Islamabad: The US government in partnership with three investment funds is managing a pool of over Rs 15.6 billion to invest in Pakistan’s small-and medium-sized businesses under the Pakistan Private Investment Initiative (PPII).

Under the PPII, a programme of the US Agency for International Development (USAID), the US is capitalising on the expertise of these investment funds to make investment decisions that will spur economic growth and generate profits for investors.

The USAID Mission Director for Pakistan, John Groarke announced on Thursday that all three private equity funds established under the PPII are making investments. John Groarke was addressing USAID’s Pakistan Private Investment Initiative here on Thursday.

In 2013, the USAID announced PPII, a partnership between USAID and three private equity management partners that would create three private equity funds to invest in small and medium enterprises (SMEs) with high-growth potential.

The 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.

“The PPII design is unique in partnering with local investment firms to support the SME sector to grow and thrive,” said Groarke, adding that with the matching contributions from the three partner investment firms, PPII is eventually going to make more than Rs 15.6 billion in equity financing available to selected SMEs. This clearly demonstrates the interest of private equity firms and the value of investing in Pakistan,” Groarke added.

Groarke said the United States is the largest trading partner for Pakistan with total bilateral trade volume of Pakistan’s annual exports now find a market, and there is potential to further enhance these trades volume and partnership initiatives.

In Pakistan, SMEs employ an estimated 80 percent of the non-agricultural workforce, according to the Small and Medium Enterprise Development Authority of Pakistan. The 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.

Small-and medium-sized enterprises are well-known driver of economic growth, but they often face difficulties accessing the capital they need to grow their businesses. 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.

By partnering with the private sector, the US government is capitalising 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.

CEO 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,” Saigol added.

Executive Director Securities and Exchange Commission of Pakistan, Aamir Khan said this developing innovative solution will help small and medium sized enterprises SMEs which are vital to Pakistan’s economic growth and key to its long-term Stability.

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