The Central Bank of Egypt (CBE) announced a plan to provide EGP 200bn to 350,000 small and medium enterprises (SME) over the next four years, according to a statement released by the CBE on Sunday.
The CBE directed banks to increase the percentage of loans allocated to this sector to 20% of their total loans portfolio.
The CBE explained that the banks will apply this rate in return for being allowed to deduct the value of the funds they will grant to these projects from the value of their obligatory reserves at the CBE.
According to a CBE statement, banks will get a declining interest rate of 5% annually, applied on the loans offered to companies with annual revenues ranging between EGP 1m to EGP 20m.
The CBE pointed out that the launch of this programme comes within the state’s strategy to boost production and achieve sustainable development, through the revitalisation of SMEs.
The statement added that these projects contribute to creating many job opportunities for the youth demographic, decreasing unemployment rates, boosting income levels, increasing the local output, and stimulating Egyptian exports.
According to the CBE, the programme takes into account a number of factors, most prominently the volume of money that would be provided to this sector by the banks.
It added that the programme also aims at benefiting more from the sources available to the banks in order to develop industry and focus on production, in addition to encouraging the projects that provide added value.
The CBe explained supporting 350,000 SMEs will create approximately 4m jobs over the next four years.
The CBE highlighted the importance of providing information to venture capitalists and investors, and facilitating their access to banks, in addition to providing the needed training for small businesses in order to increase their chances of success.
The Ministry of Trade and Industry, the Federation of Egyptian Industries, and the Egyptian Banking Institute will collaborate to assist SMEs.
The CBE stressed that the banks should prioritise granting funding to vital economic sectors, in particular industrial companies that produce feeder components, and sectors that produce high added value, in addition to those with high labour intensity.
The CBE urged the banks to provide special attention to projects with innovative ideas, and projects that seek to export their products abroad.
On the other hand, the CBE plans to move forward in the programme for financing SMEs through creating a mechanism to minimise the risks faced by banks while financing SMEs.
The statement added that the CBE has launched consultations to restructure a credit guarantor in order to provide banks with guarantees.
The percentages of these guarantees would be commensurate with the CBE’s plan to support remote areas and important strategic sectors, as well as to encourage the financing of newly established companies.
The CBE also emphasised the importance of supporting the role of the Egyptian Banking Institute in producing specialised programmes for SMEs. This comes alongside additional specialised programmes for bank employees.
Moreover, the CBE highlighted the necessity of strengthening cooperation with the Federation of Egyptian Industries, the Ministry of Trade and Industry, the Arab Organisation for Industrialization and concerned ministries, to develop the SMEs sector.