Kafalat SAL

Kafalat S.A.L. is a financial services company based out of Piccadilly Center, Beirut, Beirut, Lebanon.

Kafalat is a Lebanese financial company with a public concern that assists small and medium sized enterprises (SMEs) to access commercial bank funding. Kafalat helps SMEs by providing loan guarantees based on business plans / feasibility studies that show the viability of the proposed business activity.

It processes guarantee applications for loans that are to be provided by Lebanese banks to SMEs operating throughout Lebanon under the Kafalat programme.

Kafalat targets SMEs and innovative start ups that belong to one of the following economic sectors:

Industry
Agriculture
Tourism
Traditional Crafts
High Technology

Loans guaranteed by Kafalat benefit from interest rate subsidy. These subsidies were set up to mitigate the crowding out effect of the high interest rates in Lebanon induced by public sector borrowing. Interest rate subsidies are financed by the Lebanese treasury and administered by the Central Bank of Lebanon.

Serving Borrowers

Kafalat loan guarantees are issued based on the viability of the business project to be financed. The guarantee that is made in favor of the lending bank, allows the borrower to provide the bank with collateral, which makes the loan safer for the bank. With the Kafalat loan guarantee, the bank may require less complementary collateral for the loan. In fact, Kafalat offers some types of guarantees that explicitly require the lending bank not to impose any additional collateral request on the borrower. The final decision (and the conditions) for granting the loan rests however in the hands of the lender. Kafalat constantly urges banks to waive complementary guarantees/collateral and settle for a credit decision based on a business plan and the project feasibility/viability.

Subsidy for interest on the loan: In addition to the guarantee, the borrower benefits from a subsidy on the interest that is being charged by the bank. This allows SMEs to access bank funding at a reasonable cost.

Serving Lenders (the banks)

For banks, Kafalat loan guarantees reduce the lending risk.

In addition, Kafalat guaranteed loans in Lebanese Pounds benefit from a Central Bank exemption of the statutary reserve requirement. This significantly reduces the lending bank's cost of capital, allowing lending at lower interest rates.