HDB posts SME loan portfolio of EGP 1bn: CEO

Hossam Mounir
10 Min Read
The Housing and Development Bank (HDB) provided EGP 1bn to small- and medium-sized enterprises (SME) since the bank began servicing this sector, according to the bank’s financial statement published at the end of December 2015.

The Housing and Development Bank (HDB) provided EGP 1bn to small- and medium-sized enterprises (SME) since the bank began servicing this sector, according to the bank’s financial statement published at the end of December 2015.

The funds provided to SMEs account for 12% of the bank’s loan portfolio, according to the bank’s CEO, Fathi Sebaey.

In an interview with Daily News Egypt, Sebaey explained that HDB have finished a comprehensive plan to restructure the financial mechanisms regulating SMEs at the bank and submitted that draft to the Central Bank of Egypt (CBE) at the end of February 2016.

The plan includes restructuring the SME sector at the banks, implementing special financing programmes, preparing qualified teams to meet with business owners, training employees and project owners, and geographic expansion.

Sebaey said that HDB will invest EGP 300m to finance the sector before the end of the year.

What is the lending volume provided to small- and medium-sized enterprises?

The bank provides EGP 1bn to SMEs through 31 December, 2016.

What is the proportion of loans provided to SME compared to the total loans provided by the bank?

Up to 12%.

What are your plans for the SME financing sector in 2016?

The bank aims to increase the volume of funds put towards financing SMEs by EGP 300m before the end of the year.

CBE launched an initiative to finance SMEs and microenterprises in January 2016. It required banks to offer no less than 20% of their total loan portfolios to these projects within four years. How does the bank plan to implement this directive?

The bank immediately altered its strategy after this initiative was announced, so that it could increase SMEs loans to 20% of the total loans portfolios within four years.

The bank has prepared a comprehensive plan to achieve that goal. We handed over a draft of the plan to CBE’s Banks Supervision Department at the end of February 2016, after being approved by the bank’s Board of Directors.

This plan includes opening new marketing channels and the introduction of 10 new branches before the end of 2016.

The bank has also established special financing programmes fashioned for SMEs to facilitate the procedures to obtain funds. The changes place an emphasis on new terms and conditions to fit the contours of business conducted by SMEs.

We also formed teams specialised to provide financing to SMEs at the bank’s hotspots.

Moreover, about 100 of the bank’s employees are attending the first phase of a training programme conducted in coordination with the Egyptian Banking Institute that focuses on financial services provided to SMEs. We have also been organising trainings and workshops for the projects’ owners in collaboration with the Federation of Egyptian Banks and through the Egyptian Banking Institute.

I also want to point out that the bank signed several protocols with different bodies to offer its services to as many clients as possible. It took part in the Mashrooak initiative that offers funding to small enterprises in various provinces across Egypt in collaboration with the Ministry of Local Development though the one-stop-shop system.

The CBE’s initiative and new definition of SMEs perfectly fits with the bank’s desire to support the country’s economy by financing a broad base of investors.

This initiative is also in line with the bank’s intention to finance SMEs, especially as the CBE exempts banks that finance these projects from the stipulated ratio of reserve requirements by the same volume of loans they give these projects.

The Housing and Development Bank (HDB)  FATHI EL SABAAI.
The Housing and Development Bank (HDB) CEO, Fathi Sebaey (DNE Photo)

Does the bank focus on specific SME sectors?

The bank targets companies and SMEs producing intermediate industry components that replace imports, as well as labour-intensive activities and projects orientated toward export markets.

To what extent does the new CBE SME definition match with that of the bank?

The bank defines SMEs as companies running business with revenues less than EGP 20m. All other companies that do business valued at a greater volume must follow the foundations and firms department. Therefore, the CBE’s new definition will have some effect on the structure of the bank’s credit portfolio.

Does the bank have a specialised department to finance and serve these projects?

The bank has established an independent organisational department to offer financing and services to the SME sector. The department has reformulated its operations and put a new clear vision that includes the procedures, terms, and conditions proposed to stimulate the sector’s activity.

Does the bank finance microenterprises?

The bank finances microenterprises indirectly, through the provision of facilities for companies and associations specialised in the financing of these projects.

Serving microenterprises requires widespread distribution in villages, which may not be available to many banks.

What is your assessment of the CBE’s initiative to finance micro enterprises and SMEs four months after of its launch? Do you believe it will be successful?

A lack of a standardised definition of these projects was a problem in the past, as each bank defined them in a different way and through different measures.

The CBE’s definition has superseded all of these different understandings and unified them under a single one.

The CBE’s initiative is also one of the most important means to fold the informal sector, which is not linked to the state and the banking system, into the formal sector.

This initiative will drive many SMEs owners to adjust their situation to benefit from the special interest rates.

I think the main component for the initiative to succeed is for all relevant bodies and ministries to agree on a single goal.

The bank’s General Assembly approved the financial statements for the fiscal year that ended in 31 December 2015 at a meeting held at the end of March 2016. What were the most prominent performance indicators of the bank?

Last year carried many political and economic challenges. However, the bank’s administration was aware of them and was able to reduce their negative impact, which affected the bank’s performance and led to record results.

The growth rate of the bank ‘s total assets at the end of 2015 stood at 19.1% compared to 2014.

The return on equity rose to 24.8% at the end of 2015, compared to 15.8% in 2014. Return on assets reached 1.9% compared to 1.4%.

The capital adequacy ratio registered 16.5% at the end of 2015, an increase of 6.5% for the benchmark set by the CBE. This reflects the strength of the capital base of the structure of the bank and its ability to expand the asset base in the future.

What about the volume of both loans and deposits portfolios?

The total loan portfolio reached EGP 8.2bn at the end of 2015, an increase of 15.5% from 2014, despite the economic slowdown. The deposit portfolio increased by EGP 2.1bn in 2015, amounting to EGP 11.7bn, a growth rate of 21.8% compared to 2014. The increase was led by the increased volume of deposits in local currency, especially in saving holdings.

What about the size of the profits recorded during the past year?

The bank’s net profits, before taxes, reached EGP 674m, which is 53.8% more compared to 2014. Profit after tax deductions registered EGP 491.2m, compared to EGP 306.2m in 2014, an increase of 60.4%.

What is the bank’s future work plan?

The Board of Directors prepared an ambitious strategy for the coming years, which aims to achieve sustainable development in all financial indicators.

What are the most prominent features of that strategy?

The bank’s plan relies on the development of its own technological system and the improvement of the performance of employees to adapt to this new system.

The strategy also includes providing excellent services to customers and attracting new segments of the population, as well as increasing the bank’s share in financing SMEs and mortgages.

The strategy will also focus on commitment to risk management and the continuous evaluation of credit portfolio.

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