By Mohamed Ayyad
The banking system is key in supporting the economy, with banks playing an important role in attracting investors, according to Hisham Okasha, president of the board of directors at the National Bank of Egypt.
Okasha added that the search for investors is a key factor in bridging the domestic savings gap.
“We are optimistic about the future of the banking sector, which will be driven by the country’s improved credit rating, and we have a positive outlook for the Egyptian economy, with some banks being able obtain loans from international institutions,” Okasha said, adding. “This move heralds the return of foreign investments from abroad and comes alongside companies increasingly borrowing to finance expansion, investment, and capital plans.”
Okasha told the Daily News Egypt on the sidelines of the People and the Banks Conference last Wednesday that in the past three years, investors have developed an appetite for investment. This appetite has delayed demand for financing, he said, although the current atmosphere is “positive and stimulating”, and “we will begin to see an increasing demand for borrowing”.
Okasha continued: “We aim to increase the size of customer deposits to EGP 400bn by the end of next June compared with the current EGP 370bn that is expected to be recorded by the end of this June.”
He added that the bank is targeting to expand its retail banking portfolio to EGP 50bn over the next three years.
Okasha noted that the bank has made financing for small and medium projects a priority for the near future, increasing support from EGP 12bn to EGP 14bn. Retail banking allocations will also increase to EGP 30bn by the end of the next fiscal year.
He added that overseas expansion plans are not on the bank’s list of priorities, as they are focused on expanding within the domestic market only.
“Banks have played a vital and difficult role recently, driven by strong local demand and an increase in the volume of companies’ sales despite a decline in profits,” said Okasha.
He added there are three fundamental problems faced by the banking sector and the Egyptian economy, notably high unemployment rates, stumbling blocks and stoppages for factories, and low creditworthiness.
He stressed that the search for investors will prove a key factor for filling the gap in domestic savings, which are not enough to finance the targeted economic growth rate. He pointed out that all countries aiming at growth and investment look for a flow of external funds, including Egypt, which has lost approximately EGP 13bn in foreign investments since 2011.
He added that Egypt has suffered from a low credit rating for the past six evaluations in the last three years, translating into challenges for banks in financing foreign trade and imports, but this has slightly improved since 30 June. Several institutions have forecast a positive future outlook for Egypt’s economy, he pointed out.
Okasha emphasised the importance of raising bank awareness and incentivising the number of people interacting with the banking system. This could be on the level of savings in a preferred manner or directing citizens to take advantage of banking services.
The chairman also pointed to the importance of banks’ backing larger projects, which helps to support smaller projects on which they are based. This is due to the importance of these projects in combating unemployment and developing the economy through increased integration with the state apparatus to improve economic indicators, he said.
He added that the initiative to support mortgage financing launched by the Central Bank last April is still in its early stages of growth. The initiative did not reach the consumer in light of a drop in the number of housing units available to customers.
Okasha added that yesterday the Banks Federation completed the formation of a specialised social responsibility committee for the banks. The new committee has the goal of strengthening banks’ roles in community development.
The chairman pointed out that this is the first committee of its kind, seeking to change the concept of banks from donors. Banks will now look to play a more active role in financing sustainable development and development projects rather than each bank working on its own, with the federation having recently allocated EGP 300m to develop slums, he said.