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IFC invests $25m in Middle East SME debt fund

The private investment arm of the World Bank has invested in Gulf Capital’s second private debt fund that targets SMEs based in the Middle East and Northern Africa.

The International Finance Corporation (IFC), the private investment arm of the World Bank Group, has invested $25 million in Dubai-based Gulf Capital’s second mezzanine fund.

GC Credit Opportunities Fund II is targeting a $250 million final close, which it expects to be completed in the summer. In January, the fund held a first close after reaching $175 million.

The IFC invested $20 million in the previous fund, which raised $221 million in 2013 and is now fully invested. Karim El Solh, chief executive of Gulf Capital, said “this follow-on investment from the IFC into our second private debt fund is a strong vote of confidence in Gulf Capital and will help us provide growth capital for promising SMEs across the region.”

GC Credit Opportunities Fund II specifically targets investments in small and medium-sized enterprises operating in the Middle East, Turkey and Northern Africa. Companies operating in consumer-focused sectors such as healthcare, education and water and generating a revenue of between $10 million and $200 million are the focus of the fund.

Investment sizes are between $10 million and $25 million and the target IRR is 18 percent. Gulf Capital senior managing director Walid Cherif said that he expects to complete 10 – 12 deals in the fund and told PDI that the fund is aiming to complete three by the end of the year. Cherif confirmed that the fund has not deployed any of the fund’s capital so far.

All investors in the second fund are based in the Middle East and comprised of pension funds, family offices and sovereign wealth funds. Cherif said that future fundraising strategies will look to attract interest from Europe and North America as the firm wants to diversify its client base.