Banks must loan to SMEs

Business monthly (Egypt) - - IN BRIEF -

In a Jan. 9 speech, Pres­i­dent Ab­del Fat­tah el-Sisi said he had asked the Cen­tral Bank to en­able fi­nanc­ing for youth-run small busi­nesses, aim­ing for banks to of­fer LE 200 bil­lion in fi­nanc­ing to small and medium en­ter­prises over four years. The fol­low­ing day, the Cen­tral Bank an­nounced new reg­u­la­tions aimed at boost­ing loans to SMEs to 20 per­cent of banks’ port­fo­lios. Such loans will be lim­ited to a 5per­cent in­ter­est rate, far below govern­ment bond yields and rates on lo­cal cur­rency de­posits. In or­der to en­cour­age par­tic­i­pa­tion in the pro­gram, banks will be al­lowed to deduct the value of th­ese low-in­ter­est loans from their re­serve re­quire­ment, ef­fec­tively cre­at­ing a new pool of money from which they can make loans. The CBE said it also plans to in­tro­duce mech­a­nisms to help re­duce small com­pa­nies’ credit risks. Sisi and Cen­tral Bank Gov­er­nor Tarek Amer said the loan pro­gram should en­able the launch of 35,000 firms and the cre­ation of 4 mil­lion jobs. The re­sponse from credit rat­ing agen­cies was less pos­i­tive, with Fitch ex­press­ing con­cern that the reg­u­la­tions “could weaken the qual­ity of loans ex­tended by Egyp­tian banks in the medium term.”

AN IN­TER-AGENCY DIS­PUTE OVER A WHEAT FUN­GUS HAS ROCKED THE GLOBAL GRAIN TRADE.

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