New mi­cro-fi­nance ini­tia­tive worth $2.8m launched in Egypt

Egypt’s mi­cro-fi­nance seg­ment is gain­ing new mo­men­tum thanks to cen­tral bank and govern­ment ini­tia­tives

The Daily News Egypt - - Business -

In Au­gust state-owned in­vest­ment bank NI Cap­i­tal launched a LE50m ($2.8m) mi­cro-fi­nance arm called Tamweely (Ara­bic for “Fund­ing”) in con­junc­tion with govern­ment-backed pri­vate in­vest­ment en­tity Ayady for In­vest­ment and De­vel­op­ment, and Cairo-based pri­vate eq­uity firm Post for In­vest­ments.

NI Cap­i­tal, a pri­vately man­aged and in­cor­po­rated sub­sidiary of the Na­tional In­vest­ment Bank (NIB), saidTamweely was part of its com­mit­ment to pro­vide fi­nance and cap­i­tal mech­a­nisms to bol­ster the lo­cal econ­omy, with a fo­cus on Up­per Egypt and the Nile Delta.

The Tamweely an­nounce­ment fol­lowed the May launch of a new mi­cro-fi­nance pro­gramme by the Cen­tral Bank of Egypt (CBE), which aims to ex­tend LE30bn ($1.7bn) in fund­ing to as many as 10m cus­tomers over the next four years.

The ini­tia­tive is the re­sult of col­lab­o­ra­tion be­tween the Egyp­tian Mi­cro­fi­nance Fed­er­a­tion (EMF) and the Egyp­tian Fi­nan­cial Su­per­vi­sory Au­thor­ity (EFSA).

Eight banks are par­tic­i­pat­ing, in­clud­ing the coun­try’s two biggest lenders, Na­tional Bank of Egypt (NBE) and Banque Misr; Com­mer­cial In­ter­na­tional Bank (CIB), the biggest pri­vate sec­tor bank; and the Shariah com­pli­ant Faisal Is­lamic Bank.

Un­der the pro­gramme, the lenders will ex­tend sub­sidised fund­ing to three mi­cro-fi­nance com­pa­nies and a fur­ther 752 in­sti­tu­tions ac­cred­ited by the EFSA, which in turn will of­fer loans and other fi­nanc­ing pack­ages to in­di­vid­u­als and small en­ter­prises.

Speak­ing to press at the plan’s launch, Hisham Ezz Al Arab, chair­man of CIB and head of the Fed­er­a­tion of Egyp­tian Banks, said the coun­try’s banks need to make mi­cro-fi­nance a cen­tral part of their strat­egy and high­lighted how tech­nol­ogy would play an in­te­gral role in the plan.

Tarek Amer, gov­er­nor of the CBE, re­it­er­ated the lat­ter point at the same event, say­ing the cen­tral bank would look at rolling out a mo­bile pay­ment pol­icy for the ini­tia­tive.

There are an es­ti­mated 7m mo­bile money users in Egypt, ac­cord­ing to Amer, rep­re­sent­ing about 7% of the pop­u­la­tion.

An­nounced at the start of last year, the plan aims to in­crease SMEs’ share of com­mer­cial banks’ loan port­fo­lios to 20% by 2020 – up from 5-10% cur­rently – and man­dates that in­ter­est rates for SME lend­ing should not ex­ceed 5%.

This is sig­nif­i­cantly lower than mar­ket rates, with the cen­tral bank’s overnight lend­ing rate cur­rently at 19.75%.

The new pro­grammes should pro­vide a fur­ther boost to what is al­ready a rapidly ex­pand­ing seg­ment: mi­cro-fi­nance fund­ing grew by 23% to reach LE5.5bn ($310.9m) across the first half of this year, ac­cord­ing to the EFSA. Mean­while, the num­ber mi­cro­fi­nance ben­e­fi­cia­ries in­creased by 10%, reach­ing 2m by June.

Fi­nanc­ing over the pe­riod was fo­cused mainly on com­mer­cial en­ter­prises, which ac­counted for 61.5% of funds ex­tended, fol­lowed by the ser­vices sec­tor (18%), agriculture (13%) and pro­duc­tive and crafts ac­tiv­i­ties (7.4%).

EFSA fig­ures show that the num­ber of mi­cro-fi­nance in­sti­tu­tions has grown sig­nif­i­cantly over the past few years, ris­ing from around 400 in late 2015 to 787 to­day, with a to­tal of 1500 branches (in­clud­ing head of­fices) coun­try­wide.

The seg­ment still faces chal­lenges, how­ever. Many mi­cro-en­ter­prises and SMEs do not carry out for­mal fi­nan­cial au­dit­ing and re­port­ing, while high in­fla­tion and in­ter­est rates make of­fer­ing credit cheaply unattrac­tive to some in­sti­tu­tions.

“SMEs un­doubt­edly rep­re­sent the main en­gine of growth for Egypt’s GDP in gen­eral and the mi­cro-fi­nance seg­ment in par­tic­u­lar,” Amro Abouesh, CEO of Tan­meyah Mi­cro En­ter­prise Ser­vices, told OBG.

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