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Central Bank of Lebanon's New Policy for Startups

What  does the Central Bank of Lebanon's new investment policy for startups mean? Around 10 days ago, the Central Bank of Lebanon (the Banque du Liban) released an announcement that it had instituted a new policy to de-risk investments in startups made by banks. The news quickly made the rounds in the local startup community that Banque du Liban (BDL) had launched this new policy, in order to incentivize commercial banks to invest in technology startups, incubators, accelerators and venture capital firms. (The pdf of the amended Basic Circular 331 can be downloaded in Arabic here.) Yet, with policies like this, the devil is in the details. To understand whether it will really give banks an incentive to take on small, risky investments in startups, we met with Saad Al-Andary, Vice President at the Banque du Liban, to address issues and concerns that we had. Here's our breakdown of how it works and what the challenges might be.
How it works: if a local bank agrees to invest in startups, it receives a seven-year interest-free credit from the Central Bank (BDL), which can be invested in treasury bonds that return interest rate of 7%. As the local bank benefits from this interest, it then must turn around and invest its own capital in startups or startup support entities. The BDL will also guarantee up to 75% of the value of this investment, meaning that if the startup goes under and a commercial bank loses its investment completely, the BDL will reimburse a full 75% of that investment, taking only 25% as a loss. This is designed to keep the margin of risk very low for the commercial banks. Every investment will also have to be approved by the BDL, which will follow up closely with the banks. To ensure that banks also reduce risk by diversifying their investments, the BDL has set some limitations set on the amount of investment the bank can make in any given startup: banks can only invest a total of 3% of their entire capital in startups, yet they can only invest 10% of that 3% (0.3% of their total capital) in any one startup. In other words, with that pool of 3% of its capital, each bank must make at least 10 different bets; it can't invest it all in one company. To put this into perspective, the order of magnitude is still a bit off- one of our first concerns with the model. For example, 3% of the total capital of a given commerical bank in Lebanon could be US $20 billion to $50 billion. 10% of that would be $2 billion to $5 billion; hardly an amount that could viably be in invested in a small company. Regardless, once an investment is made, both the commercial bank and the BDL stand to profit; the BDL will take 50% of any profit made if the company is sold or the banks cash out after another round of funding. All of those guarantees come at a price.