The Egyptian Banking Institute (EBI) will be holding an international conference on 28 March with experts from abroad to pass on their experience in dealing with small and medium enterprises (SMEs) to bank officials working in the Egyptian market.
On this occasion, Daily News Egypt has met with Laila El Oteifi, director of the SMEs unit at the EBI, to talk about the conference and the role of the unit she is managing in serving SMEs.
El Oteifi stressed that the specialised body announced earlier by the president to support SMEs is a great necessity for the growth of these projects. She hopes the body would be affiliated to the cabinet rather than to a specific ministry, as this would enable it to coordinate between all concerned bodies.
She also pointed out that strengthening of a credit-guarantee company and the presence of a department specialised in SMEs in I-Score, as well as changing the mentality of higher administrations in banks, is important for the achievement of the initiative launched by the Central Bank of Egypt (CBE) to support these projects.
She stressed that the EBI exerts great efforts to train projects owners and qualify them for the obtainment of financing. It also carries out field visits to successful countries in the field, including Malaysia, Italy, Turkey, Hungary, Canada, England, South Africa, and Kenya.
Could you introduce us to the SMEs unit in the EBI?
It was established in 2009 with a decision by the CBE to help support owners of SMEs obtain financing.
It was established in cooperation with the Canadian Certified Energy Efficient Data Center Award (CEEDA) as a second phase of the banking reforms by the CBE.
What are its activities?
The basis of its activities is a varied group of activities to serve the sector and help SME owners deal with the banking sector. In other words, we prepare the owners to obtain financing. One of the main problems banks faced when they dealt with these individuals included the fact the latter did not have a financial background or work plans to submit to the banks as it was required. We offer them a training programme to help them understand, and it is free of charge.
How are SMEs owners trained by the unit?
The training is carried out by the EBI, but it is not done directly with the owners, but rather through cooperation protocols with government institutions to reach these owners.
The EBI has signed agreements with Chambers of Commerce, 10th of Ramadan Investors Association, 6th of October Investors Association, the Federation of Egyptian Industries (FEI), and the National Council for Women, in addition to banks that send clients, who cannot obtain financing, to be trained.
Currently, we are carrying out an initiative with the Ministry of Youth and Sports under the supervision of the CBE to train workers in the ministry who will pass on their expertise to the youth across the country.
We are also launching another initiative with the Bank of Alexandria to train craftsmen on entrepreneurship.
Training is held in several governorates. It is done through the centres of the EBI in Cairo, in addition to several workshops held in universities.
The training programmes include training individuals to become successful entrepreneurs, to help them set a work plan and a feasibility study, and to carry out marketing and obtain financing.
I would like to point something out that causes confusion to several owners of SMEs. Initially, being financed from banks may not be the most suitable method for SMEs; this may be more suitable for later phases, especially since banks usually have requirements that are not available for these projects in the beginning. Moreover, these projects often carry high risks, which banks may not accept.
This has caused great trouble among many young people who went to banks to obtain financing for their projects within the initiative launched by the CBE in January 2016 at a 5% interest rate. They were surprised to find banks rejecting their requests.
What is the most appropriate way to obtain financing for these projects at their start?
These projects can benefit from the Social Fund or financial leasing companies and venture capital firms, or even associations that are specialised in microfinance.
How are young people made aware of this?
Many associations play that role. In addition to the role the media plays in this regard, the programme we prepared in cooperation with the Ministry of Youth and Sports includes raising awareness among young people in different governorates.
What is the role of the unit in serving banks?
Serving the banking sector is the basis of the unit and the EBI’s role. The unit, as a specialist in serving SMEs, has offered technical support to banks that did not have administrations specialised in financing these projects and want to establish them. This is done with the aid of experts from abroad to help them on that matter.
Now, most banks have these administrations; hence, we started holding a training forum with heads of the SMEs sectors in banks where we meet them regularly to explain to them the developments in the field, using the knowledge of foreign experts.
We also hold meetings with officials of industrial and import chambers to look into the problems they face and notify the CBE about them. We work according to the CBE’s instructions, and we are keen to implement its decisions or initiatives of the banking sector and vice versa.
Banks complain about the unavailability of information about owners of SMEs. What is the role the unit plays in this regard?
This has been a problem for banks a very long time. We had to discuss it with them, and, as a result, in 2010 we carried out a comprehensive survey about these projects across the country.
The scan was done with financing from the CBE and in cooperation with the Central Agency for Public Mobilization and Statistics (CAPMAS) and under the supervision of the Center for Surveys and Statistical Applications (CSSA) at the Faculty of Economics and Political Science at Cairo University to ensure the quality of the data.
