Egyptian banking sector handles pandemic’s repercussions efficiently: CBE

Hossam Mounir
17 Min Read
The Central Bank of Egypt (CBE) has launched a new EGP 15bn initiative to finance the dual-fuel vehicle conversion plan, with a lump-sum return of 3%. In a Sunday letter to banks, the CBE said that the initiative aims to support the government’s ambitious, recently announced multi-year plan to replace car engines powered by traditional fossil fuels with dual-fuel engines that run on both petrol and natural gas.

The Egyptian banking sector has dealt efficiently with the repercussions of the coronavirus pandemic and has contributed to mitigating its negative effects on the social and economic levels, according to the Central Bank of Egypt (CBE).

In its financial stability report issued last Thursday, the CBE attributed this to the banking sector’s high solvency and abundance of liquidity in both local and foreign currencies as well as the application of a package of precautionary measures to ensure economic activities proceed smoothly. 

The CBE explained that it had taken a package of precautionary measures, including supporting customers affected by the crisis; providing stimulus packages; providing credit guarantees; maintaining sufficient liquidity in the banking system; maintaining banking operations and workflow in banks; and ensuring the continuity of payment systems in an efficient and secure manner.

It explained that these measures have contributed to the stability of the banking sector and boosted its ability to perform its role efficiently and effectively since the beginning of the crisis while maintaining high financial safety indicators. Moreover, adhering to the CBE’s instructions in regulating all banking activities has led to maintaining financial stability and achieving the targeted economic growth rates.

The measures have also supported economic sectors in various fields without the need to reduce their workforce. These sectors and individuals were able to repay loans on a regular basis after the postponement period of 6 months.

Furthermore, the measures resulted in a growth in the size of the credit and investment portfolios of banks and an abundance in liquidity. Banks were also able to self-support capital bases as a result of continuous improvement in asset management, and they could commit and benefit from the advanced systems of risk management, as well as apply the best international best practices in the banking industry.

The CBE emphasised that the financial inclusion plan continues to be applied with new segments of clients targeted to benefit from the services of the banking sector. At the same time, the CBE is encouraging demand at a macroeconomic level.

It pointed out that these measures supported banks’ provision of digital products and services and benefited from financial technology to serve customers, in line with developments in the banking industry. There is a continuous increase in the confidence of individuals and companies in the banking sector, especially micro-, small-, and medium-sized enterprises (MSMEs). 

At the same time, the CBE confirmed that the Egyptian banking sector was able to manage all risks efficiently due to the CBE’s attention to risk management systems and structure. It was also keen on urging banks to build strategies, taking into account the size of the risks in the business.

The CBE added that the banking sector enjoys high liquidity rates, which allows it to utilise them in more employment and investment opportunities and provide liquidity for all sectors, which reflects the quality of the banks’ liquidity management policies. The policies include harmonising the maturities of assets and liabilities by monitoring the integrity of the maturities and adopting maximum limits for the total current and cumulative gaps. Moreover, banks are continuously making scenarios and tests to be able to predict any changes. 

In the same context, the CBE indicated that despite the challenges the Egyptian banking sector deals with as a result of changes in the financial environment, the spread of the pandemic, and the continuous attempts to penetrate data information systems, the process of developing and strengthening the sector’s capabilities is ongoing and is being implemented efficiently.

It explained that it provides the banking sector with instructions and procedures that reduce exposure to risks that may result in losses. The CBE informs banks of all developments in the banking industry and events that could affect the sector, and it takes the measures necessary to mitigate the repercussions and maintain the sector’s strength, durability, and liquidity. 

It also continues to contribute to achieving target economic growth rates by supporting all sectors. The banking sector is expected to maintain its strength, efficiency, and ability to fund the local economy and enhance growth rates.

Furthermore, the necessary regulatory and supervisory rules and instructions for implementing the new CBE and banking sector’s law have been prepared.

There has been a special focus on spreading banking culture and educating customers on how to preserve personal data and information related to their accounts and transactions. This is taking place within the framework of enhancing financial inclusion, especially as directives are given to banks to continuously update their cybersecurity systems and secure digital banking services and products.

The CBE stressed the need to strengthen the financial positions of banks and their capital bases in implementation of the requirements of the new law of the CBE and the banking sector. 

They must strengthen their ability to face risks while continuing to apply financial inclusion and rely on electronic payment systems to attract a larger number of clients and encourage them to use the services provided by their banks, according to the CBE. 

Working on improving and strengthening governance systems, risk management, internal audit functions, and the inclusion of risks in the decision-making process continues, as banks are keen on developing and enhancing risk management in the sector. 

This happens through constant testing and business continuity plans updating, in addition to having backups, creating copies of all data and operation processes, providing alternative e-channels (such as internet banking) and ensuring that all transactions can be done remotely. 

The CBE has also revealed the results of financial stress tests, which have shown the great resilience of the banking system and its ability to handle losses due to the COVID-19 repercussions and climate-related shocks. 

These tests have been applied to the 15 largest banks in the banking sector, accounting for 84.7% of the sector’s total financial position to estimate the extent of the impact which could continue throughout 2022. 

Stress tests have also been applied on several companies and institutions within the non-banking financial sector and capital market, accounting for 60-100% of the volume of each activity. 

The results of these tests have shown a low or medium level of financial solvency risks. Capital bases of the sector could accommodate losses from presumed shocks, whether in basic or more severe scenarios. The capital adequacy ratio also continues to be higher than the minimum level set by the CBE and higher than the requirement of the Basel Committee.  

Moreover, the results of the stress tests showed the strength and durability of the financial position of non-banking financial sector companies and institutions. They also shed light on some aspects that should be taken into consideration at this stage. 

