Explainer| Can an investment fund save failing factories?
This summer, Minister of Industry Khaled Hashem proposed a novel idea for Egypt: an investment fund targeting struggling factories and seeking to turn a profit by rescuing them, a departure from previous funds that focused on stocks, bonds and metals.
Later in October, this idea materialized when the government announced the launch of a 1 billion Egyptian pound ($19 million) fund to support distressed factories. The government has called for financial contributions and urged factory owners to apply for assistance through a digital portal affiliated with the Ministry of Industry.
However, the initiative faces several challenges, prompting questions about its investment priorities and how it will guarantee shareholders a return on their money by investing in struggling companies.
Why do we need the fund?
The first question that comes to mind when reading the joint statement from the Central Bank of Egypt and the Minister of Industry on the fund’s launch is: Why do we need a new initiative when the government already launched an industrial financing program two years ago that remains in effect?
According to Mahmoud Khalifa, chief investment officer at CI Capital Holding, which manages the new fund, the two initiatives complement each other; one is not a substitute for the other.
Khalifa told Al Manassa that while the previous initiative aimed to provide low-interest financing for manufacturers, the fund seeks to partner with companies through capital injection.
“For example, if a factory is valued at 250 million pounds (about $4.76 million) and requires an injection of 80 million pounds (about $1.52 million), the amount can be provided in exchange for a stake in the company, based on the final valuation,” the CI Capital executive said.
He is confident the fund will have a positive long-term impact, as it offers a better option than distressed factories taking out loans.
“In the case of a loan, the factory remains indebted to the bank,” Khalifa added. “In the direct investment model, the fund becomes a partner in the company, imposing a higher level of governance, discipline over spending, and performance monitoring.”
The industrial sector has suffered from high loan interest rates due to a wave of monetary tightening that began in 2024. Although the central bank has moved toward gradually lowering interest rates since April 2025, it has been forced to hold rates steady during most of its meetings this year due to inflationary pressures resulting from the US war on Iran.
If this model proves successful, Khalifa expects it will encourage banks, private equity firms and financial investors to inject capital into restructurable, distressed factories, ultimately expanding the pool of financing available to these companies.
Although the fund’s contribution to financing the industrial sector will remain limited compared with the banks’ initiative, which has allocated 30 billion pounds (about $571 million), the CI Capital executive does not see this as undermining the fund. He distinguished between the two, noting that “the banks’ initiative requires massive expenditures because it aims to finance new production lines, while the fund aims to direct capital to support already existing factories.”
Why aren’t citizens participating?
While the distressed factories fund opens the door for financial institutions and companies to participate in its capital, it has not, contrary to the norm for other investment funds, allowed citizens to subscribe.
Khalifa explained that by nature, private equity is unsuitable for retail investors due to the long investment period and the difficulty of a quick exit.
“Direct investment usually requires a long time frame that can reach five or seven years in some cases, which makes it more suitable for institutions such as banks, insurance companies and financial institutions,” he said.
The Industrial Development Authority holds roughly 33% of the fund, while five banks (Banque Misr, the National Bank of Egypt, the Arab African International Bank, the Agricultural Bank of Egypt and the Export Development Bank of Egypt) account for about 65%, with CI Capital holding the remaining 2% stake.
How are risks managed?
The fund has to balance two somewhat contradictory goals. On one hand, it aims to pump money into companies facing challenges that hinder their operations. On the other hand, it is obligated to pay an attractive return to the institutions that helped finance its capital. How does it balance this difficult equation?
Khalifa explained that to meet its obligations to subscribers, the fund will focus on factories that guarantee profits. These include companies that faltered due to shocks such as the coronavirus pandemic or regional tensions, but possess the fundamentals that will allow them to return to production once liquidity is provided.
The fund also targets factories distressed by using short-term loans to fund long-term investments—such as building construction or buying production lines—a mismatch that strained cash flow and forced them into default.
Khalifa pointed to a third profitable category: family businesses inherited by inexperienced second- or third-generation owners, and companies stalled by partner disputes that disrupt ongoing operations.
To limit risk, the fund will diversify its investments, investing no more than 10% of its size—up to 100 million pounds (about $1.9 million)—in a single factory. Additionally, its investments in a single sector must not exceed 25% of the fund’s total size, according to Khalifa.
The fund will not be permanently tied to these activities. Once a company is restructured, the fund will exit to seek a new investment.
“The fund’s investment period could extend for two to three years,” Khalifa explained. “After the factory regains its operational capacity, the fund can exit its investment by reselling its stake to the factory owner, offering it on the stock exchange, or selling it to another financial or strategic investor.”
Who will the fund work with?
According to previous Ministry of Industry estimates, the number of distressed factories in Egypt reached about 6,000 by the end of 2025. The CI Capital chief investment officer revealed that, at this stage, the fund will focus on the food, pharmaceutical, chemical, readymade garment, and building material sectors.
Khalifa noted that the fund does not have a preference for specific governorates or industrial zones, but instead relies on investment opportunities that meet its selection criteria. About 25% of the distressed factories currently registered on the Ministry of Industry’s digital platform are concentrated in Cairo, while Alexandria accounts for 14.5%, Beni Suef for 9%, and Port Said for 6.5%.
The remainder are distributed across the governorates of Ismailia, Luxor, the Red Sea, Beheira, Suez, Sharqiya, Gharbiya, Menoufiya, Minya, Aswan and Assiut.
Is the fund overly ambitious?
Mohamed Maher, chairman of the Egyptian Capital Market Association, expects that the restructuring fund’s activity, given its current capital, will be limited to 10 to 15 companies.
He stressed to Al Manassa that the fund’s limited resources will make it a pilot experiment, insufficient to cure the ills affecting thousands of factories.
Selecting the right sectors and companies is only part of the challenge, Maher noted, adding that the fund must also collaborate with industry specialists to provide the expertise needed to guide businesses from loss to profitability.
The initial trials will reveal the new fund’s ability to treat the industrial sector’s problems and offer a new investment model for manufacturing, following years of funds focusing on debt instruments and equities.