Only 14 banks among 39 operating in Egypt participated in mortgage-financing initiative launched by CBE to finance low- to middle-income housing

Hossam Mounir
9 Min Read

Among 39 Egyptian, Arab, and foreign banks operating in the Egyptian market, only 14 participated in the mortgage finance initiative launched by the Central Bank of Egypt (CBE) to finance low- to middle-income housing, according to May Abdel Hamid, head of the Mortgage Finance Fund (MFF).

Abdel Hamid said that these banks provided EGP 5bn to finance the purchase of 62,000 housing units in the framework of the initiative. She called for the banks to exert greater effort in order to achieve better results in the coming period, simultaneously calling for other banks to adjust their status to join the initiative.

The CBE launched the initiative in February 2014, granting EGP 10bn for banks to finance low- to middle-income housing units on a 20 year maturity at an interest rate of 5%, reduced for families with incomes below EGP 1,400 per month, and 8% for middle-income families.

The CBE amended the initiative to allow earners of not more than EGP 15,000 per person or EGP 20,000 for families to benefit from the initiative at an interest rate of 10.5%, under the condition that the value of the unit does not exceed EGP 950,000.

The Egyptian Banking Institute of the CBE held a conference a few days ago about the role of the banking sector in supporting the mortgage-financing initiative.

Mona El Baradei, executive manager of the institute; Ola El-Khawaga, head of the research department in the institute; a number of bank leaders and officials of the mortgage-finance sector in the institute; along with officials from finance and real-estate development companies participated in this conference.

During the conference, bankers explained the efforts made for the implementation of the mortgage-finance initiative launched by the CBE and the results that have been reached so far.

Karim Sous, head of the retail credit risk sector at the National Bank of Egypt (NBE), said that the mortgage portfolio of the bank amounted to EGP 1.5bn and financed 13,500 units.

Sous explained that the bank has established two units of mortgage finance in 6th of October City and 10th of Ramadan City, in order to meet the demand for this type of financing as they are new urban cities that are in great demand for the purchase of residential units.

He confirmed that the faltering mortgage rates are very low and do not exceed more than 0.25%. He called for simplifying the legal procedures to achieve the target of the CBE’s initiative and to fund a larger number of customers.

According to Hend Fahmy, general manager of mortgage fund department at Banque Misr, said that the size of the mortgage portfolio of the bank amounted to about EGP 1bn by the end of 2016 and financed 12,000 customers.Fahmy explained that the bank was offering mortgage products through its branches during 2015 and established a specialised unit for mortgage finance in early 2016. She confirmed that the bank aims to complete the study of 3,000 requests for low- to middle-income housing per month during the coming period.

She added that the most important challenges facing banks in granting funding for the units of the initiative are the legal procedures. She said that they must be simplified to achieve the target of the initiative to finance a larger number of customers.

She noted that the last period has seen an improvement in the use of modern technological methods in dealing with customers.

According to Ahmed Megahed, assistant managing director of regions and branches affairs of the Housing and Development Bank (HDB), the size of the bank’s participation in the initiative amounts to about EGP 1.105bn and were directed to finance the purchase of 27,000 units for low- to middle-income housing.

Megahed said that the bank offers more than a programme for mortgage finance with interest rates of 5%, 7%, 8%, and 10.5%; pointing out that the bank devoted a special unit to this type of financing to accelerate funding.

On his part, Mohamed Samir, head of the mortgage sector at the United Bank, stated that the number of mortgage customers doubled after restructuring and developing management. He pointed out that the mortgage portfolio of the bank exceeded EGP 100m. The bank aims to increase its mortgage portfolio to EGP 300m by the end of this year.

He said that the bank is currently studying 700 requests for mortgage finance for low-income citizens, worth up to EGP 60m, pointing out that these funds are spread over three governorates, including 400 customers in Daqahleya, 200 customers in Sharqeya, and 100 customers in Sohag.

The bank intends to complete studying the requests to offer the necessary funds during the first half of this year.

The United Bank negotiated with the Housing Development Bank to participate in financing the purchase of Dar Misr units for average housing, and seeks to inject loans worth EGP 100m, in order to fund units in this project. It is expected that funding requests will start within weeks, according to Samir.

He explained that the bank’s plan for this year focuses on the developers of projects, to which they apply the terms of the initiative, which include middle-class and above-middle-class housing. He added the bank signed a protocol of cooperation with the mortgage companies to finance a number of projects.

He added that the bank focuses on the finances of individuals and is about to launch a programme of ownership after renting.

The bank has taken measures to improve communication with the target customers of the mortgage initiative, including the establishment of a special call centre for the mortgage sector. It also activated a mechanism to communicate with the customers through social networking, such as via Facebook, to respond to customer inquiries and receive some papers, such as ID cards copies, according to Samir.

He added that the recent period witnessed the approval of the activation of the “Tangible Insurance Record Law,” which serves as a form of a “criminal record” of the property, which will develop the mortgage finance system.

For his part, Hussein Kamal, director of the mortgage finance management at Faisal Islamic Bank of Egypt, revealed that the volume of mortgage finance within the CBE’s initiative amounted to about EGP 5m of the total mortgage portfolio of the bank worth EGP 500m, pointing out that these loans are allocated to about 15 customers of medium income.

He added that the bank is preparing to issue new approvals to finance low-income citizens throughout this week, explaining that this will grant funding for low-income customers through murabaha and trading contracts, in agreement with the Social Fund for Development (SFD).

He pointed out that the bank was facing a problem in the provision of units for low-income citizens during the last period, due to its dependence on the Islamic provisions in banking transactions.

According to Ayman Mohamed, executive director of the retail sector and mortgage finance at the Industrial Development and Workers Bank, the size of mortgages pumped by the bank within the CBE’s initiative amounted to about EGP 150m, stressing that the bank aims to provide EGP 100m for this activity and to increase the portfolio size to EGP 250m by late December.

He added that the current portfolio was spread over 1,250 customers and that it is targeted to double financing approvals in collaboration with the SFD during 2017.

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