Egypt’s capital market is key funding source for economic growth, SMEs stimulation: Madbouly

Alyaa Stohy
5 Min Read

Egypt’s Prime Minister Mostafa Madbouly has said that the country’s capital market is an important source of funding for economic growth, and the stimulation of the small- and medium-sized enterprise (SME) sector.

The minister’s comments came as he opened the Egyptian Exchange’s (EGX) session, on Wednesday, along with: five ministers; Mohamed Abdel Wahab, CEO of the General Authority for Investment and Free Zones (GAFI); and Mohamed Farid, the EGX Chairperson.

The comments mark the occasion of the announcement of a comprehensive restructuring strategy for the SME capital market and launching the “Tamayuz” index to measure the performance and movement of the market.

Madbouly said that SMEs are a top priority for the Egyptian state, as the sector plays a pivotal role in developing and advancing production in various fields. 

Moreover, the national strategy for developing SMEs aims to facilitate increased access for this segment to all forms of financing. 

The Prime Minister also said that the role of the capital market is an important source of financing for the growth and launch of this vital labour-intensive sector. 

In the same regard, stock exchanges not only help companies access financing, but also improve their capabilities in terms of governance, disclosure, and transparency.

This, in turn, qualifies them to attract foreign and local investments, and provide investment opportunities for all investors.

Madbouly said that providing a supportive work environment and facilitating access to all forms of financing is a basis for enhancing the economic and development role of SMEs. 

This contributes to increasing levels of economic diversification, integrating production chains of goods and services, and improving the competitiveness of the Egyptian economy.

Meanwhile, Farid said that the stages and components of the reform plan include developing the sponsors system, with the number of sponsors reduced from 33 to eight only after the assessment. There are currently 13 sponsors. 

Another step for reform includes meeting with licensed research companies which sponsors will contract with to prepare the research coverage. It also means amending the rules governing the work of the sponsors, by activating the role of investor relations.

It also means defining the components and periodicity of communication with investors.

Farid said that a second pathway for development includes developing the registration system for SMEs. A new department at the EGX, was created to promote registration with the aim of communicating with promising companies, and introducing them to the benefits of registration. 

This resulted in 10 companies that expressed their desire to register, and an agreement was reached with the European Bank for Reconstruction and Development (EBRD) to cover the costs of sponsorship by up to 75%. 

In the case of companies needing additional financing, the EGX’s Board of Directors approved supporting companies with additional amounts. New companies submit a presentation before the Registration Committee to present their growth plans and financing needs. A meeting is held with the registered companies to inform them of the requirements of registration and contracting with sponsors.

He added that the third pathway involves working to improve vision and strengthen communication channels, as companies in the SMEs market were classified and distributed according to two lists. 

The first, the Tamayuz list, includes companies with strong financial and operational performance, which comply with disclosure and governance standards. The second, the Nile list, includes companies that are not listed on Tamayuz, but which are working to develop their financial and operational performance to be included on the Tamayoz list. The goal is to shed more light on companies with high growth rates.

Farid added that the fourth and final pathway of the executive plan included developing the trading platform. He pointed out that consolidated accounts were made available to SMEs, which positively affected the average of their trading values.

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