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The March 2023 issue argued that the banking collapse had removed the main obstacle to equity markets in Lebanon. For two decades banks had captured savings, steered companies towards short-term credit and discouraged family businesses from listing, leaving the Beirut Stock Exchange undiversified, illiquid and dominated by bank shares. With depositors having lost faith in banks, the authors saw a new class of local investors emerging, alongside diaspora investors seeking Lebanese exposure.
The issue identified the conditions for a revival of SME equity funding: currency devaluation favouring exporters and import substitution, a local industry filling the gap left by the lifting of subsidies, strong demand for alternative energy, and companies that had cleaned up their balance sheets by repaying dollar bank debt at LBP1,500. It described the mandate of the Capital Markets Authority, established under Law 161 of 2011, and maintained that the Electronic Trading Platform, designed for small, lower-cost listings, should be launched without further delay.
The authors coined the term 'small and medium-sized investors' for cash-rich individuals lacking the expertise for international markets often drawn into speculative positions. They argued that private equity in SMEs offered such investors a safer channel and a precursor to public listing, with transaction advisory work, a corporate governance charter and national scoring as the necessary preparation for an IPO.
Key findings
- At the time of writing the Beirut Stock Exchange listed only ten stocks: six banks, two cement companies, one real estate developer and one car dealership.
- The issue estimated that around US$7 billion of fresh cash was sitting idle outside the banking system.
- Overdrafts at about 22% a year had been the quickest route to SME credit before the crisis, which the authors held had destroyed much of the value SMEs created.
- The issue cautioned that an IPO places heavy demands on management, requires quarterly and annual disclosure, and should rest on a long-term strategy rather than capital needs alone.
Archive: written in Mar 2023; figures and assessments reflect conditions at the time of writing.Summary of the paper; the full analysis is in the PDF.