Egyptian government, banking sector take strong action to support MSMEs

Hossam Mounir
8 Min Read

In the past few days, Egyptian government and banking sector have been very active in support of the micro, small, and medium enterprises (MSMEs).

The Central Bank of Egypt (CBE) recently decided to increase the percentage of financing to these projects to 25% of the total loan portfolio of banks.

As part of its keenness to support the country’s MSMEs, the National Bank of Egypt (NBE) and the European Investment Bank (EIB) signed a new financing contract. 

It is aimed at supporting the needs of these projects, to activate and support this vital sector, especially in light of the economic consequences of the novel coronavirus (COVID-19) pandemic.

NBE Chairperson Hisham Okasha said that this financing will serve the MSMEs sector, which is an important and vital economic sector in Egypt. This reflects the state’s great attention to the sector as a top priority, as it provides many job opportunities and supports the state’s development plans and growth rates.

Yahya Aboul Fotouh, Vice-Chairperson of NBE, said that the financing contract will be re-lent to small- and medium-sized enterprises (SMEs) operating in the industrial, trade, and agricultural sectors. This aims to help them improve their use of energy, water, and land resources. 

Egyptian government, banking sector take strong action to support MSMEs

In addition, this would support investments in terms of using high-performance technology with quality and efficiency. It would also enable companies to identify exemplary green technology approaches available in Egypt through the Green Economy Finance programme.

For his part, Tarek Fayed, Chairperson and CEO of Banque du Caire, said that the bank aims to take the financing of MSMEs to 25% of the bank’s total credit portfolio within two years.

He pointed out that this financing currently accounts for nearly 20% of the portfolio, and is characterised by diversity.

Fayed said that the bank has contributed to providing about 1.3 million job opportunities over 19 years, as well as a sustainable production project that serves various segments, especially youth and female breadwinners.

He added that micro-loans were granted to 500,000 customers during the past three years. Moreover, the bank pays great attention to supporting newly established companies and very small companies by providing non-financial facilities and services. These are aimed at achieving financial inclusion and simplifying credit granting procedures.

Fayed’s remarks came during the signing of a contract for the “Tamkeen Microfinance Project”. The contract will take place between Banque du Caire and the Mico, Small, and Medium Enterprises Development Authority (MSMEDA), at a value of EGP 500m.

Hazem Hegazy, Vice-Chairperson of Banque du Caire, said that the bank is working to launch innovative technological banking solutions and services for micro-enterprise customers. 

These solutions will save time and effort through the mechanisation of microfinance. In addition, the bank will be launching a service to accept electronic payments on mobile phone wallets through QR codes, with the option to collect instalments through a mobile phone wallet.

For its part, the Export Development Bank of Egypt (EBE) aims to take its MSMEs financing portfolio to 14% by the end of December 2021, compared to 11% at the end of June 2020.

In a statement to the Egyptian Stock Exchange (EGX) at the end of last week, the bank stressed the importance of the CBE’s initiatives to finance SMEs, especially the 5% initiative. 

Hegazy said that the bank is keen to benefit from the CBE’s initiatives, while giving priority to expanding the credit portfolio of exporting customers. This covers manufacturers and customers who provide products for the purpose of import substitution.

He added that the bank is also working to achieve the most geographical spread possible in various governorates. It also seeks to provide financing products that suit the nature of the activities of SME clients. 

Furthermore, the bank targets financial associations and institutions that operate in the field of lending to micro-enterprises.

Last week, Prime Minister Mostafa Madbouly witnessed the signing of a Memorandum of Understanding (MoU) between the Ministries of Local Development and Youth and Sports.

The MoU aims to support and develop national initiatives related to MSMEs, with the aim of providing direct and indirect job opportunities, especially for young people. 

This is part of the state’s directions towards raising employment levels as a strategic goal within the government’s work programme and a major aspect of Egypt’s 2030 vision for sustainable development. 

The state plans to do this by providing decent and productive job opportunities that contribute to reducing unemployment rates, doubling productivity rates, and improving citizens’ lives. 

It also aims to integrate the informal sector into the economy. This will reduce informal transactions and can happen as the result of developing human workforce, focusing on MSMEs, and encouraging self-employment and entrepreneurship.

The MoU aims to establish a national integrated pioneering system to support and develop MSMEs. It will also promote the culture of entrepreneurship and support the skills and capabilities of young people to become owners of successful projects. 

This is expected to happen by unifying and coordinating the efforts of development partners with the aim of incubating these projects and providing an integrated package of technical support. 

The support covers the fields of training, technology, and marketing for all their phases, with the funding to match the volume and needs of each project.

For its part, the EGX’s Index Committee has adopted the ‘Tamayoz’ index methodology. It includes a sample of companies whose securities are listed on the SMEs market, provided that the new index is launched within days.

EGX Chairperson Mohamed Farid said that this is a major step taken within the comprehensive restructuring process for the SMEs market.

He added that within a few days, an executive decision will be issued to compel the companies whose securities are listed on the SMEs market list to contract with an approved sponsor registered with EGX to start the restructuring plan. 

This plan includes obligating the sponsor to assist companies listed in the SMEs market in developing and building the capabilities of investor relations departments. 

It will help create more professional communication with shareholders and investment institutions through conferences. These will be organised to announce and analyse financial statements on a quarterly basis. 

Moreover, sponsors will also be obliged to provide research coverage through research coverage companies operating in the market. This contributes to attracting more institutional investments to this market and promoting liquidity and trading.

Farid explained that the completion of the Index is a step within the comprehensive restructuring plan for the SMEs market, which the EGX launched two years ago.

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