With the recent growth of non-bank financial activities, EFG-Hermes Finance has entered and expanded the non-bank financial services platform of EFG Hermes by establishing six companies that offer these services, while seeking to add two new companies to complete the group’s non-bank financing system (NBFS).
Chief Financial Officer of EFG Finance Group, Walid Hassouna, said in an interview with Daily News Egypt that his company will adopt a new strategy in the coming period to cope with the digital transformation and financial technology currently underway in the country. All non-banking financial services provided by the group to individuals will be through the use of advanced technologies and electronic applications, as with valU, which offers its services fully electronically.
The Financial Group includes six subsidiaries providing non-banking financial services, Hassouna said. Two new companies are planned, one of which is a Life Insurance Company and the other is an electronic payments company. Financial services and solutions will be offered in the two new companies, in addition to the real estate finance company that was recently established.
Financial technology (fintech) will not be fully used in those companies, as in the case of valU, he added. The application of technology may acquire varying rates in the two companies which may range from 50% to 70%, to be gradually increased, due to the commitment of companies to work according to specific legislation, procedures, and controls that must be implemented in a routine manner. Hassouna explained that in the life insurance company, the fintech services and solutions will be significantly provided in the process of selling electronic policies and payment premiums.
Furthermore, Hassouna said that the real estate finance company will start its activity early next month, and aims to provide financing to individuals with innovative technological solutions that do not exist in the Egyptian market. This will include financing the projects of the Talaat Mostafa Group, along with the remaining real estate projects. It is expected that fintech will contribute to a breakthrough in the performance of this company and its business volume.
The Financial Group is very interested in benefiting from the state’s trend toward digital transformation and the use of financial technology in all non-banking transactions, Hassouna said. The company is preparing to participate in these initiatives by developing innovative solutions to benefit all parties involved in financial technologies, including customers, merchants, and partners alike. He stressed that creating innovations and technological solutions is the real nucleus for shaping a new future for the financial services sector, which is conducted through start-ups—considered the backbone of financial technology and digital transformation processes. The group established the EFGEV FINTECH fund, in partnership with the Ministry of Investment, with the aim of taking a permanent look at market developments in the field of fintech and investing in entrepreneurial ideas in Egypt.
Moreover, the Chief Financial Officer of EFG Finance Group revealed that the fund is currently in negotiations to buy stakes in four new start-up companies worth around $50,000 – $100,000 per company, expecting these deals to be concluded in the fourth quarter (Q4) of this year.
Additionally, Hassouna said that the EFGEV FINTECH fund is currently investing in six companies, and that one of its companies, Paynas, is about to obtain financing in the amount of EGP 5m.
Paynas is using technology to integrate small and medium-sized enterprises (SMEs) into Egypt’s financial system. The company built a cloud-based human resources (HR) and payroll management platform that allows Egypt’s small businesses to provide their employees with benefits. By providing HR features such as employee and payroll management, Paynas is helping SMEs optimise their workforces.
Another Egyptian startup incubated by the fund is X-Pay, that in addition received $250,000 from UAE funds. X-Pay is a revolutionary electronic payment solution that allows closed communities – such as residential compounds, schools and clubs – to digitise payments and payment collection. Additionally, X-Pay provides its users with a variety of value-added services that render it easier to manage payments and settle recurring bills. The fund further includes Noqood, Hood, and Verified.
What’s more, with a mobile penetration rate of over 100% and a large demographic tech-savvy young population, Egypt is increasingly turning to fintech solutions to offer better services and integrate its unbanked and underbanked populations into the formal financial system, Hassouna added. Banks and other financial institutions are already collaborating with fintech companies to make their products and services accessible and affordable for more people.
The popularity of these solutions is rising around the world, as over $100bn has been invested globally in fintech companies in the past five years.
The Central Bank of Egypt (CBE) has empowered fintech startups by pressing to make Egypt a cashless economy and launching a variety of financial inclusion initiatives.
In general, Hassouna said that the current trend of banks switching to electronic branches and digital transformation will represent a big leap in promoting the process of technological transformation in Egypt and educate people about it, as these services now suffer from fear and a reluctance of people. If it is provided by trusted sources it will be a powerful driver of digital transformation processes, Hassouna believes.
The economic situation in Egypt and the world in general is not at its best, which represents an opportunity to make good investments in providing innovative technological solutions with high efficiency, thus enabling companies to capture good market shares in the non-banking financial services sector, which is expanding significantly in past periods to fill funding gaps, Hassouna pointed out.
Furthermore, Hassouna advises companies that seek to benefit from the current period in which technological development starts to spread and start-ups to expand, to invest in the establishment of an internal sector of technology. That sector would depend on the provision and development of technological services from the company’s internal resources to avoid reliance on external technology only, which ensures a promising future for those companies in various sectors.
Hassouna believes that what is currently lacking for the launch of fintech is to simplify the procedures of the electronic signature and give it a recognised and reliable power in Egyptian courts. This is in addition to the issuance of the Consumer Finance Law, which will support the entry of new players in all areas related to fintech, Therefore, this will promote competition between companies to provide the best innovative technological solutions and services.
EFG-Hermes operates six non-bank financial services companies, namely Hermes Leasing, Tanmeyah for Microfinance, EFG Hermes Factoring, a mortgage finance company in partnership with Talaat Mostafa, and Ghabbour Auto, next to valU for retail instalment services, and finally the EFGEV FINTECH incubator.
EFG-Hermes Leasing is currently preparing a new securitisation process worth EGP 300-400m during Q4 of this year or up to Q1 of 2020, Hassouna said.
The financial leasing company significantly expands in the financing of SMEs, which represent about 15% of the total size of the company’s financing portfolio, currently standing at EGP 3.3bn, he added.
Furthermore, Hassouna believes that the financial leasing and factoring companies will greatly benefit from the growth witnessed by SMEs, which he considers as the real strength of the Egyptian economy’s progress and growth in the coming years. He added that the two sectors will also benefit from the CBE’s tendency to cut interest rates. The lower the interest rates, the greater the volume of activities, so he expects a significant improvement in the two sectors in the coming period.
As for valU instalment sales services, Hassouna said that the company currently has 50,000 customers and is carrying out more than 200 operations a day. It also plans to develop the application for the third time before the end of this year, to be developed every six months thereafter.
He pointed out that the default rate in the repayment of the valU premiums of customers does not exceed 1%, a simple rate enjoyed by the consumer finance sector, so this sector is one of the likeliest sectors of growth in the coming period.
