Amid current market upheavals and government attempts to boost the economy, the banking sector is searching for secure investment opportunities.
The National Bank of Egypt (NBE) will focus in the coming period on financing small and medium sized enterprises (SMEs), Treasury Manager at NBE Zainab Hashem said, adding that the sector “requires attention”.
Osama Al-Manyalawy, assistant treasury manager at the Arab Banking Corporation (ABC), echoed Hashem’s opinion, adding that the Central Bank of Egypt (CBE) has recently adopted a plan to directly finance SMEs.
Last Tuesday, the CBE announced that it would allocate EGP 10bn for low-cost housing projects, which it said would have a positive effect on the country’s economic growth and social development, Reuters reported.
Al-Manyalawy pointed out that the textiles industry requires funding from banks, “but those loans should be syndicated loans, due to the high production costs”.
“The electricity and petroleum sectors are also good investments for banks,” said Al-Manyalawy, adding: “Projects in the infrastructure sector in general need higher contribution from banks.”
Former chairman of Misr Iran Development Bank Ismail Hassan said that all sectors require equal attention in order to operate effectively and increase production.
“What really matters for the banks, when choosing the sector of their investment, is the ability to meet deadlines for loan repayments,” Hassan stated.
“Due to the shaky security situation, the rate of granting personal and auto loans has decreased,” Al-Manyalawy said, adding that personal loans would increase if “the security status of the country improved”.
“Banks should halt funding to entertainment projects, such as commercial malls, for a while,” Al-Manyalawy said, adding that banks should direct their liquidity to vital sectors that would improve economic growth.
The banking sector has recently been a source for filling the financial gap in public authorities. Analysts say that funding governmental authorities is a secure investment for banks.
Earlier in December, 13 banks announced the completion of an EGP 2bn syndicated loan for the Egyptian General Petroleum Corporation (EGPC), a public authority, to meet its “internal and external needs” and secure the continuous supply of petroleum products for the local market.
The chairman of Société Arabe Internationale De Banque (SAIB) said at the time that the deal is a contribution from the banking sector to revive the petroleum sector.
The Upper Egypt Electricity Production Company (UEEPC) and Banuqe Misr have also signed an EGP 285m loan agreement in December to fund renovations and replacements for a power plant project in Assiut.
This move was said to reflect Banque Misr’s confidence in the electricity sector’s success.
An improvement of Egypt’s creditworthiness has led Standard and Poor’s (S&P) to raise the ratings on four Egyptian banks last November. S&P upgraded its long-term credit rating on the National Bank of Egypt (NBE), Banque Misr (BM) and the Commercial International Bank (CIB) to B- from CCC+.
In January, the European Investment Bank (EIB), the European Bank for Reconstruction and Development EBRD, the Saudi Fund for Development (SFD) and the Islamic Development Bank (IDB) allocated a total of $900m from their funds to finance a power plant in Assiut.
The managing director of EBRD’s Southern and Eastern Mediterranean region, Hildegard Gacek, said earlier in February that the bank aims to encourage the Egyptian private sector.