KUWAIT CITY (AFP) – Arab finance ministers on Monday officially launched a two-billion-dollar development fund that will provide loans to small and medium-size projects across Arab countries.

The Arab Development Fund, which was approved by the first Arab economic summit in January last year, was first proposed by Kuwait’s Emir Sheikh Sabah al-Ahmad al-Sabah.

Speaking to reporters after the launch ceremony, Kuwaiti Finance Minister Mustafa al-Shamali said the fund has so far received pledges of 1.18 billion dollars (850 million euros) from 11 Arab nations and more contributions are expected.

The original proposal envisaged a two-billion-dollar fund, a figure that was repeatedly mentioned by ministers on Monday.

Oil-heavyweights Saudi Arabia and Kuwait have each pledged 500 million dollars and the Kuwait-based Arab Fund for Economic and Social Development (AFESD) pledged 100 million dollars. The rest came from nine Arab countries.

The new fund will be run by the AFESD.

Shamali said that the Arab Development Fund will only finance small and medium investments in Arab countries that have pledged contributions to the fund.

The aim of the fund is to improve the living standards in the Arab world which has 140 million people living below the poverty line, according to a joint report by the United Nations Development Programme and Arab League.

The report, issued in December 2009, said overall poverty remains high, reaching up to 40 percent on average.

The main challenge for Arab countries was to provide 51 million new jobs over the next 10 years which, while not actually reducing unemployment, would contribute to preventing its increase and maintaining it at current levels until 2020, said the report.