They include working on developing business continuity plans, supporting companies’ orientation towards further digital transformation, conducting constant follow up on some companies, and determining the extent of their need to increase their capital.

CBE stresses its support to agricultural activity, rural development efforts

The Central Bank of Egypt (CBE) announced its support for the Agricultural Bank of Egypt (ABE) to become a locomotive for agricultural and rural development by granting it a loan worth EGP 20bn.

The CBE also revealed a reduction of the minimum annual business volume for projects operating in the agricultural, manufacturing, dairy, fodder, fish, poultry, and livestock fields to benefit from the initiative to finance small enterprises at a return rate of 5%.

Furthermore, it approved the ABE’s decision to inject about EGP 3bn to finance small breeder projects within the national project to revive veal within the framework of the CBE’s initiative to finance small projects. Another EGP 10bn will be injected through the National Bank of Egypt (NBE) and the ABE to finance other livestock projects.

The CBE also indicated that the ABE was allowed to finance cooperative societies working in the field of agriculture, agricultural manufacturing, dairy, fodder, and poultry and livestock wealth within the framework of the Small Enterprises Initiative at a decreasing return rate of 5%.

Additionally, it announced the launch of the national initiative to develop irrigation methods, according to which an amount of EGP 55.5bn was allocated with a guarantee from the Ministry of Finance through both the NBE and the ABE. The amount was provided in the form of an interest-free loan for a period of up to 10 years. 

Finally, coordination is taking place with the ABE to convert EGP 6m of agricultural holdings into a dual-application prepaid card in accordance with the requirements for issuing the ‘Meeza’ national payment cards in cooperation with the Egyptian Banks Company and e-finance.

Financing institutions account for 70.6% of bank loans in June 2021

The Central Bank of Egypt (CBE) revealed that the total banking loan portfolio increased to nearly EGP 2.9trn in June 2021, compared to about EGP 2.2trn in June 2020.

Financing institutions accounted for 70.6% of the total loan portfolio in June 2021. The share of consumer loans reached 17.5%, while the share of micro-, small-, and medium-sized enterprises (MSMEs) reached 11.9%.

The percentage of loans provided to the private sector amounted to 57.1% in June 2021. Furthermore, the loan portfolio of banks enjoyed a high level of quality, as the ratio of non-performing loans to the total portfolio decreased from 4.2% in June 2019 to 4% in June 2020 and continued to decline to 3.5% in June 2021.

Banks continue to support institutions, retail banking, and micro-, small-, and medium-sized enterprises (MSMEs), in order to achieve the percentage the CBE imposed.

According to the CBE, the MSMEs portfolio was 25% of the net loan portfolio in December 2020; and banks are expected to adhere to this percentage until December 2022.

Credit facilities granted to 100 largest clients amount to EGP 507.6bn last June 

The Central Bank of Egypt (CBE) said that the credit facilities granted to the 100 largest borrowing clients in the public and private business sectors amounted to EGP 507.6bn in June 2021, with an annual growth rate of 19%.

The CBE explained that these credit facilities were focused on 16 economic sectors, topped by four sectors with a rate of 58%, which are construction 22%; oil, gas, and petrochemicals 16.2%; iron and steel 10.35%; and real estate development 9.5%.

Digital bank loans to be available in Egypt this year

The Central Bank of Egypt (CBE) has announced that digital lending is expected to be activated in 2022, being one of the most important services that majorly contribute to achieving financial inclusion. 

Digital lending allows clients to borrow instantaneously and electronically as soon as they make a request via the mobile wallet.

The CBE explained that the rules for the service have already been issued in April 2021. Instantaneous lending will be based on an electronic credit rating model based on the analysis of clients’ behavioural scoring and implemented in cooperation with I-Score.

This service is expected to significantly help with financial inclusion and digital transformation, resulting in including all the segments of clients that are not part of the banking sector.  

Egypt to lunch electronic check clearing system by 2H 2022

The Central Bank of Egypt (CBE) said that an electronic clearing system for checks will begin operating in the second half (2H) of 2022.

The bank added that the multi-currency clearing system that was launched in June 2021 was adopted to complement the market infrastructure in the required diversity in the dollar and euro currencies as a first phase.

This comes within the framework of the CBE’s efforts to develop the basic infrastructure of payment systems in accordance with international standards in terms of insurance, efficiency, effectiveness, reliability, and diversity of tools in order to suit the needs of the various sectors of the market.

CBE targets to issue 5 million Meeza cards during 2022

Total e-payment cards in Egypt increase to nearly 52 million in August 2021

The Central Bank of Egypt (CBE) has revealed its plan to increase the number of issued national payment cards “Meeza” to 25 million in 2022, compared to the current 20 million. The Meeza system was launched in late 2018.

The CBE revealed that the total number of electronic payment cards in Egypt increased to nearly 52 million in August 2021.

The value of monthly transactions for mobile phone wallets amounted to about EGP 20bn in June 2021, an increase of 160%. The number of mobile phone wallets also reached about 23.17 million, with an annual growth rate of 26%.

Moreover, the number of monthly wallet transactions reached 20.7 million in June 2021, an increase of 120% compared to June 2020.

In a similar context, the CBE said that 1.8 million “Takaful and Karama” cards – a social safety net – were issued in cooperation with the Ministry of Social Solidarity and Nasser Social Bank. The issuance of the remaining cards is underway.

The CBE has also cooperated with the Ministry of Social Solidarity and Nasser Bank to issue cards for people with disabilities within the Meeza system. So far, 2.3 million cards have been issued and more are underway.

Furthermore, in cooperation with the Ministry of Agriculture, the CBE also issued cards for farmers. The project targets issuing 3 million cards through the Agricultural Bank of Egypt. Total 1.5 million cards have already been issued and the rest are underway.  

Share This Article