Sherif Lokman, Sub Governor of the Central Bank of Egypt (CBE) for Financial Inclusion, said that the medium, small, and micro enterprises (MSMEs) sector receives much attention from the state and the CBE due to its great importance in promoting economic growth, creating job opportunities, and achieving sustainable development.
He added in his speech at the “Future of Small and Medium Enterprises 2030 Vision Conference” that MSMEs account for 98% of the private sector’s activity in Egypt and contribute about 43% of the country’s GDP.
Lokman also noted that there are 3.4m micro-sized businesses, 2,200 medium-sized enterprises, and 217,000 small-sized businesses, stressing the importance of supporting this sector to achieve several goals in accordance with Egypt’s 2030 strategy, which includes creating job opportunities, increasing exports, import substitution, mechanisation, and digital transformation.
He also revealed that the volume of funds obtained by micro-enterprises amounted to about EGP 57bn by the end of 2021, benefiting 4.2 million enterprises, which contributed to creating thousands of job opportunities and contributing to economic growth.
Furthermore, he pointed out that the funds granted directly by the banking sector amounted to about EGP 32.5bn, while the volume of funding from the non-banking sector — which includes associations and finance companies — amounted to EGP 24.4bn.
Additionally, Lokman stressed that the CBE aims to provide automated systems to facilitate access to financing by setting policies, facilitating work procedures, raising the institutional capacities of employees, and applying governance requirements.
He also emphasised the role of MSMEs in achieving the country’s sustainable development goals, most notably the eradication of poverty and the provision of job opportunities for the neediest unanimous groups, along with gender equality to improve the status of women in society by providing them an opportunity to own projects.
Lokman pointed out that MSMEs faced many challenges before 2016, including the lack of a unified definition between the various state institutions, the absence of specialised sectors in some banks, the lack of an obligation for banks to finance these projects, as well as the high cost of financing this type of projects.
He explained that the CBE has taken many measures and steps to support this sector within the framework of the financial inclusion strategy, which included several axes, including facilitating access to finance; creating a supportive environment; supporting entrepreneurship, financing education, and protecting customer rights; diversifying financial products and services along with financial services and electronic payments; and increasing interest in the agricultural sector within the framework of the Egyptian state’s strategy.
Lokman added that during the period from 2015 to 2021, a unified definition of the sector was issued and became the national definition of the state, and specialised sectors were established to finance this sector with banks, and a mandatory rate was set on banks at 20% of their credit portfolios directed to this sector, which was increased to 25% in 2021.
He also pointed out that after the outbreak of the coronavirus pandemic, the CBE did not hesitate to issue more initiatives and measures to support the sector, including postponing all credit maturities for a period of 6 months and restructuring debts in a manner that provides project owners flexible payment plans.
The measures also included continuing to fund the initiative for MSMEs at a rate of return of 5% and the amendment of the rate of return of the industrial and agricultural private sector and the contracting sector for medium and large companies to become 8%, calculated on a decreasing basis instead of 10%.
He added that the CBE facilitated financing procedures, as it allowed the financing of micro and small projects with a maximum sales volume of less than EGP 20m without obtaining approved financial statements.