Consumer finance companies differ on CBE-offered loan payment delay

Yara El-ganiny
5 Min Read

Many consumer finance companies have complied with the Central Bank of Egypt’s (CBE) decision to postpone credit entitlements, including consumer loans to institutions and individuals, for six months, while others believe they’re not obligated to follow the initiative. The postponement will occur with no delay charges applied, as part of precautionary measures against the ongoing coronavirus (Covid-19) pandemic.

The finance companies launched various initiatives to reduce the negative repercussions caused by the virus, which has left many workers in dire financial straits. Economies worldwide have ground to a halt which has seen an ensuing reduction in revenues, with jobs either lost or threatened.

Drive, one of Egypt’s leading factoring companies and subsidiary of GB Auto, has decided to postpone monthly payments on its consumer loans for six months, provided that instalments payment will resume from September. The rate of interest applied to the loans will also be calculated according to the pricing mechanism at the time of contracting. Additional charges will be added to the delayed instalments, unless the customer wishes to keep paying regularly to avoid further costs.

Ahmed Osama, Drive’s Managing Director, said the instalment delay charges will be calculated as per the CBE instructions and the interest rates at the time of contracting. He added that banks and financing companies are in the process of determining the costs to be added to postponed instalments.

Osama said that Drive seeks to determine the actual cost for each customer based on the interest rates during the contracting time. Many consumers are keen to pay monthly instalments on time, where the CBE decision aims to reduce the burden on those who suffer from strained financial conditions due to the disruption of work.

Osama said the company has stopped collecting the premiums through direct withdrawal from clients’ accounts according to the decisions of the Financial Regulatory Authority (FRA).

He also said that the magnitude of the coronavirus’ impact will differ from one company to another, depending on each company’s ability and financial solvency. GB Drive created EGP 425m worth securitised bonds in November, Osama said, through the Commercial International Bank and the Arab African International Bank.

Similarly, Elmobasher for auto loans, affiliated to Abdul Latif Jameel Group, will postpone car loan payments, including for Swvl drivers, for six months.

The company explained it will calculate interest rates in the delay period as per the CBE’s decision, and would also accept payments from customers who do not want to benefit from the postponement.

Moreover, valU for Instalment Sale Services (valU) announced it would postpone instalment payments for Uber drivers participating in valU’s ride-hailing car financing joint programme with the Saudi Fund for Development (SFD), for three months.

“valU” and Uber had signed a partnership agreement allowing Uber drivers access to car loans at a 5% interest rate to facilitate vehicle purchases.

Acting CEO of vaIU Mohamed El Fekky said the company will not collect additional interest from its Uber customers, as funding is through the SFD initiative and the Ministry of Investment. El Fekky added that interest rates are included originally in the monthly instalments.

He noted that the company has not been directly addressed by the CBE’s decision but has, nevertheless, made the decision in view of the current situation.

El Fekky said the company collects its dues from e-payment channels, including Fawry, Masary, Aman, Sadad, Bee, Damen, and valU app using debit or credit cards. He ruled out the possibility of offering securitised bonds in the current phase, given that the company was only launched in November 2018.

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