United Bank aims to expand SME financing in 2016

Hossam Mounir
13 Min Read
Chairman of the Board of Directors and Managing Director Abdel Hamid United Bank adopted a clear strategy in mid-2006 to build a strong local bank to provides financing and development services to SMEs. Amany Kamal

The United Bank aims to expand financing for SMEs and introduce new competitive products this year according to the bank’s Acting Chairman of the Board of Directors and Managing Director Farag Abdel Hamid.

He told Daily News Egypt, in an interview, that the bank will reconsider its employment policies and grant priority to funding major companies for infrastructure and renewable energy projects. The bank plans to open 12 new branches throughout 2016, concentrated in Upper Egypt and the Suez Canal Area Development.

What are the most important features of your strategy for banking work throughout 2016?

Our strategic plan for 2016 includes reconsidering investment policies to focus on specialised financial services for the SME sector in accordance with the tariffs recently set by the Central Bank of Egypt (CBE). This will be achieved through products that suit the comparative advantage of each governorate, with a focus on productive projects.

The bank’s action plan includes granting priority to funding major companies operating in the fields of infrastructure and renewable energy.

The bank also aims to implement an expansion plan to increase the number of branches, especially in Upper Egypt and the Suez Canal, while also expanding the spread of banking retail products, especially those that aim to attract savings and investments in fields of production.

The work plan for the bank also includes expanding real estate financing services for low- and medium-income individuals, along with expanding the electronic payments programme for taxes and customs. Another goal includes obtaining funding sources with reduced interest rates by cooperating with local bodies, such as the Social Fund for Development (SFD), or regional and international bodies to pump the funds into different projects.

What about developments in bank performance since its establishment in 2006?

United Bank has adopted a clear strategy since its establishment mid-2006 to build a strong, dedicated local bank that provides financing and development services to SMEs. The bank has been able to implement this strategy thus far through a plan designed to advance all banking and technology sectors.

The results of this strategy were borne when CBE and the Central Auditing Organisation announced the 2012 budget and the bank was able to fill the gap in allocations completely and complete restructuring measures.

The bank was able to move beyond the losses and move toward achieving a net profit in 2013 and 2014 estimated at EGP 356m. Profits for the year 2015 are expected to reach the same level according to preliminary estimates.

The bank has continued to expand its network of branches, banking services, and online banking applications thanks to good planning and qualified professionals managing the system.

In light of the efforts made by the entire bank’s working group, for the third year in a row, the bank won the award for best global performance for the Straight-Through Processing Excellence Award from America’s Standard Chartered Bank, NY.

How do you view Islamic banking on the Egyptian market currently?

The Islamic banking market is not new to Egyptian society, and has had present since the second half of last century. The sector has grown steadily and has a wide, popular base, especially in the governorates. However, those working in this industry must develop the sector to suit the nature of society and individuals’ needs in the near future.

We at United Bank are working to offer services under the umbrella of “Rakhaa” for Sharia-compliant transactions to meet the demand of a large category of people.

We have a Sharia Board composed of senior economists, Sharia, and Fiqh scholars who are working to review all products offered on the Egyptian market and judge whether they are permissible from a Sharia perspective.

These products are offered at all 50 bank branches situated across the country and include the Rakhaa credit card, a Dyar real estate product for low- and medium-income individuals as well as luxury housing, a product for personal finance, a Rakhaa cash fund, travel funding for Hajj, Umrah, and domestic and foreign tourism trips, and financing for participation in social clubs.

The Bank has also issued a wide diversity of Sharia-compliant savings products and certificates and directs surplus liquidity to Sharia-compliant investments.

What is the bank’s current value of deposits, and what is your target for liquidity in 2016?

The total volume of deposits in the bank surpassed EGP 20bn by the end of 2015 and the bank is working to increase this number even further. Now we are considering offering new savings products throughout 2016 in local and foreign currency.

What is the current volume of bank assets?

The bank’s assets exceeded EGP 28bn by the end of 2015.

What is the expansion plan for bank branches?

The bank is looking forward to opening 12 new branches during 2016, most of which will be concentrated in Upper Egypt and the Suez Canal Area and ports. We also have plans to expand along the coast and in Greater Cairo.

