The private business sector accounted for 61.9% of the total credit facilities granted by banks to their non-governmental economic customers until the end of August 2017, according to the Central Bank of Egypt (CBE).
The CBE said in a recent report that the total of facilities amounted to about EGP 1.4103tn at the end of August, compared to EGP 1.4137tn at the end of July, down by EGP 3bn.
Credit facilities refer to the sum of loans granted by banks to clients, along with letters of credit and letters of guarantee granted to cover importation.
According to a survey conducted by Daily News Egypt based on CBE figures, the government received about 24.816% of the total facilities, worth EGP 350bn, including EGP 143.984bn in local currency and the equivalent of EGP 206.017bn in foreign currencies.
As for the most prominent economic activities that have obtained credit facilities from banks, the industrial sector ranked first among these activities, where it received a total of 26.894% of them.
According to the CBE, the total credit facilities received by the sector by the end of August 2017 amounted to EGP 379.296bn, including EGP 214.684bn in Egyptian pounds and EGP 164.612bn in foreign currencies.
In second place came the service sector, including tourism, accounting for 22.34% of facilities, worth EGP 315.081bn. This includes EGP 187.431bn in Egyptian pounds and EGP 127.65bn in foreign currencies.
The share of the household sector (retail loans) reached 17.489%, ranking third amongst all sectors.
The total credit facilities provided to the household sector amounted to EGP 246.655bn, including EGP 239.01bn in local currency and EGP 7.645bn in hard cash.
The trade sector also accounted for 7.143% of facilities, putting it in the fourth rank.
The sector received credit facilities worth EGP 100.745bn, of which about EGP 80.137bn was in local currency and EGP 20.608 was in foreign currencies.
Finally, according to CBE figures, the agricultural sector ranked last in the list of sectors that obtained credit facilities from banks. The sector’s share of these facilities amounted to only 0.751%.
The total credit facilities received by this sector reached EGP 10.603bn, including EGP 8.173bn in local currency and about EGP 2.43bn in foreign currencies.
Hany Aboul Fotouh, a prominent banking expert, criticised the government and public entities taking a big part of loans and credit facilities from banks.
“The CBE’s figures show that the government is the second largest borrower, following only the industrial sector,” he said. “This means that the government is contending with other economic sectors to obtain funds.”
He added that it is easy for the government to obtain bank loans, as banks consider it a low-risk borrower, unlike other sectors, such as the agricultural sector, which has a very small share of loans.
Aboul Fotouh furthermore noted that bank loans to the agricultural sector have never exceeded 1% or 2% of the total loan portfolio in banks, reflecting the banks’ lack of interest in financing this sector.
Another general manager of a private bank in Egypt explained that every bank makes a list of projects and economic sectors it wants to finance. The public banks finance almost all economic sectors, while the private sector banks avoid funding some sectors, such as agriculture, tourism, and trade, as well as some activities such as construction.
He pointed out that the agricultural sector often obtains loans from the Egyptian Agricultural Bank of Egypt (ABE) and public banks, as most private banks prefer not to invest in this sector.
He also said that “despite the importance of the trade sector, banks finance only large investors and owners of major commercial chains and agencies.”
He urged the banks to reduce loans granted to the government to the lowest level and direct more loans to other sectors, such as agriculture and trade.
He pointed out that the service and industry sectors obtain an acceptable share of bank loans, though the industrial sector needs to double the volume of banking funds, as it contributes to achieving high growth rates and reducing unemployment.
“The banking sector should restructure its funds in line with the state’s objectives in the next phase, as the state is always keen to develop the agricultural sector, livestock, and fish farms, as well as the industrial sector, especially SMEs,” he stressed.
Moreover, he called on banks to reduce their loans to the household, retail trade, and government sectors.
He suggested rearranging bank loan priorities as follows: the agricultural sector, then the industrial and service sectors, followed by the trade and government sectors, while the household sector should come last.