Faisal Islamic Bank of Egypt to focus on MSMEs in new lending policy

Hossam Mounir
3 Min Read

Faisal Islamic Bank of Egypt finalised a plan to increase the percentage of loans granted to micro, small and medium enterprises (MSMEs) to 20% of the bank’s total loans portfolio by the end of 2019, according to deputy general manager of local investment, Sabri El-Bendary.

Faisal Islamic Bank of Egypt informed the Banking Supervision Department at the Central Bank of Egypt (CBE) at the end of last month, in accordance with the CBE’s instructions issued in January 2016, according to El-Bendary.

In January, the CBE launched an initiative to finance SMEs, and obliged banks to provide a minimum of 20% of their total loans portfolio to this sector within four years. Moreover, the CBE mandated that banks must submit a comprehensive outline indicating how they will implement the CBE’s recommendation. The deadline for banks to inform the CBE’s Banking Supervision Department of their implementation plan was the end of February 2016.

Faisal Islamic Bank of Egypt provided approximately EGP 1bn to MSMEs at the close of December 2015, approximately 13% of its total EGP 7bn loan portfolio, according to El-Bendary.

The CBE has provided allowances for banks to correct their plans from the time of submission until next.

Following the CBE’s proscription, Faisal Islamic Bank of Egypt created a MSME department, began training a staff to specifically handle MSME business, and has launched a risk management department.

El-Bendary expects Faisal Bank to begin granting loans to MSMEs next July, in accordance with the new CBE initiative .

Faisal Islamic Bank of Egypt recently withdrew the EGP 1m from the CBE to finance the purchase of housing for the first five middle and low-income homebuyers who had been approved to be financed. This came as part of the real estate financing initiative launched by the CBE in February 2014.

Faisal Islamic Bank recently obtained approval from the Egyptian Financial Supervisory Authority to use Murabaha (non-interest bearing loans) contracts to finance real estate development, allowing Islamic banks to finance this sector in accordance with Islamic law.

Faisal Bank allocated EGP 200m for this purpose, an amount it may increase. The bank’s funding comes under the parameters of contract signed with the Mortgage Finance Fund.

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