CBE’s recent decision to agree to build small branches has helped us re-plan our geographic expansion across Egypt to ensure that banking services reach all parts of the country.

The bank is looking to increase the number of ATMs across the country to 250.

Does the bank intend to increase its capital in the near future?

The bank’s capital currently does not meet the amount required by the banking law, and we will consider increasing this figure when necessary through a discussion with the owner.

What about the bank’s plan to fund SMEs?

Since CBE issued the new unified tariffs for the SME sector, banks have competed to increase their share of funding for this promising sector.

The bank is currently restructuring the private sector by funding such ventures in order to keep pace with this shift, having doubled its market share of such financing.

Our ambitious plan aims to increase the volume of investment in the SME sector in order to play an important role in development and provide work opportunities, especially as the expected returns from this investment are very promising in light of the incentives offered by CBE.

The bank has already signed a number of agreements with donors who will provide technical and physical support, including the Social Fund for Development, which has pledged EGP 175m, and the Information Technology Industry Development Agency (ITIDA) with a total of EGP 150m, and the Cairo Federation of Chambers of Commerce for EGP 50m. A partnership with a development company will bring in EGP 200m to finance SMEs.

The bank expanded its specialised funding programme to develop the industry and service sectors by enhancing productive capacity and linking them with major companies to ensure continued success.

United Bank offers a range of specialised programmes to these sectors that comply with their nature, including carrier, distributor, supplier, environmental project, and trademark (franchise) financing.

United Bank adopted a clear strategy in mid-2006 to build a strong local bank to provides financing and development services to SMEs.
United Bank adopted a clear strategy in mid-2006 to build a strong local bank to provides financing and development services to SMEs.

What is the bank’s plan for introducing new products into the retail banking sector?

The bank currently has more than 30 retail banking products, which vary between financing tools and investment instruments and certificates, in addition to a package of credit cards and electronic payment programmes. United Bank will also participate in a real estate financing system for youth by providing real estate financing to low- and middle-income individuals, and a total of EGP 350m has been allocated to this sector.

The bank is expected to offer savings certificates and instruments this year in local and foreign currency and issue a number of payment cards in the future.

The bank also aims to work on good investment placement, expanding the spread of these products to increase its market share, and raising awareness of banking among a wider cross-section of Egyptian society.

What is the size of your current retail portfolio and what is your target for the new year?

The volume of our retail portfolio currently exceeds EGP 1bn and the bank is hoping to expand this figure through products that encourage funding used for production instead of consumption.

What is the bank’s position on CBE’s initiative to revitalise mortgages?

The bank was the first to announce that it would participate alongside CBE on a real estate initiative to house low- and medium-income individuals due to our belief in the social and economic importance of this initiative.

The bank signed a joint cooperation agreement with a fund to ensure and support real estate financing activities valuing EGP 350m to refinance mortgage clients at discounted prices.

Has the bank implemented the Basel II standards and are you prepared to implement Basel III?

The bank is already in compliance with Basel II requirements and has the instructions for Basel III.

Is the bank prepared to implement the US Foreign Account Tax Compliance Act (FATCA)?

In July 2014, the US tax law FATCA was implemented in accordance with instructions given by CBE and a specialised work team was created to supervise implementation in accordance with these regulations. In the middle of 2015, the first report was issued by the US Internal Revenue Service (IRS).

What about social responsibility at United Bank?

Under the slogan ‘Open the door to goodness,” United Bank launched an integrated system for organised charity work, through a department called ‘Altruism’ which brings together 32 NGOs across all governorates of Egypt.

The ‘Altruism’ project centres on a number of themes, including health, education, social development, and slums.

The bank’s interest in offering innovative programmes and solutions for social responsibility draws from our deep-seated belief in the importance of economic institutions stepping away from their role calculating numbers toward organised social responsibility.

Some of the most important annual Altruism programmes on social responsibility include the Zakat debtor programme, Adha instrument programmes, charitable investment accounts, the academic research system, medication accounts, support for incapable students, and youth welfare through the Holy Qur’an.

The bank’s administration has been able to collect close to EGP 27m for the Altruism project, and it is expected to separate this amount and become an independent institution.


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