The Agricultural Bank of Egypt (ABE) is set to offer a global tender within six months to companies specialised in electronic banking systems, in order to develop the bank’s technological infrastructure, according to Elsayed Elkosayer, chairperson of the ABE.
This comes under the umbrella of the plan’s restructuring of the bank, initiated by Elkosayer since he took charge in March 2016, along with the new board.
In a previous interview with Daily News Egypt, Elkosayer said that developing the bank’s technological infrastructure would cost over EGP 1bn, and could take up to three years.
The ABE has 1,210 units across Egypt, including 20 Islamic branches, and it aims to increase these Islamic branches to 30.
The development of the bank differs from its restructuring plan, which costs more than that. The bank is seeking funds from international financing institutions, including the World Bank. DNEW interviewed Elkosayer to discover the ban’s latest development, the transcript for which is below, lightly edited for clarity:
What is new about the bank’s development plan?
Ernst & Young has been our consultants for about six months, in cooperation with one of the country’s sovereigns entities, to assess the bank’s current state. This could take six more months, after which, we will offer a global tender to choose the company that will electronically develop the bank.
The development process aims to provide the best modern banking services, and expand the electronic services system to better satisfy its customers, farmers and their families, especially in the payroll, payments, and remittances, as well as developing the ATM network and electronic points of sale (POS).
You started the bank’s restructuring process since you assumed responsibility in March 2016, what has been achieved so far in that process?
The restructuring of the bank is carried out through several stages and consists of several axes starting by supporting the capital base of the bank, through the Central Bank of Egypt (CBE), which has injected a support deposit worth EGP 10bn for 20 years.
We have also established several new regulatory departments, and separated some existing departments from one another, such as the internal control from the inspection department.
Additionally, we surveyed the bank’s assets, and improved their efficiency, while eliminating other assets so as to use the proceeds in the development of the bank’s branches.
On the other hand, there is a plan to completely restructure the human resources department. and review of the bank’s organisational structure, in order to raise the employees’ efficiency through the human resources development programmes. Over 8,000 training opportunities were granted to the employees, in addition to the recruitment of experts and specialists from other banks.
The bank has contracted with international banks to implement its development plan. Rabobank, one of the largest agricultural banks in the world, is supporting the ABE’s comprehensive reform and development plan, including the development of human resources management, as well as risk and product management. We also obtained training opportunities in cooperation with the USAID, Germany’s SANAD, and Ernst & Young.
The bank is also in the process of contracting with a specialised external offices to study its aptitude to implement the International Accounting Standard IFRS 9, which evaluates the bank’s internal control, separates jurisdictions, and implements risk management.
What about the technological development plan within the bank?
The restructuring plan also includes the development of information technology and business systems within the bank, and the implementation of the core banking system, which qualifies the bank to achieve its objectives required during the coming period.
Consistent with this plan, we have provided our branches with electronic services. We added 100 new ATMs, and equipped all branches with POS, in cooperation with e-finance and Fawry.
All of the bank’s branches are expected to be equipped by ATMs through three phases, each by 400 ATMs.
Moreover, the bank will develop and modernise about 250 branches to befit the banking sector’s developments, so that the customers feel that there is a convenient place and that they provided with first-rate banking service, in addition to reviewing the bank’s geographical spread, given that some of the branches are in the same areas.
A strategic plan for the bank’s operations has been developed. What are the main features of this plan?
The bank’s strategy has been developed for the first time, in a long time. There is a strategic direction and objectives we are working to achieve, including attainig annual growth rates of at least 15% across all banking activities, such as deposits, loans, or the total return of the bank’s activity.
One of the first results of this plan was an increase in the volume of bank deposits to EGP 50bn, up from EGP 35bn in March 2016. Loans have also grown to EGP 26bn, despite real settlements with defaulting clients.
How did the bank increase its loan portfolio, while many reconciliations are occuring for insolvent customers?
During the past period, the bank participated in joint loans for the housing, oil and energy sectors.
At present, the bank is focused on achieving agricultural and rural development through small, medium and micro enterprises, by financing plant and animal production, as well as and funding the packaging and feed projects throughout all its branches within the country.
The volume of small finance has reached EGP 598m of 955 projects included in the CBE’s initiative.
The bank’s cooperation with the Micro, Small, and Medium Enterprises Development Agency (SMEDA) has reached EGP 3.037bn through funding 156,000 projects. We also signed a new agreement with SMEDA worth EGP 50m.
The amount of funding in the Ibdaa Masho3ak ( Start Your Project) initiative, has also reached EGP 1.257bn for 22,000 projects. The ABE is ranked third among the participating banks in this initiative.
I would like to emphasise that the ABE aims to achieve rural and agricultural development. Regarding this, our primary concern is farmers, fish farms, livestock and poultry production, exporting agricultural products, fertilisers, pesticides and all activities related to agriculture, such as feed production, livestock development, meat manufacturing, dairy products, and agricultural equipment and machinery.
The foundation is the agricultural and rural development, the farmer and the Egyptian farms, and to revive the agricultural field, provide funding for all stages from production to consumption, and assist in the marketing of agricultural commodities and all related activities. The bank has an effective role in this regard, especially that we have the bank’s commercial division, the Egyptian Company for Agricultural and Rural Development.
What has been done concerning the defaulting problem?
We have managed to reduce the proportion of non-performing loans (NPL) from 20% of the total loan portfolio in March 2016 to a current 12%. Plus, we aim to cut the ratio to 10% by the end of 2018, and then lower in the coming years.
Likewise, we have already treated 26,000 defaulting cases with debts amounting to EGP 1.5bn. Conjointly, we settled loans with 2,700 further customers with debts worth EGP 175mm during the CBE’s initiative to settle debts of defaulters and individuals whose debts are less than EGP 10m.
What about covering the provision gap for other NPLs?
Recently, we have obtained the CBE’s approval to compensate the provision gap within the bank over the coming five years.
What is new about the smart farmer card that the bank is issuing?
The Smart Farm Card is one of the projects of the Ministry of Agriculture, in coordination with the ministries of military production and planning, which is being implemented via e-finance. This the real alternative to agricultural tenure, and will contribute to the assembly of agricultural policies and benefit from in-kind support.
We have printed 2.2m cards to far, but distribution was delayed until the finalisation of the infrastructure of agricultural associations, so that farmers can use and benefit from the card. Fayoum and Gharbiya will witness the pilot programme before we apply it for all other governorates.