3 credit lines to­talling €619m to sup­port SMEs, Mid-cap Fund in Egypt

THE EIB HAS PRO­VIDED EUR 2.7BN TO THE PRI­VATE SEC­TOR IN THE RE­GION SINCE 2011, THE BANK HAS PRO­VIDED NEARLY EUR 1BN TO EGYPT THROUGH IN­TER­ME­DI­ARY BANKS

The Daily News Egypt - - Business - By Shaimaa Al-Aees

The Euro­pean In­vest­ment Bank (EIB) in­vested $15m in Egypt’s Mid-cap Fund, said EIB Di­rec­tor of Neigh­bour­ing Coun­tries Flavia Palanza.

Daily News Egypt in­ter­viewed Palanza to talk about the “EIB MED Con­fer­ence: Boost­ing In­vest­ments in the Mediter­ranean”, which is be­ing held in Cairo and the de­tails of the new Egyp­tian fund for small and medium en­ter­prises (SMEs).

The EIB will or­gan­ise a con­fer­ence in Egypt. What is the ob­jec­tive and topic of the con­fer­ence, and why do you or­gan­ise it in Egypt?

The bank or­gan­ises an an­nual con­fer­ence in the Mediter­ranean re­gion.This year’s con­fer­ence will be held in Cairo on “boost­ing in­vest­ments in the Mediter­ranean re­gion”.The con­fer­ence will gather a num­ber of com­pa­nies, fi­nan­cial in­sti­tu­tions, and as­so­ci­a­tions from Egypt, Jor­dan, Le­banon, Morocco, and Tu­nisia to dis­cuss strength­en­ing the busi­ness en­vi­ron­ment, im­prov­ing SMEs and larger com­pa­nies’ ac­cess to fi­nance, fos­ter­ing en­trepreneur­ship, and en­hanc­ing the com­pet­i­tive­ness of com­pa­nies in the Mediter­ranean re­gion.

Egypt is an im­por­tant coun­try in the Mediter­ranean and a key ben­e­fi­ciary of the bank’s in­vest­ments. Thanks to the ex­cel­lent re­la­tions we have with our part­ners and stake­hold­ers in Egypt, we are step­ping up our op­er­a­tions and con­trib­ute to meet­ing the ris­ing fi­nanc­ing needs in the coun­try, both at the gov­ern­ment level and at the pri­vate sec­tor one. Pri­vate sec­tor de­vel­op­ment is a pri­or­ity for Egypt, and the EIB is well placed to sup­port pri­vate in­vest­ments in the coun­try.

The EIB is well known for fi­nanc­ing large in­fra­struc­ture projects. Do you fi­nance the pri­vate sec­tor?

As the bank of the EU, we are a pol­icy-driven bank.We con­trib­ute to achiev­ing the south­ern neigh­bours’ de­vel­op­ment goals and ob­jec­tives that was agreed with the EU by fi­nanc­ing se­lected in­vest­ments. We fo­cus on sev­eral main themes: im­prov­ing so­cio-eco­nomic in­fra­struc­ture, sup­port­ing pri­vate sec­tor de­vel­op­ment, and fight­ing cli­mate change and its ef­fects.The over­all goal is to cre­ate lo­cal jobs through sus­tain­able growth. Thus, we have a clear man­date to sup­port the pri­vate sec­tor in Egypt as well as other Mediter­ranean coun­tries. We have been per­form­ing this func­tion con­sis­tently through the years, in co­op­er­a­tion with lo­cal au­thor­i­ties and other in­ter­na­tional fi­nan­cial in­sti­tu­tions.

For more than 35 years, we have mo­bilised EIB’s re­sources and ex­per­tise to tar­get pri­vate and pub­lic sec­tor projects that can con­trib­ute to the process of eco­nomic and so­cial re­cov­ery in Mediter­ranean coun­tries.

More­over, the EIB is step­ping up its ac­tiv­i­ties to re­in­force eco­nomic re­silience in coun­tries most se­verely im­pacted by the cur­rent refugee and mi­gra­tion crises and to con­trib­ute to tack­ling root causes of mi­gra­tion through sup­port of sus­tain­able de­vel­op­ment.

The EIB’s new Eco­nomic Re­silience Ini­tia­tive for Europe’s south­ern neigh­bour­hood and the west­ern Balkans is ev­i­dence of this com­mit­ment. Af­ter en­dorse­ment of the Eco­nomic Re­silience Ini­tia­tive by the Euro­pean Coun­cil, the first projects of the ERI have been signed in the re­gion.

Can you elab­o­rate more on the ERI and how will it in­crease your in­vest­ments?