The scan ended in 2012 because it was delayed by the 25 January Revolution. We have made the information available on the website of the EBI, which is dedicated only to the banking sector, and we published the results for everyone to access.
Does the scan need to be updated?
It does, especially after the recent developments in the Egyptian market; however, we postponed this step, but made modern information available for banks regarding these projects. We were able to obtain this information from CAPMAS, and they can always be used.
What are other efforts undertaken by the EBI to support owners of SMEs in their dealings with banks?
Nine years ago, the bank created certificates for the field of training for financing SMEs. Trainings’ duration is about 116 hours. We were able to connect the theoretical parts to the practical parts in this training.
After finishing the theoretical part, trainees conduct a field study on one of the developed countries that had successful experiences in the field of SMEs. They are then introduced to the best international practices to learn from these projects and expertise and transfer them to their banks. There are also other kinds of field studies for banks and heads of the SMEs sectors of banks. They are not related to the previously mentioned certificate.
The EBI has visited Malaysia twice, India three times, and Italy twice. It has also visited Turkey, Hungary, Canada, England, and South Africa.
We have also visited Kenya twice, especially that it is specialised in microfinance projects and financing women. We have an upcoming visit to South Africa in early May 2017.
The EBI is specialised in field studies that are organised by concerned authorities in the countries we visit or through the department of international cooperation in the EBI.
Throughout the past years, a large number of workers in the banking sector has joined these visits. Most of them were the heads of SMEs departments.
There are five international programmes carried out every year in the field of banking training in cooperation with international institutes such as Fitch, Garner Financial, Euromoney Conferences, and GBRW Consulting. Experts from these institutions visit to hold training programmes for bank officials.
Were there any special training programmes carried out after the CBE’s initiative to finance SMEs?
Yes. After the CBE’s initiative, the EBI’s attention towards the sector increased greatly. The EBI developed specialised credit and risk certificates for workers in the units of the projects, with the certificate’s training duration going up to 190 hours.
A large number of officials in banks now carry these certificates. One medium-sized bank has sent us 140 trainees who received necessary training and stressed that it helped them develop the financing portfolio of these projects in their bank.
On 26 March, the EBI will hold an international conference for SMEs. We would like to know the conference’s agenda and the difference between it and many other conferences held every now and then for these projects.
Since the launching of the CBE’s initiative to finance SMEs, many conferences were held. The common thing about them is that they include the same people and speakers. This is how the idea of this conference developed. It will be held under the sponsorship of the World Bank and other bodies.
We believe that foreign expertise must be brought here to pass on experience to banks here to finance SMEs and discuss the problems the former faced and how to solve them. This is the difference between our conference and other conferences.
Given your experience and local and foreign tours, what are the issues that hinder the growth of SMEs in Egypt?
When we look at Malaysia’s experience in dealing with these projects, you find that they have successes not only at financing SMEs, but at developing an entire organisation.
The secret is that the Malaysian government is interested in these projects and tries to coordinate between them. I demand that this takes place in Egypt as well. We have heard a lot about establishing a body specialised in serving these projects under the umbrella of the Ministry of Trade and Industry. However, we have seen no tangible results until this moment.
I believe it is necessary for this body to be affiliated to the cabinet directly rather to than a specific ministry so that coordination can take place between all concerned authorities to serve these projects.
If financing is one of the problems facing projects, I believe the bigger problem is obtaining licensing.
Moreover, higher administrations in some banks do not pay much attention to this issue, and I believe they must change their way of thinking and become a supporter to these projects. There should also be risk management in banks that are specialised in these projects.
Another important matter that can help the growth of SMEs is the presence of a strong credit-guarantee company. All the countries that succeeded in terms of SMEs depended largely on such companies.
The CBE has already started restructuring a credit-guarantee company. The administration of the company is also exerting major efforts to identify the experiences of other countries in this regard.
Moreover, the Egyptian Credit Bureau, I-Score, must have a department specialised in SMEs to help banks in the processes of inquiring.
There must be an integrated system that works together to achieve good results and offer good support to these projects.
Do you think that amending the CBE’s definition of these projects after flotation will help increase the financing provided to them by banks and help banks take their financing to these projects up to 20% of their total loan portfolio?
Amending the definition and expanding the scope of the projects to benefit from the CBE’s initiative can help achieve better results. Reaching the 20% stipulated by the CBE throughout four years that end in 2019 has become so easy. But such an amendment must be accompanied by a change in concepts and the mentalities of higher administrations in the banks.
In India, banks are obliged to direct 40% of their loan portfolios to certain activities that the state specifies, including education, health, SMEs, and agriculture. India was very successful in making this happen through the support of all of the country’s institutions.