The main challenge facing small- and medium-sized enterprises (SME) in Egypt is obtaining required financing, according to banking experts at the first session of the SME Banking Conference for 2016 held on Monday.
SMEs represent a fundamental pillar of the Egyptian economy, according to Hala El-Saeed, dean of the Faculty of Economics and Political Science. All sectors should be supported to push economic development, she said.
There have been great efforts by state bodies to support SMEs in recent years, but the major problem is the lack of a unified body responsible for this sector, El-Saeed said.
The number of SMEs in Egypt is about 2.5m projects, however, the contribution of these projects to the GDP does not exceed 25%.
“The formal sector obtains 40% of its funding from formal financial institutions, while the informal sector provides 80% of its financing and 20% from non-banking sector,” according to El-Saeed.
A unified body responsible for this sector must be established, as well as spreading awareness of these projects in schools and educational entities, she said.
According to Sherif El-Behairi, head of the SMEs sector at Barclays Bank-Egypt, there are about 2.45m SMEs in the Egyptian market which employ 75% of the labour force.
There is a financing gap in the SME sector estimated at $1bn annually, El-Behairi said. The Central Bank of Egypt’s (CBE) initiative to invest EGP 200bn over four years will eliminate that gap.
He said that some banks are slow in dealing with the SME sector, where they are treated with the same conditions and rules of big businesses. He added that it is inconceivable that the provision of $2m or $3m for SMEs can take six or nine months.
According to Nihal Badawi, chairperson of SMEs funding at the Egyptian Gulf Bank (EGB), only 15% – 20% of SMEs can obtain the required financing.
Nevin Tahiri, managing director of Delta Holding, said the unified definition for SMEs issued by CBE is the first step in solving the challenges hindering its growth.
Tahiri added that these projects are still facing major challenges, such as difficulties in their registration.
According to Rashwan Hamdy, head of banking service at the Commercial International Bank (CIB), the presence of a credit risk system for these projects will reassure banks and encourage them to finance SMEs.