Today the Commission is signing its €14 million contribution to the newly established European-Palestinian Credit Guarantee Fund. The Guarantee Fund, led by the German Development Bank (KfW), will support Palestinian small and medium size enterprises’ financing from local banks in the form of soft loans and grants. This €29 million Fund will be made up of contributions from the Commission (€14 million), KfW (€5 million), and the European Investment Bank (EIB) (€10 million). In addition to the Fund’s capital, the financing partners are providing technical assistance to the European-Palestinian Credit Guarantee Fund and partner banks with a view to strengthening the financial sector in the Palestinian Territories.
Following Gaza disengagement, a special effort will be made to promote loans in Gaza. The creation of a loan guarantee scheme was an area highlighted by the Quartet Special Envoy for disengagement in his Rapid Action Plan as being important to support economic revival.
In Brussels, the Commissioner for External Relations and European Neighbourhood Policy, Benita Ferrero-Waldner, commented: “Small and medium enterprises can be the driving force for economic growth, job creation and poverty alleviation. This initiative is a major step to revive the Palestinian economy.”
The Palestinian economy has been economically depressed and badly damaged since the onset of the second Intifada at the end of 2000. Five years of economic crisis have severely compromised Palestinian living standards with the International Monetary Fund estimating GDP per capita at $979 in 2004, down from $1,410 in 2000. Poverty and unemployment levels have risen significantly since the beginning of the second Intifada.
Official estimates show that there are about 93,000 small and medium enterprises operating in Palestine. Ninety percent of those employ 20 persons or less. The European-Palestinian Credit Guarantee Fund will target these enterprises.
The signing of the agreements is the result of extensive research, design, and donor-coordination. The Fund’s principal office is located in Ramallah and another affiliated office will be opened in Gaza. Local partner financial institutions have welcomed and supported this initiative which they consider as a major step to revive the economy.
The Commission has already set out its commitments made in 2005 to support the Palestinian people, including support for infrastructure reconstruction in the context of Gaza disengagement(1). The Commission is working on its 2006 programme of assistance.