The Central Bank of Egypt (CBE) has issued regulations for an initiative to support production sectors, specifically the industrial and agricultural sectors, which were approved by the Cabinet earlier.
In a letter sent to the banks operating in Egypt, the CBE said that the total value of the initiative amounts to EGP 150bn, of which EGP 140bn is to finance working capital, and EGP 10bn to finance the purchase of machinery and equipment.
It pointed out that the amount of the initiative decreases by 20% every year, and the maximum period for it is 5 years, and in the event that financing extends for longer periods after the end of the initiative period, the customer bears the full financing cost.
The Central Bank stated that the initiative benefits companies and establishments operating in industrial and agricultural activities and the production of new and renewable energy, and includes: large and medium companies according to the definition issued by the Central Bank of Egypt, small companies and enterprises associated with medium or large entities, factories inside free zones, and cooperative societies working in the agricultural field.
It added that the maximum financing within the initiative for a single customer amounts to EGP 75m, and for a single customer and related parties it is EGP 112.5m, including working capital financing and the purchase of machinery and equipment in light of the volume of business and the regulated banking rules, with a maximum of dealing with only two banks, and the customer’s data is recorded on the initiative’s electronic system at the Central Bank to tighten control over those limits.
The Central Bank affirmed the availability of financing to customers after obtaining the necessary and guarantee documents to obtain the loan, and not linking between the facilities granted within the new initiative of the Ministry of Finance and the facilities of the previous initiative to support the private sector at an interest rate of 8%.
The Central Bank stressed the prohibition of using the facilities granted within the framework of this initiative to pay off any other debts, pointing out that the mechanism for compensating the banks participating in the initiative will be with a return of 1% above the credit and discount rate at the Central Bank, and the Ministry of Finance will bear the difference based on the credit and discount rate +1% – 11%.
It said that the interest rate will be adjusted according to what the bank sees in the event that the customer is classified irregularly or a rescheduling of the indebtedness obtained is carried out within an initiative.
It pointed out that the Ministry of Finance does not bear the delay returns calculated on customer facilities within the initiative, stressing that the bank must obtain the approval of the beneficiary to share the data of the facilities granted to him within the initiative with the Ministry of Finance.
The Central Bank pointed to the commitment of the bank, whose accounts are not audited by the Central Auditing Organization, to issue a certificate approved by the head of the internal auditing sector and the CEO of the bank, on a quarterly basis, with the value of compensation for the interest rate difference, while banks whose accounts are audited by the Central Auditing Agency issue that certificate from the agency.
The Central Bank called on banks to provide its banking operations sector with the value of compensation required for the interest rate difference during the first week of the month following the end of the quarterly period for which compensation is due.