The National Bank of Egypt (NBE) targets to increase the size of its loans portfolio for small- and medium-sized enterprises (SMEs) by 20% by the end of June, according to deputy chairperson of the bank Yehia Abou El-Fotouh.
Abou El-Fotouh revealed in statements to Daily News Egypt last week that the NBE has raised the size of loans directed to this sector from EGP 5.6bn to EGP 23.9bn in six years, from June 2010 until the end of April 2016.
The rate for granting these projects is about 1,100 new customers monthly.
In 2011, the bank granted EGP 2.2bn to 8,000 new customers; in 2012, EGP 3.2bn was granted to 8,700 new customers; in 2013, EGP 4.6bn was granted to about 16,500 new customers; in 2014, EGP 6.5bn was granted to about EGP 12,000 new customers; in 2015, EGP 7.2bn was granted to about 13,400 new customers.
The number of SMEs customers increased from about 4,000 in June 2010 to about 43,000. This is in addition to the customers who repaid their loans.
According to Abou El-Fotouh, the current default rate of the loans in this sector is less than 1.5%. Customers from northern and southern areas are more committed to repaying their loans than customers in Cairo. In southern areas in particular, the rate of commitment to repaying loans is higher.
During the SME Banking Egypt 2016 conference held by the Egyptian Banking Institute a few days ago, Abou El-Fotouh said that in 2008 the bank adopted a special philosophy in dealing with these projects. This philosophy is based on sustainable development and focusing on quality along with quantity.
The size of the loans portfolio of these enterprises in 2008 amounted to about EGP 3.5bn, 60% of which were non-performing debts. This made the bank change its way of thinking in dealing with these projects, so a plan was initiated to support and develop them.
According to Abou El-Fotouh, this plan includes providing an institutional framework to deal with this sector, simplifying procedures of financing, in addition to providing specialised credit products and programmes, along with providing non-financial services.
Moreover, the NBE conducted partnerships with local and international parties associated with SMEs, in addition to organising awareness and promotional campaigns for these projects.
The bank has established a specialised sector, completely separate than the sector of financing huge enterprises, to deal with this segment of customers. This ensures that these enterprises are treated as separate entities with different needs to larger enterprises. In addition, the bank allocated about 287 branches, geographically distributed across seven regional areas, to provide various services for them.
“The bank also authorised credit committees at the branches and regions and gave them the authority to grant credit for these projects to speed up credit decision-making, in addition to allocating 1,000 credit researchers specialised in the field of SMEs. The bank supports them by training existing employees on aspects related to the field of financing these enterprises, as well as hiring 500 more employees to support the staff,” said Abou El-Fotouh.
The bank organised field visits for those who working in the field of financing SMEs to a number of banks in Europe, Asia, and Africa. The workers visited Germany, Turkey, Italy, South Africa, Kenya, and India, in order to learn about such successful models in the field of the development of these projects.
The NBE’s plan for the development of SMEs also includes simplifying the procedures, the model of credit study, and the documents needed to grant these projects financing, in addition to assigning six credit check agencies to collect information about the customers of these projects externally in order to conduct credit reports about the customers before granting them financing. These agencies will also follow up after the granting to ensure that the financing is used properly.
According to Abou El-Fotouh, the bank also offered several specialised financing programmes to fit the nature of each sector of these enterprises. It offered programmes for the industry sector, the agriculture, livestock, and poultry production sectors, and in the services field, such as physicians and pharmacists and retailers, in addition to financing programmes for businesswomen.
In regards to providing non-financial services for these projects, he said that a department was initiated within the organisational structure of financing SMEs sectors at the bank in order to provide services of education and counselling for customers.
The bank also contracted with the largest American consulting firm within the framework of an agreement with the European Bank for Reconstruction and Development (EBRD) to design and activate a number of these non-financial services, such as services for training customers, communicating with them (text alerts, brochures, and flyers), submitting financing requests through the website (SME online application), in addition to developing the system of serving SMEs through the call centre. Moreover, ready-made models to evaluate customers’ projects are currently being designed, and the bank’s website is currently being upgraded.
In the case of rejecting the customer of an SME owner, the bank re-examines the reasons of the rejection, sets the appropriate mechanisms to avoid the reasons of rejection, and helps applicants obtain the loan later, according to Abou El-Fotouh.
The bank conducted several agreements with local and international parties related to SMEs with the aim of achieving the integration of roles between all parties concerned with serving these enterprises, which reduces time, effort, and cost, and directly benefits the owners of small enterprises.
Abou El-Fotouh said that the bank signed about EGP 17bn-worth of contracts over the past few years with local and international financing agencies. It has also conducted a number of cooperation agreements with commercial and industrial chambers in order to support those who are part of these chambers to cover their financing needs.
The NBE has launched many campaigns in print and broadcast media, one of the more prominent of which is ‘your place is not here’ which resulted in attracting 6,300 new customers. Moreover, it has held meetings with customers, in addition to workshops in the complexes of SMEs, to inform them about the services offered by the bank for these projects. Meetings were also held with young people in universities to establish the concept of entrepreneurship, according to Abou El-Fotouh.
Within its keenness to manage risks associated with these enterprises, the NBE initiated a sector specialised in this issue in 2009 and supported it with 121 risk officers. In addition, it distributed risk units geographically to tighten control over credit facilities granted to the customers of this sector.
According to Abou El-Fotouh, a system for measuring creditworthiness (Risk Rating) was created and applied in order to improve the quality of loan portfolio of these enterprises, in addition to creating an electronic database for the sector’s customers. This database is divided according to the size of customers, the product type, industry, and geographical area.
He added that the Scoring model has been activated gradually to serve customers of micro financing through nine branches of the bank, in addition to setting criteria for granting credit and working on diversifying the loan portfolio in terms of economic activity, geographical distribution, and maturity periods of facilities.
The bank transferred risks associated with financing these projects to credit guarantee companies. Moreover, it conducts a number of periodic reports about the developments of the performance of these enterprises’ loans portfolio. That is with the aim of reviewing the activities that are financed and monitoring the concentration and the way of managing risks in each unit.
The bank also, according to Abou El-Fotouh, created a team to collect debts in order to follow up on customers who delay repayments, whether through field visits to the places they are, or by phone. In addition, it created an early warning form enabling the bank to discover the problems faced by these enterprises early on and set quick solutions for them.
Moreover, the bank established specialised units to follow up and implement the SMEs financing scheme. These units are geographically distributed all over the country and operate in a decentralised manner to ensure quick activation of the credit facilities.