyond traditional civilian assistance toward mutually-beneficial business arrangements. The United States is the largest trading partner for Pakistan, with total bilateral trade volumes approximating USD 5 billion annually. The U.S. is also where more than 14% of Pakistan’s annual exports now find a market, and there is potential to further enhance these trade volumes and partnership initiatives.