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ONE ON ONE: EGB forays into microfinance, targets SMEs - Daily News Egypt

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ONE ON ONE: EGB forays into microfinance, targets SMEs

CAIRO: The Egyptian Gulf Bank’s (EGB) approach to the global recession has been a unique one. As it continues to push its corporate and retail sides, the bank is also taking 2009 to ramp up divisions committed to small and medium enterprises (SMEs) and microfinance. Over the past several months it’s been reported that despite …


CAIRO: The Egyptian Gulf Bank’s (EGB) approach to the global recession has been a unique one. As it continues to push its corporate and retail sides, the bank is also taking 2009 to ramp up divisions committed to small and medium enterprises (SMEs) and microfinance.

Over the past several months it’s been reported that despite the downturn in the global economy, Egypt’s banks continue to make a concerted effort to extend their reach and grow their businesses.

EGB is no exception.

Launching two new divisions in an economic climate like this one is a bold move, but Senior General Manager Nevine Kashmiri said she has confidence in the bank’s strategy.

“As long as companies are serious about what they’re doing, we’re always ready to bank, said Kashmiri, who is also head of the corporate division and is overseeing the expansion.

From a corporate banking point of view, the move will significantly expand the bank’s reach across the country. By only targeting large corporations, EGB limited itself to a thin portfolio of businesses. By financing SMEs and extending credit to individual low-income businessmen through microfinance, the bank has increased its target market dramatically.

Kashmiri is well positioned to shepherd the corporate division through this time of change. She spent 23 years working at Misr International Bank, helping to usher the bank through periods of recession and restructuring. She spent three years at Greek-based Piraeus Bank as deputy head of the corporate side in Egypt.

She then joined EGB in December of last year. “It’s a small and solid bank, Kashmiri said, adding that EGB was offering her “more experience, a better career, and higher exposure.

Still, though, financing large corporations remains the bank’s bread and butter. As a result, Kashmiri has taken steps to prod her clients to take financing by lengthening loan tenors and reducing interest rates. As a result, she said, business has hit the low ebb and has begun to make a comeback.

“For the clients it always ranges between the short term facilities as well as the medium and long term loans, she said.

Kashmiri noted that the long-term loans have dropped off somewhat because they are typically used to finance growth-oriented projects. Instead, the bank has focused on expanding its short-term facilities. But, she said, the last quarter of 2008 was significantly slower than the first quarter of 2009, giving her optimism going forward.

“Ever since the credit crunch started, there was a conservative view from the bank, taking the responsibility as consultant to my clients, I was the one preferring that this is not the time for the enlargement of the assets. It was the time to be cautious, a little bit conservative, she said.

But EGB, in cooperation with the Central Bank, has made a concerted effort to offer attractive financing to sectors that have been badly hit in the recession, like tourism. Sectors that are down, Kashmiri said, will have significant growth potential in the future.

EGB plans to launch the microfinance bank gradually over the course of this year. The project is endowed with LE 40 million in capital and the plan is to have 35 branches (that will also serve as hubs for retail banking) online over the next two to three years.

The microfinance plan was developed in tandem with the SME plan, which will also be critical to EGB’s growth since it will, Kashmiri said, “diversify the risk and help grow the Egyptian economy.

“We started a small unit for SMEs and we plan to increase it, she said, “because the SMEs are very much enhanced from the Central Bank of Egypt. The CBE avoided the banks to put the 14 percent reserves on the SMEs in order to encourage the banks to go after these.

Kashmiri also noted that there is significant competition among banks to finance the big corporates but that the SMEs are a largely untapped market.

The bank has also launched an Islamic banking division that accounts for 5 percent of business. Kashmiri said the goal is to increase the number to 20 percent over the coming years.

One of Kashmiri’s biggest challenges is preparing a staff that has been accustomed to pursuing large multinational companies as clients and to adopt a more intimate hands-on approach to dealing with microfinance clients and SMEs. Kashmiri says her division is ramping up a significant training program.

The goal, as Kashmiri describes it, is to have all new segments running at full strength by the time the economy bounces back. Growing a microfinance division, an SME program, and an Islamic banking segment would be a challenge regardless. But Kashmiri sees the economy starting to make a comeback, so time is short.

“I am very optimistic for the second half of 2009 and the beginning of 2010 because as we have seen, things are becoming slightly better, she said, noting that the US has already come off its low point, progress which should catch up to Egypt in the next few months.

When it does catch up, Kashmiri said, EGB will be ready.

Topics: FJP

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https://www.dailynewsegypt.com/2009/04/29/one-on-one-egb-forays-into-microfinance-targets-smes/
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