In the south­ern neigh­bour­hood and west­ern Balkans, at the re­quest of the Euro­pean Coun­cil, we have de­vel­oped the Eco­nomic Re­silience Ini­tia­tive.The ini­tia­tive will sub­stan­tially in­crease the sup­port from the EIB to the two con­cerned re­gions. In ad­di­tion to its reg­u­lar lend­ing, the EIB will pro­vide a fur­ther €6bn of fi­nanc­ing un­der the ERI, which are ex­pected to en­able €15bn of new in­vest­ments up to 2020, tak­ing the to­tal EIB mo­bil­i­sa­tion of in­vest­ment in the re­gions to some €35bn.

This ini­tia­tive is pro­gress­ing— we have re­cently ap­proved loans for SMEs for €600m that will be in­ter­me­di­ated through banks ac­tive in Jor­dan, Egypt, Le­banon, Morocco, and theWest Bank that will sup­port growth and sus­tain ap­prox­i­mately 38,000 jobs. We are dis­cussing a blended mu­nic­i­pal in­fra­struc­ture fa­cil­ity to sup­port lo­cal com­mu­ni­ties in Ser­bia that are im­pacted by the refugee cri­sis in sec­tors like waste, health, ed­u­ca­tion, and so­cial hous­ing.

How would you eval­u­ate the im­por­tance of the pri­vate sec­tor in Egypt?

In Egypt and else­where, the de­vel­op­ment of a vi­brant pri­vate sec­tor is es­sen­tial to fire up the engines of eco­nomic growth to meet the needs and as­pi­ra­tions of peo­ple. In many coun­tries, the pri­vate sec­tor pro­vides some 90% of jobs, and is thus es­sen­tial for eco­nomic growth.

The pri­vate sec­tor in Egypt is highly di­verse, rang­ing from en­ter­pris­ing in­di­vid­u­als to large multi­na­tional cor­po­ra­tions and fi­nan­cial in­sti­tu­tions, from en­ter­prises cre­at­ing share­holder value to peo­ple­cen­tred so­cial busi­nesses.They may op­er­ate at a lo­cal, na­tional, re­gional or in­ter­na­tional level, in ru­ral or ur­ban ar­eas, in the for­mal or in­for­mal sec­tor and in very dif­fer­ent coun­try con­texts. Each of these pri­vate sec­tor ac­tors re­quires dif­fer­ent con­di­tions and in­cen­tives to con­trib­ute to de­vel­op­ment, en­tail­ing dif­fer­en­ti­ated ap­proaches to their sup­port and en­gage­ment for de­vel­op­ment. That’s why we are work­ing with dif­fer­ent types of banks to chan­nel EIB fund­ing at favourable con­di­tions to Egypt’s en­ter­prises.

Ac­cord­ing to the EIB/EBRD/ World Bank En­ter­prise Sur­vey, 40% of firms iden­ti­fied ac­cess to fi­nance to be a ma­jor ob­sta­cle to eco­nomic de­vel­op­ment. Im­proved ac­cess to fi­nance would make an im­por­tant con­tri­bu­tion to un­leash the po­ten­tial of en­ter­prises, in par­tic­u­lar when di­rected at small and young com­pa­nies that are likely to in­no­vate and cre­ate em­ploy­ment.

How much does the EIB in­vest to sup­port the re­gion’s pri­vate sec­tor? And what are the key projects?

Since 2011, the EIB has pro­vided €2.7bn to the pri­vate sec­tor in the re­gion.The bank has fi­nanced large cor­po­ra­tions di­rectly, such as the chem­i­cal in­dus­try, au­to­mo­tive, and agro-in­dus­try, as well as SMEs and mi­cro-en­ter­prises though a wide net­work of part­ner banks and in­sti­tu­tions. As the most re­cent ex­am­ple,we pro­vided €265m through Le­banese banks, ex­pected to serve en­ter­prises and sus­tain jobs in sup­port of the coun­try’s eco­nomic re­silience.

What is the bank’s to­tal size of in­vest­ment in Egypt?

Since 2011, the bank has pro­vided nearly €1bn to Egypt through in­ter­me­di­ary banks and in­di­cat­ing our stepped up ef­fort in this field— in 2016 alone three credit lines to­talling €619m to sup­port SMEs and Mid-cap.

