Lebanon has the human capital and talents required to develop a startup ecosystem, but what was missing were the appropriate tools and financing; hence why Banque du Liban (BDL) decided to intervene. In August 2014, BDL announced Circular 331, injecting the potential of 400 million dollars into the Lebanese enterprise market. The Circular guarantees 75 percent of the banks’ investments in the knowledge economy through direct startup equity investment or indirect startup support entities.
BDL Circular 331 looks to reverse the trend of Lebanon’s university graduates leaving the country to look for jobs elsewhere. It is through BDL Circular 331 that many companies now have the chance to bring their innovative ideas to life not only through the financial aspect, but also by backing and supporting boot camps and training programs that would support and help entrepreneurs develop further.
The local banks receive a seven-year interest-free credit from BDL, which can be invested in treasury bonds with an interest rate of 7%. In return, the bank commits to investing in the knowledge economy. Local banks can invest up to 3% of their capital in startup support entities, funds or directly into startups. BDL guarantees 75% of the investment, de-risking it by mitigating the potential losses and reducing them to a mere 25%. The Circular is designed to diminish risk for the conservative local banks and does so by dictating the banks’ portfolio diversification. A bank can invest up to 10 % (of its 3%) in any one startup, thus spreading the risk. BDL takes on 75% of the risk and only 50% of any profit made, making the circular attractive waters to venture into.
The main objective of institutionalizing the Circular 331 is to move Lebanon towards a knowledge-based economy and eventually create job opportunities to battle the 20% unemployment rate expected to befall Lebanon in 2015. To ensure the circular is appropriately used and that it serves its intended purpose, BDL has laid down ground rules for qualifying. The company should be a Lebanese joint-stock company with nominal shares; its work should rely on knowledge economy, support creative intellectual skills, and have an enriching impact on the economic and social growth and on job creation in the Lebanese market.