Banking leaders stressed the importance of micro, small, and medium enterprises (MSMSEs) in dealing with many of the aches suffered by Egypt, especially terrorism and unemployment.
These leaders, during their participation in the “People and Banks” conference held last week, highlighted the importance of banks expanding their financing to these projects to increase domestic production as well, thereby reducing imports and providing foreign exchange.
Sub-Governor of the Central Bank of Egypt (CBE) Tarek El-Khouly said that the bank’s interest in small and medium projects contributes to the elimination of terrorism because it creates job opportunities for youth, which reduces unemployment rates.
During the conference, a number of bank leaders revealed the role of their banks in supporting these projects and providing them with the necessary funding.
Vice Chairperson of the National Bank of Egypt (NBE) Yehia Aboul Fotouh said that the bank’s loan portfolio for small and medium enterprises (SMEs) amounted to EGP 36bn, including EGP 15bn that are part of the CBE’s soft-interest initiative for 55,000 customers.
He added that the bank has also financed 3,714 projects under the Mashro’ak initiative for micro enterprises. Total loans in this part amounted to EGP 1.016bn.
The initiative was launched by the Ministry of Local Development in 2014. NBE, Banque Misr, Banque du Caire, the Housing and Development Bank (HDB), the Agriculture Bank of Egypt, and Alex Bank have all joined the initiative.
The project initiative is based on the concept of participatory development between citizens and the state. It is a developmental programme aimed at fighting unemployment and creating job opportunities for young people by supporting them establish their own small projects by granting loans to projects in the form of equipment, aids, and feasibility studies. Experts then follow up with the participants throughout their implementation phases to production and making revenues.
This project aims at the entire governorates of the republic, especially Upper Egypt, to provide the largest number of employment opportunities for youth in these governorates.
Through this initiative, banks offer many facilities to young people so that they can get the loan that covers their project in the shortest possible time and without any obstacles.
Sherif Elbehery, head of small, medium, and micro finance sectors at Banque Misr, said that the bank has financed 41,000 clients in the initiative with a total of EGP 1.5bn.
He added that the bank has developed an integrated plan to raise the size of the portfolio of SMEs, based on the promotion of geographical spread, in addition to activating a number of protocols of cooperation with some concerned parties, in addition to activating decentralisation through granting branch directors and regional directors greater powers in granting loans to these projects.
“The bank’s loan portfolio for SMEs is about EGP 6bn. The bank plans to comply with the CBE’s requirements to boost financing to 20% of total loans by the end of 2019,” he stressed.
Mohamed El Dib, chairperson and managing director at QNB ALAHLI, said that the SMEs portfolio at the bank registered some EGP 17.2bn, which is 16% of the bank’s total loans portfolio.
He added that the bank has channeled funds to about 3,500 SMEs, adding that the bank has a good portfolio of microfinance sector amounting to EGP 400m for companies and associations.
Meanwhile, Mohamed Abbas Fayed, CEO and managing director of Bank Audi – Egypt, said that the bank’s SMEs portfolio amounted to EGP 3.1bn, up from EGP 400m only last year.
Fayed added that the loan portfolio of these projects accounts for 11% of the total credit portfolio, which is about EGP 30bn, compared to 4% last year, reflecting the unprecedented effort and unprecedented growth in the portfolio at the banking level.
He pointed out that the defaulting rate in the credit portfolio of small and medium enterprises is about 1%, one of the lowest ratios at the level of banks.
“Bank Audi Egypt aims to develop and increase the portfolio of SMEs to reach the rates set by the CBE during the next two years to reach 20% of the credit portfolio by expanding the various credit sectors and increasing the number of customers and achieving operational efficiency of the portfolio,” Fayed said.
He stressed the importance of CBE’s initiative to provide easy financing for small and medium enterprises at an interest rate of 5% and 7%. He explained that the bank provided funds under the initiative worth EGP 600m, about EGP 400m have been used.
“SMEs are the main backers to achieve the renaissance and economic development of any country aspiring to achieve real development, especially in light of the high rates of inflation and interest rates that reduce the opportunities of major companies to obtain funding,” according to Fayed.
Fayed pointed to successful experiences in many foreign countries, especially as they shift the population growth in countries from mere consumer forces to productive forces.
He pointed out that the most important characteristic of this type of projects is that despite its great importance and its role in economic development, they do not need large funds or manpower, complex technology, or huge investments, but they have a strong return on the level of the national economy, making them the best choice for young people to get the right job.
Fayed stressed the importance of raising awareness for young people who want to implement small and medium enterprises and their knowledge of how to deal with banks. He asked the youth to answer a number of questions before entering into any project, the most important of which is why did they choose this project? How will they find financing? Will they resort to banks or partners? Do partners have the same desire for success?
“Education is an essential part of the development of the SME sector in Egypt, but it is not the role of banks alone. Banks provide funding and do part of the awareness raising, but the media bears a large part of the financial awareness and education of citizens about the importance of dealing with banks and how to obtain financing. Next to efforts carried out by the state and actions aimed at achieving financial inclusion,” he explained.
In addition, he stressed the interest of Bank Audi in financing the industrial sector, which accounts for about 50% of the portfolio of SMEs in a large number of industries, while the remaining part are of the commercial and service sectors, pointing to the importance of industry in increasing the volume of exports and providing products that reduce the volume of imports from the outside.