The Central Bank of Egypt (CBE) has launched a new EGP 15bn initiative to finance the dual-fuel vehicle conversion plan, with a lump-sum return of 3%.
In a Tuesday letter to banks, the CBE said that the initiative comes under directives of President Abdel Fattah Al-Sisi, and it aims to support the government’s ambitious, recently announced multi-year plan to replace car engines powered by traditional fossil fuels with dual-fuel engines that run on both petrol and natural gas.
Accordingly, the central bank will provide the needed financing through this initiative at low-interest rates.
Its Board of Directors approved the decision, with the financing to be made available through banks at a flat return rate of 3% used in granting loans. For individuals wanting to convert their vehicles, whether private vehicle, taxi, or microbus, to operate on dual fuel.
The loan period ranges from seven to 10 years, with the repayment to be made in equal monthly instalments. This is provided that banks are compensated for the interest rate differential by the credit and discount rate (currently 8.75%) by + 2-3% (lump sum return).
The scrapping fee for old vehicles is considered as the minimum down payment for new dual-fuel vehicles. Vehicle replacement initiative beneficiaries will be exempted from the standard ratio of loan to income granted to individuals for consumer purposes.
The interest rate includes all expenses and commissions except for credit risk insurance expenses, vehicle or individuals insurance expenses, and taxes and stamps expenses under the applicable laws.
The CBE also decided not to deduct an early repayment commission to motivate individuals to pay off loans before their maturity.
According to the letter, the central bank will issue a pledge of EGP 15bn in tranches to the Credit Risk Guarantee Company, as an umbrella to guarantee the balances of guarantees issued by the company to the banks.
Under the guarantee, the company will cover 80% of the risks associated with financing individuals within the initiative, and banks will bear 20% of the risk.