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More than 140 projects have been financed, until June 2023, by the five private equity companies approved by the commission for the organization and supervision of stock exchange operations (COSOB), for a total amount of 6.7 billions of dinars. A level which remains below the potential but above all the objectives.
The need to put in place attractiveness incentives for investment funds as well as the importance of further popularizing this alternative method of financing among companies, mainly SMEs, are recommended by financial expert Souhil Meddah contacted by the Young Independent.
This alternative method of financing to bank financing, which has existed for decades, has not yet attracted project leaders, who often opt for “classic” financing. 144 projects have been financed, until June 2023, by the five private equity companies approved by COSOB, as indicated by the president of the commission, Youcef Bouzenada, during an information day on Thursday, on the promotion of financing through private equity, where he underlined the need to popularize this method of financing, knowing that it offers several advantages to financed companies, particularly those which do not have access to bank credit.
For Souhil Meddah, this level is “practically negligible”, knowing that the potential is to go towards 6,000 to 8,000 financings over three to five years, with intermediate sizes. In his statement to Young Independentthe financial expert, who underlined the existence of this method of financing since the 1990s, indicated that “we could have at least moved forward, especially from 2012, and called on investment funds, even to revive companies in difficulty.
What explains the timid use of this method of financing? Mr. Meddah indicated that this situation presents problems on both sides. According to him, there must first be a willingness on the part of companies to accept this method of financing, knowing that for this type of financing, there are capital structure conditions to be respected. “The investment funds will force the operator to capitalize part of the contribution. On this basis, the investment fund will be below the project leader and will not be in the majority,” he indicated, affirming that SMEs which use this method of financing are often faced with this problem linked to capital.
“Either they do not have sufficient means to provide the requested capital, or they try to avoid the total capitalization of their contribution and go through intermediate accounts,” explained the financial expert. The other problem concerns investment funds. The latter sometimes require time to respond to requests while other times, they do not agree to join in areas known to be saturated. “This problem deters investors from turning to investment funds. This question being recurrent, investors are not too interested,” according to the financial expert who recalls that investment funds are called upon to join forces in these areas, even if they are known to be saturated.
According to him, it is necessary to put in place attractiveness incentives for investment funds and to further popularize this method of financing, particularly for SMEs. This is also what the president of COSOB recommended, among others, during the information day on the promotion of financing through private equity, specifying that through this tool, the company benefits significant financing, while avoiding paying interest. “It offers support and expertise from private equity companies for the benefit of the financed company,” he said, affirming that this alternative means of financing offers several advantages to the financed companies.