Also re­cently, we in­vested $15m in Egypt’s Mid-cap Fund,an Egyp­tian fund that in­vests in SMEs.This is the first EIB op­er­a­tion signed in Egypt un­der the Risk Cap­i­tal Fa­cil­ity for the south­ern neigh­bour­hood coun­tries.The EIB Risk Cap­i­tal Fa­cil­ity is part of the “EU Ini­tia­tive for Fi­nan­cial In­clu­sion”, de­vel­oped jointly by the Euro­pean Com­mis­sion and sev­eral Euro­pean fi­nan­cial in­sti­tu­tions, among them the EIB.The ini­tia­tive is a com­pre­hen­sive pro­gramme to help mi­cro busi­nesses and SMEs in the south­ern and east­ern Mediter­ranean re­gion to be­come more com­pet­i­tive and grow. It pro­vides fi­nance and know-how to boost de­vel­op­ment and cre­ate jobs. In this way, it con­trib­utes to job cre­ation and eco­nomic growth in the south­ern neigh­bour­hood coun­tries.

What are the loan con­di­tions for the pri­vate sec­tor?

Our lend­ing ac­tiv­i­ties in the Mediter­ranean are based on a man­date from the Euro­pean Union and the funds that we bor­row on favourable terms on the cap­i­tal mar­ket, thanks to the EIB’s best pos­si­ble credit rat­ing (AAA).We can fi­nance in­vest­ments that are com­mer­cially and tech­ni­cally sound and have our own in-house sec­tor ex­perts. We are not profit-driven, but we need to be com­pen­sated for the credit risk we are tak­ing.

What are the tools and process of pro­vid­ing fi­nance to the pri­vate sec­tor?

The EIB is a key player in sup­port­ing the pri­vate sec­tor, of­fer­ing a broad range of fi­nanc­ing so­lu­tions for com­pa­nies in­vest­ing in Egypt, siz­able Egyp­tian com­pa­nies—in­clud­ing com­mer­cially man­aged pub­lic sec­tor com­pa­nies—as well as Mid-cap with strong de­vel­op­ment po­ten­tial and/or added value to the lo­cal econ­omy.

The EIB in­stru­ments are par­tic­u­larly well suited to dif­fer­ent types of projects, rang­ing from pro­vid­ing funds to banks, with the ob­jec­tive for banks to lend to SMEs, to di­rect loans to larger lo­cal or for­eign in­vestors.

We can pro­vide up to half of the fi­nanc­ing for in­vest­ment projects, de­pend­ing on the credit risk of the bor­rower and the par­tic­u­lar­i­ties of the pro­ject.

In cer­tain cases we can also pro­vide di­rect loans to Mid-cap com­pa­nies with up to 3,000 em­ploy­ees where the loan vol­ume re­quested is be­tween €7.5m and €25m. EIB sup­port is of­ten the key to at­tract­ing other in­vestors.

The pri­vate sec­tor has been suf­fer­ing, es­pe­cially since the flota­tion of the Egyp­tian pound.Do you think this will have an im­pact on your in­vest­ments and fi­nance to com­pa­nies in Egypt?

Eco­nomic re­forms and new poli­cies take time to achieve their goals. We see pos­i­tive signs of re­cov­ery in Egypt.For ex­am­ple,the ex­change rate of the Egyp­tian pound tends to set­tle down and in­vest­ments fig­ures are on the rise.At our side, we are present in Egypt to sup­port pri­vate sec­tor, small and large en­ter­prises. It is our com­mit­ment to the coun­try.

For cor­po­rates, what are the key sec­tors that you can fi­nance?

The EIB fi­nances projects in most in­dus­tries as long as they are tech­ni­cally sound and make eco­nomic sense.These can be for in­stance in­fra­struc­ture in­vest­ments, new pro­duc­tion fa­cil­i­ties, or in­vest­ments in agri­cul­ture. We par­tic­u­larly like in­vest­ments that make sig­nif­i­cant con­tri­bu­tion to sus­tain­able growth and cre­ate lo­cal em­ploy­ment. We also take the en­vi­ron­ment very se­ri­ously and can sup­port in­no­va­tive in­dus­tries.

Did you re­ceive fi­nance re­quests for new projects in Egypt? If yes, what type of projects?

Over­all, we have a long list of projects in Egypt. Cur­rently, we are look­ing into many of those projects.

OUR LEND­ING

AC­TIV­I­TIES IN

THE MEDITER­RANEAN

ARE

BASED ON A

MAN­DATE FROM

THE EURO­PEAN

UNION

Egypt Mid-cap fund is the first EIB op­er­a­tion signed in Egypt

Egypt is an im­por­tant coun­try in the Mediter­ranean and a key ben­e­fi­ciary of the bank’s in­vest­ments

Flavia Palanza, di­rec­tor of neigh­bour­ing coun­tries at the EIB

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