ABE launches diagnostic study to determine financing gap needed to complete its restructuring: chairperson

Hossam Mounir
19 Min Read
Elsayed Elkosayer, the head of the Principal Bank for Development and Agricultural Credit (PBDAC)

A specialised consulting firm will start this week a diagnostic study for the Agricultural Bank of Egypt (ABE) to determine the funding gap it needs to complete its restructuring, according to the bank’s chairperson Elsayed Elkosayar.

Elkosayar said in a special interview with Daily News Egypt that the bank will sign a contract within a few days with one of the companies specialized in technological development to advise and operate the technological system of the bank

He stressed that the bank is engaged in activities of a national character and does not work only in terms of profitability, revealing that the bank pumped EGP 100m in the national project to revive beef in the market. The bank also coordinates with the ministries of finance and agriculture to get another EGP 200m, stated Elkosayar.


For starters, what is new in the performance indicators of the bank since you got in charge? 

Let me assure you at the outset, and above all, the ABE is engaged in activities of a national character and does not work for profitability benefits, and should not be seen in this regard only at all.

The bank has huge assets, but most of these are exploited with very low returns within the framework of the national role played by the bank. The bank’s main role is to support and serve the Egyptian farmer and to provide him with the lowest possible returns. Therefore, the bank is not concerned with the profit as much as the service of this country.

What is new in the bank’s asset portfolio?

We are very interested in the issue of raising the efficiency of asset management, and we are in the process of inventory, classification, registration, and re-evaluation. As I mentioned, there are assets used for national purposes, and there are assets that we try to maximise the benefit of them either by selling or renting them for funds to enable us to work on a comprehensive restructuring of the bank, which requires huge funds to be completed.

What assets are used for national purposes?

The bank owns 6 silos, 82 hangars, and 88 cement shanties that help store strategic commodities such as wheat. Although the return from these assets is limited, it has a national role. This is the success of the system of storing agricultural crops, reducing losses and raising the quality and purification of crops of impurities.

What is new about the restructuring file?

The executive management of the bank will make every effort to complete the implementation of the restructuring plan.

One of the specialised offices, which was carefully chosen this week, will start a diagnostic study of the bank in coordination with the Central Bank of Egypt (CBE) in order to identify the financing gap needed by the ABE to complete its restructuring and put it on the right track.

The bank’s restructuring plan also includes an adjustment of the bank’s organisational structure, separation of support and business sectors, and the bank’s in-house expertise to enable it to perform its role correctly.

The bank is also cooperating with the Egyptian Banking Institute (EBI) and in coordination with the CBE to train a large number of employees of the bank and qualify them to work, especially in the sector of small and medium enterprises (SMEs).

The restructuring plan also includes the development of the bank’s technological infrastructure, which may cost more than EGP 1bn. The aim is to provide the best of modern banking services and expand the electronic services system to serve its farmers and their customers, especially in the areas of salaries, payments, and remittances.

Within a few days, a contract will be signed with a company specialised in technological development to provide advice and work for the technological system of the bank. We also started cooperating with some banks to develop our payment system, such as the National Bank of Egypt (NBE) and the Commercial international Bank (CIB)

We also offer the service of receiving and disbursing foreign and internal remittances, in addition to the bank’s participation in the project to pay salaries of employees of the state electronically.

We will soon launch the smart farmer card in cooperation with several agencies and ministries, which aims at between 6 and 7 million farmers, and we will add some services to it so that we can extend our services to farmers everywhere.

Where will the bank cover all this cost for restructuring?

The bank seeks to obtain the appropriate funding, whether from the CBE or the World Bank, in addition to obtaining its dues from the Ministry of Finance.

The CBE has granted EGP 2.5bn in a 10-year fixed interest-free deposit, which is only a start until the bank’s needs are fully determined.

We are also in talks with Minister of Investment and International Cooperation Sahar Nasr to reactivate the agreement reached with the World Bank earlier to grant $500m to be used in the restructuring.

The World Bank was required to provide this support to the ABE to issue its own law and transfer its subordination to the CBE. A request has already been submitted to the CBE, indicating that this has already been achieved and coordination is underway between the CBE and the Ministry of Investment to address the World Bank.

We also turn to some of the agencies that help us train staff and provide technical support, and we hope that this support will become material support after a while, when they trust in the process of restructuring and management capacity.

Negotiations are underway with the Dutch Rabobank to help us with some aspects of the restructuring. Several mutual visits have taken place, and we have a definite desire to help the bank.

What about the bank’s receivables with the Ministry of Finance?

First, everyone should know that these debts are the result of the state’s support for the Egyptian farmer, whether through previous initiatives to eliminate debts for farmers, or support the result of the difference between the low interest obtained by the farmer and the real interest in the market.

The amount of debt owed by the Ministry of Finance to the bank is currently about EGP 4bn, and there is full coordination with the Ministry of Finance and under the auspices of the CBE and the Prime Minister to reach solutions to this matter in the near future.

A recent negotiation session was held at the CBE under the patronage of Lobna Helal, the deputy governor of the CBE, attended by the deputy minister of finance during which the matter was reviewed.

One of the solutions proposed in this regard is to convert this debt into investments in treasury bills and bonds offered by the Ministry of Finance, if not obtained in cash.

What is new in the file of bad debts at the bank?

We are dealing with the file of bad debts seriously, and the branches have been granted more mandates in order to address this file quickly.

We have managed to reduce the size of the troubled debt portfolio from EGP 4bn, equivalent to 20% of the bank’s loan portfolio, to EGP 3.4bn currently, equivalent to less than 15% of the loan portfolio and aiming to reach 10% by 2018.

