Bank Audi Egypt aims to increase the size of its small- and medium-sized enterprises (SMEs) portfolio to EGP 6bn over four years, up from a current EGP 1bn, according to deputy chairperson and managing director of the bank Mohamed Abbas Fayed.
He said that Bank Audi has an ambitious plan to support SMEs in accordance with the definitions of the Central Bank of Egypt (CBE), adding that the bank is working on continuous development in approaching the funding of SMEs and improving the products that the bank offers them, in line with the CBE policy to finance the sector.
“The bank has many SMEs funding schemes, and aims to increase lines of communication with the Social Fund for Development to reach more clients,” Fayed said.
He noted that the bank is also keen on cooperation with international financial institutions, such as the International Finance Corporation (IFC), which the banks has cooperated with in designing SMEs, credit assessment, and risk evaluation modules. He added that the bank successfully developed a model to deal with SMEs that will be implemented starting next year.
According to Fayed, the bank obtained a loan worth $30m from the European Bank for Reconstruction and Development to finance SMEs.
In response to a question about the impact of liberalising the exchange rate in the bank, he said that the US dollar collection increased eight-fold, exceeding $25m in the first three weeks after the flotation.
He added that the bank directs the proceeds to cover its customers’ demand, in accordance with the regulations and controls of the CBE, which instruct banks to prioritise imports of essential goods and then finance non-essential goods. Should there be any surplus, banks trade via the inter bank market.
He said that Bank Audi Egypt cancelled all restrictions that were previously imposed on using cards abroad, where the spending limits were brought back to normal.
He added that the bank has also raised its interest rate on its three-year saving certificates to 16% to match the market development following the CBE’s decision to raise its basic rate. The banks also launched a special saving certificate of 20% to its clients only to preserve the savings of clients and keep them in the bank.
According to Fayed, liquidity attracted by the certificates amounted to EGP 3bn.
But he noted that banks are expected to see low profits at the end of this year, and another drop in 2017, due to the high interest banks have to pay on deposits and lack of investments that could cover for it.
He said the bank is currently studying how to compensate for the expected losses, especially as the high interest rate will reduce demand on loans.
Moreover, he said that the interest rates are expected to return to normal in the coming period. “The high interest rate will not achieve the development sought by the state,” he hinted.
In another matter, Fayed said that financial inclusion is a strategic target during the current phase, adding that achieving it requires three main pillars: a stable and strong financial system, achieving financial integrity through the development of flexible systems that counter money laundering and terrorism financing without negatively impacting clients’ access to services, and implementing financial protection for the consumer.
He noted that only 13% of the Egyptian population deals with banks. “Financial inclusion can boost this to 60%, which is the global rate, in the coming period,” he concluded.
He stressed that achieving inclusion requires partnership between the government and the private sector for preparing databases for banks, automation, and facilitation of SMEs access to funding, and offering tax incentives to the informal sector to encourage moving it into the official market.