Senior management at the Principal Bank for Development and Agricultural Credit (PBDAC) have started to visualise a change in the statute of the bank and amendments to its main system and policies for loans and deposits, on the back of the parliament approving the law, which places the bank under the supervision of the Central Bank of Egypt (CBE) instead of the Ministry of Agriculture, on Tuesday.
Chairperson Elsayed Elkosayer told Daily News Egypt in an interview that the bank will immediately begin communications with the World Bank to obtain $500m necessary for the restructuring plan, which was hindered pending the now-issued law.
Through this interview, Elkosayer calls upon the CBE and the Ministry of Finance to support the bank’s efforts in its new beginning and improve the services it provides to Egyptian farmers.
The parliament finally agreed on the PBDAC Law. What does this bring to the bank?
Issuing the law and placing the bank under the supervision of the CBE is a step that has been delayed for nearly 20 years. This delay had a massively adverse impact on the situation and the activity of the bank.
This move will have a positive impact. Working under the umbrella of the CBE will provide the PBDAC with many advantages to reach its potential and activate its role. The CBE’s supervision will also ensure that the bank operates in the right direction, especially in calculating interest and commissions, which is in the favour of Egyptian farmers.
Besides, being under the supervision of the CBE will give the bank a more solid ground when negotiating for funds with local and international financial institutions to obtain loans at special interest rates that could then be relended to farmers at good rates. The bank will also be able to receive help from the CBE to support its capital base or restructure itself, just like any other bank.
Some are worried that this would drive the bank away from serving Egyptian farmers and their best interests. What do you think?
I believe that this new law cares for Egyptian farmers. The law prioritised serving agricultural policy and activities associated with it as its main objective. Moreover, the bank will be renamed the Egyptian Agricultural Bank.
The bank will not be entirely out of the mantle of the Ministry of Agriculture, as the law will enable the minister of agriculture to nominate members to the board of directors, along with a ministry representative being present on the board.
Does this mean that the bank will not be converted into a commercial bank, as it is now ruled by the CBE Law instead of the Ministry of Agriculture?
There is absolutely no intention to do so. On the contrary, the bank is committed to its role in serving Egyptian farmers. Why can we not do this and still fund projects in other sectors? The bank has already funded electricity projects and we hope to expand in this area in the future.
According to the new law, the bank will provide funding for all types of agricultural and rural development activities in accordance with the banking systems in effect, in the framework of the general policy of the state. The bank will also contribute to funding the provision of production inputs, whether imported or domestic production, and practice all types of banking operations.
In fact, the bank is one of the most experienced banks in the world in its field of serving agriculture. We compete with major specialised banks, such as the Dutch Rabobank, France’s Credit Agricole, and the Agricultural Bank of China.
We deal with some one million farmers, who represent a group of clients that no other bank can have. This is where we are distinct, and hence we should maintain that and improve it.
The bank’s management is now looking into how to increase the relationship between us and the farmer, and to offer them and their families all the required services.
What comes next now that parliament has approved the law?
We will immediately begin by changing the statute of the bank to fit with the new law. We will also amend the policies for granting loans or attracting deposits. We will, however, continue down the old path [of PBDAC’s previous policies] until all these procedures are completed.
The World Bank had started a plan to restructure PBDAC, which was supervised by Dutch Rabobank. Funding was suspended until the law was changed to put the bank under the CBE’s supervision. Therefore, now we can begin communicating with the World Bank to obtain the $500m that was previously allocated for the bank’s restructure.
We are also going to start coordination with the CBE to obtain some sizeable monetary support to assist in the restructuring of the bank, improve its infrastructure of branches and technology, and improve its services which it provides to its customers (farmers, low-income citizens, and other clients).
We, as the senior management, can see significant interest and support from CBE Governor Tarek Amer in helping the bank.
What about the bank’s working plan for the coming period. Will it be changed for these developments?
Yes, we will be working to amend our operations to match the initiatives launched by the CBE, including supporting small- and medium-sized enterprises (SME) as well as mortgage financing for low- and limited-income citizens.
I always stress that PBDAC is one of the most capable banks to reach citizens nationwide anywhere, equipped with 1,210 branches spread across all governorates, cities, and villages. We will have a strong role in implementing the CBE’s initiatives and assisting with the plans for financial inclusion.
What does the bank need to fulfil its anticipated role?
There are three main requirements. The Ministry of Finance should pay its dues to the bank—which currently stand at EGP 3bn plus interest. The ministry should also keep supporting the bank so it can continue lending to farmers at low-interest rates. Moreover, all loans and grants for agriculture should be channelled to the bank only.
Regarding the Finance Ministry’s dues, where do those negotiations stand now?
As I mentioned, there are EGP 3bn worth of dues, plus interest, still standing. We expect to receive EGP 600m within two weeks, according to the ministry. We are working to attain all our dues, whether in cash or investments in debt instruments.
We also call for the quick settlement of these financial dues owed by the Ministry of Finance and for them not to accumulate so we do not enter this situation again.
The new law states there must be two deputy chairpersons for the bank. When will they be appointed?
All I can say for now is that there are ongoing procedures to appoint two deputies. This will be announced very soon.