The Central Bank of Egypt (CBE) issued a number of controls for benefitting from the new initiative it launched at the end of January to support the tourism sector.
Through the initiative, the CBE allocated EGP 5bn to replace and renovate floating hotels and tourist transports with a 10% return rate and a maximum of 10 years for financing.
According to the instructions banks received on Wednesday, the CBE stressed the importance of banks carrying out studies of each case that wishes to benefit from the initiative, followed by making the most suitable decision.
CBE stressed that the aim of the financing should be to carry out the renovation and replacement processes necessary for floating hotels and tourist transport fleets. The initiative applies to bank clients who regularly repaid their debts up until 31 December 2016.
“The price of the return on loans that banks will provide within the initiative is a decreasing 10%, where banks will be compensated for the price difference, with a 10-year-maximum funding period. Clients will pay the instalments of these loans quarterly with a grace period of two years, which includes a withdrawal period of funding of no more than one year. Banks capitalise returns during the grace period,” CBE instructions said.
The CBE pointed out that banks will finance 75% of the replacement and renovation costs, where clients will bear the remaining amount through several alternatives. The most important of these is that clients pay their share as a down payment before starting renovation. Another option is that clients obtain a pledge by the mother company to cover the value of the down payment if they (the client) have no liquidity. Alternatively, clients may opt to pay the remaining amount by a percentage that suits the bank’s share based on cash flow studies provided by clients.
To benefit the most from the initiative, the CBE has the condition that 75% of the products used in the process of renovation must be local. Banks should receive feasibility studies prepared by companies and resort to an advisory agency to ensure the project’s feasibility, follow up implementation works, and approve achievements.
The CBE also stressed the importance of the replacement and renovation process to match the standards set by the tourism ministry.
The CBE was keen on launching this initiative as part of its continuous attention to the tourism sector and a continuation of the initiatives it began to launch since 2013. These initiatives are also a result of the discussions and meetings recently held with investors in the sector to look into their suggestions.