Amman-Jordan News – The JD275 million Jordan Capital and Investment Fund promises to “inject money into promising companies” and create more jobs, according to Maher Mahrouq, director general of the Association of Banks, in an interview with Jordan News.

The investment fund, the largest ever established by the private sector in Jordan, comes at a time of economic difficulty for the country. The COVID-19 pandemic has had a devastating impact on the local economy, forcing businesses to close and all but eliminating the country’s usually profitable tourism industry. In the fourth quarter of 2020, unemployment reached almost a quarter (24.7 percent), according to the Department of Statistics.

The fund, created through a collaboration between 14 commercial banks and three Islamic banks, will have three major impacts on the Jordanian economy, according to Mahrouq. “It can enhance the economic growth, at the macroeconomic level,” Mahrouq said. It will “deliver a great message about the investment climate in Jordan.” The fact that commercial banks are investing almost $400 million into this fund could “be one of the major tools to promote an investment climate in Jordan”, encouraging foreign investors to invest as well. The third impact, the director general said, will be the creation of new jobs as companies selected by the fund increase production and increase exports. “Because if you look at the labor market in Jordan, the highest or the fastest factor to create jobs, is to have economic growth,” he said.

Launched under the patronage of Prime Minister Bisher Al-Khasawneh, the fund will partner with companies with strong growth potential in Jordan. “Any company, or any sector (that) has a potential to increase its products, to increase its exports” will be eligible for funding, said Mahrouq. However, specific areas of focus include food processing, agriculture, the chemical industry, pharmaceuticals, IT, and digital entrepreneurship.

Businesses selected by the fund will receive both financial and managerial assistance.

“In the developing countries, the managerial theory says that all of the family businesses actually in the third generation are collapsed,” Mahrouq said. To combat this collapse, the fund will “help the companies to enhance their management level” and “implement the concepts of governance and corporate governance,” he explained. “Corporate governance” describes “having companies, owners and regulators become more accountable, efficient and transparent, which in turn builds trust and confidence,” according to the World Bank. Establishing strong principles of corporate governance may take on added importance in Jordan, where the Global Corruption Barometer study found that over half the population believed corruption had increased in the past year.

“This will give a long life, and sustainability” for selected businesses, Mahrouq said. And this service is going to be a crucial service and a crucial contribution from the fund as well.” According to the director general, the Jordan Capital and Investment Fund is the only fund in Jordan offering this kind of managerial and governance consulting to its partners. Consulting and training sessions will enable companies to follow global best practices.

Decisions on which opportunities will be selected will be made by the board of directors for the fund, which will be completely independent from the banking sector. The investment policy of the banks requires “some kind of diversification in terms of sectors and in terms of companies,” Mahrouq said. “You will not find a concentration of a fund in a certain sector or a certain company.”

The fund is completely owned by the banks themselves, despite the coordination with the Prime Minister. “The ownership is private, the management is going to be (governed) by the private sector rules and regulations,” Mahrouq said. The Central Bank of Jordan will function as a regulatory body overseeing the operations of the fund. He described corporate governance as “one of the major pillars and the cornerstone of this fund”, and attributed the strong precedent for corporate governance in the banking sector to regulations implemented by the Central Bank of Jordan.

On March 31, the government announced a 448 million JD stimulus package, which Mahrouq described as “a good step but not enough” to revive the Jordanian economy during the pandemic. He suggested that the government could clear procedural obstacles for investors to encourage them to “sustain the jobs that they have for their employees”.

Mahrouq emphasized that he hopes that the establishment of the fund will promote an optimistic message about the Jordanian economy, with a ripple effect that encourages investment from global investors. “We are supporting our economy, because we do believe in the Jordanian economy. We still believe in our country. We will continue believing that there is opportunity and a lot of good things to come in Jordan.”

“The structural changes in the sectors and the companies are actually going to reposition the sectors and the companies in terms of the supply chain, the whole supply chain all over the world,” he said. “We have to be ready for these kinds of changes because our life — and our business and economic structure — after COVID-19 is going to be completely different than our structure before.”

“In developing countries,” most family businesses fail after the third generation, Mahrouq said. To combat this collapse, the fund will “help the companies” at the managerial level by implementing “concepts of governance and corporate governance,” he explained.

“This will give a long life, and sustainability” for selected businesses, Mahrouq said. And this service is going to be a crucial service and a crucial contribution from the fund as well.” According to the director general, the Jordan Capital and Investment Fund is the only fund in Jordan offering this kind of managerial and governance consulting to its partners. Consulting and training sessions will enable companies to follow global best practices.

Decisions on which opportunities will be selected will be made by the board of directors for the fund, which will be completely independent from the banking sector. The investment policy of the banks requires “some kind of diversification in terms of sectors and in terms of companies,” Mahrouq said. “You will not find a concentration of a fund in a certain sector or a certain company.”

The fund is completely owned by the banks themselves, despite the coordination with the Prime Minister. “The ownership is private, the management is going to be (governed) by the private sector rules and regulations,” Mahrouq said. The Central Bank of Jordan will function as a regulatory body overseeing the operations of the fund. He described corporate governance as “one of the major pillars and the cornerstone of this fund”, and attributed the strong precedent for corporate governance in the banking sector to regulations implemented by the Central Bank of Jordan.

On March 31, the government announced a 448 million JD stimulus package, which Mahrouq described as “a good step but not enough” to revive the Jordanian economy during the pandemic. He suggested that the government could clear procedural obstacles for investors to encourage them to “sustain the jobs that they have for their employees”.

Mahrouq emphasized that he hopes that the establishment of the fund will promote an optimistic message about the Jordanian economy, with a ripple effect that encourages investment from global investors.