By James Harmon, originally published in The Hill.
(July 28, 2017) — As members of Congress and administration officials consider cutting foreign aid to Egypt over human rights concerns, highlighted by a new NGO law, there is a bright spot in the U.S.-Egypt relationship: The Egyptian American Enterprise Fund (EAEF) — a U.S. government seeded investment fund that supports Egypt’s economic development.
Modeled after the enterprise funds created in the 1990s under President George H.W. Bush following the fall of the Soviet Union, the EAEF, where I serve as chairman, represents a success story in the U.S.-Egypt relationship and a promising case study in the value of enterprise funds as a tool for U.S. foreign policy.
Here’s how they work: Enterprise funds use seed funding from the U.S. government to promote economic development by investing in the private sectors of developing economies. They multiply their impact by leveraging U.S. funding to attract additional investments from the private sector. These investments support U.S. development objectives and seek to generate positive returns that are returned to the U.S. government.
As part of its dual mandate to 1) promote private sector development in Egypt, and 2) generate financial returns for the U.S. government, the EAEF seeks investments that create jobs, increases access to financial services and improves the quality of life for Egyptians.
In 2015, the EAEF led a consortium of international investors to acquire a majority stake in Fawry, Egypt’s largest electronic bill payments platform. Fawry promotes financial inclusion — a major component of economic development — by extending basic financial services to Egyptian citizens, less than 15 percent of whom have a bank account. Studies show that increasing access to finance is critical to reducing income inequality and driving inclusive growth. Since our investment, the number of Egyptians using Fawry has increased from 15 million in 2015 to 20 million users today.
Egypt faces many barriers to economic growth but increasing access to financial services for consumers and businesses, such as small and medium-sized enterprises (SMEs) is a catalyst for economic growth. SMEs are critical to employing vast portions of the country’s human talent but they often lack access to loans. The EAEF’s investment in Sarwa, a consumer finance company is helping alleviate this burden by extending lending to hundreds of SMEs. In the last year, Sarwa extended $14 million in loans to 200 SMEs, and plans to extend over $30 million in loans to more than 300 SMEs in 2017.
About one in four Arabs live in Egypt. And in a country where more than 50 percent of the population is under 30 and nearly 30 percent of the youth are unemployed, growing SMEs is key to addressing youth unemployment and promoting a stable and prosperous Egypt. With Egypt on the frontlines in the fight against terrorism, creating new jobs for a restless, young population makes it less likely they will resort to violence to have their voices heard.
To stimulate its economy, the Egyptian government recently embarked on a promising, economic reform agenda. This included a successful phasing out of energy subsidies and floating its currency — helping pave the way for a $12 billion loan from the International Monetary Fund. On June 29, this year, the Egyptian government took one of its most aggressive steps to improve the economy by cutting nearly $2 billion in fuel subsidies. Amidst these reforms, the EAEF has generated positive returns and created an estimated 500 jobs during the past 2 years. This number will grow as investments increase and expand into untapped, remote areas of the country.
It is a false paradigm to assume that in today’s political climate putting America first means reducing foreign aid to allies at the frontlines of global threats. The EAEF is helping to shore up one of America’s most important allies and ensure it remains a bulwark for regional stability. The enterprise fund promotes Egypt’s economic development and stability, which in turn bolsters our national security here at home.
With Congress pushing back against proposed cuts to foreign aid, there is now a renewed focus on enterprise funds — led most recently by the House Foreign Affairs Committee, who held a hearing on the issue in June.
Done right, enterprise funds are smart investments that advance U.S. interests at almost no cost to the U.S. taxpayer.
The original article can be found here.