In the last year alone, the bank has managed to handle more than 15,000 defaults with a total of EGP 850m.

Debtors of less than EGP 10,000 represent about 60% of the bank’s total default customers.

And the bank distinguishes well between the client faltering for reasons beyond his control, where we give him all the support, and the customer is able to pay off their loans and does not want to. Such clients, we are keen to get our money from by all means.

I would like to emphasise that traders should be keen on the bank’s money, because it is money deposited, and therefore the sense of social responsibility by the customers of the bank writes to continue and carry out its function efficiently.

What are the latest indicators of the bank’s performance in terms of deposits and loans?

The volume of deposits with the bank reached more than EGP 43bn by the end of June 2017, mostly the savings of farmers.

The loan portfolio reached about EGP 22bn, of which about 70% was for microfinance and microenterprises, which exceeded the percentage set by the CBE in its initiative to finance these projects, amounting to 20% of the total loan portfolio.

And 80% of the loan portfolio of the bank is directed to plant production, agricultural processing, livestock, irrigation, agricultural drainage, and agricultural mechanisation, and a large proportion of these are pumped through subsidized programs, either from the state or other programmes obtained by the bank. It goes out of its role in the service of the Egyptian farmer.

Negotiations are underway with one of the development banks in Belarus to obtain credit facilities from, to be re-lent to companies engaged in the import of agricultural products and equipment related to the development of agricultural production from Belarus.

What are the financing programmes adopted by the bank in its new form after transferring its subordination to the CBE and issuing its own law and forming a new board of directors under your leadership?

The bank adopts a number of developmental financing programs, especially in the field of livestock development, in order to reduce the gap that Egypt suffers from meat as well as contribute to reducing the costs of livestock breeding.

The bank has two major projects, in addition to the bank’s other financing programmes.

The first project is the National Project for the Revival of Al-Batelu, launched in 2012 and was implemented only about a month ago with the efforts of the bank in cooperation with the Minister of Agriculture, who heads the project.

This project is allocated about EGP 300m from the state as the first amount can increase as needed. These funds are obtained by the bank and returned to the owners of projects at a rate of 5% only, as part of state support for the Egyptian farmer.

The bank has already completed the first instalment of EGP 100m last week. The Ministry of Agriculture and Finance is coordinating to pay the second and third instalments of the amount allocated for this project. I expect to complete the disbursement of EGP 300m in a very short time.

Daily News Egypt monitored the existence of some complaints from citizens in obtaining such loans. What is your response to those complaints?

On the contrary, the terms of obtaining loans under this project are very easy. It is aimed at small farmers and young people, where young people and young breeders get loans up to EGP 400,000. Companies and associations working in this activity receive loans of up to EGP 2m.

The main condition for accepting the project is that the citizen has the right place to accommodate the number of livestock he needs.

The inspection is carried out through the officials of the bank and veterinary medicine and through the animal production officials of the directorate of agriculture or agricultural unit located in the area to be evaluated by the project to verify the suitability of the place for the project.

This means that there is no relationship between the possession of the citizen agricultural possession and access to funding under this project as is reflected in the market?

It is not at all related to whether the citizen owns agricultural holdings or not and obtains loans under this project, and what is said otherwise is baseless.

The bank seeks guarantees for these loans through other alternatives away from agricultural tenure, either through a credit risk guarantee company or a cooperative credit association.

I emphasise that what matters to us here is a great deal of seriousness, because such projects carry real support from the state. We aim and take great care to ensure that this support reaches its true beneficiaries and that the funding that the citizen receives is directed at real projects.

Does the owner get cash or in any way?

If the citizen buys cattle from an agent or from a farm, the bank will issue checks for the value of those heads directly to these entities. If he buys from the market, he will be granted the loan in instalments equal to the purchase of 10 heads in each batch, followed by the remaining. The owner is also given the price of feed at a later stage.

There are controls for the process of disbursement of the loan to be sure that the owner will spend it in the purpose obtained for it is not disbursed in other purposes, as confirmed earlier in the framework of the bank’s keenness to reach support for those who desired it.

And here I appeal to you through the owners of the projects to be keen on the money they receive and be keen to return it to the bank again to recycle and grant them to other projects and so that the bank can perform its role in the service of the the Egyptian farmer.

There are two main projects that the bank is currently undertaking. The first is the national project to revive the plant. What is the second project?

The second project is the livestock development project.

There are some people who have animal production farms and have empty places in them. They do not, however, have the financial capacity to fill these spaces.

As long as these projects are licensed, have a good business history, and have no notes in their work, the bank finances these projects either for breeding, meat production, or dairy production, as part of the CBE’s initiative to finance small projects with a return of only 5%.

I would like to point out that the CBE has taken the lead in this matter and decided in July 2017 to reduce the minimum size of the work of companies and small enterprises working in the field of agriculture and agro-processing, dairy, fodder, fish, and poultry, whether in fattening or breeding or in the production of milk to EGP 250,000 instead of EGP 1m to less than EGP 50m.

This decision is in support of the state’s keenness to develop the agricultural sector as a cornerstone of the Egyptian economy as well as the provision of milk and meat.

We have already started this project and so far we have about 25 applications that we are studying and will issue its approvals soon.

Are there other development financing programmes at the bank?

Yes, a few days ago, we launched the “Bint Misr” project to finance women, especially in the governorates of Delta and Upper Egypt.

We aim to help women entrepreneurs with very favourable terms and conditions, with a maximum funding of EGP 10,000.

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