The Central Bank of Egypt (CBE) has directed for banks working in the local market to inject EGP 117bn into micro-, small- and medium-sized enterprises (MSMEs) until the end of December 2022.
This comes as the CBE issued a package of measures and facilities to ensure access to finance, and create millions of job opportunities for youth.
The package also aims to support Egyptian industry in facing foreign products, and achieving sustainable economic stability.
The CBE move comes in response to President Abdel Fattah Al-Sisi’s directives to encourage financing of companies and MSMEs, due to their strategic importance in achieving economic growth.
Funding these enterprises also allows the opportunity for the informal economy to integrate into the formal sector.
On 21 February 2021, the CBE’s Board of Directors decided to compel banks to increase financing directed to these companies and establishments from 20% to 25% of the bank’s credit facilities portfolio.
This is set to lead to the additional EGP 117bn injection into this vital sector by the end of December 2022. Funding will be made available to more than 120,000 companies and establishments, which would create and maintain about one million jobs.
The CBE called on banks to set plans to achieve the target percentage, including the governorates and targeted economic sectors, so that implementation would be followed up on a quarterly basis.
It has issued several initiatives since 2015 urging banks to provide the necessary financing at subsidised interest rates.
This has resulted in granting credit facilities for these enterprises, during the period from December 2015 to September 2020, amounting to EGP 213bn. Of this amount, 81% has already been used for 126,000 small- and medium-sized enterprises (SMEs) in the industrial, agricultural, and service sectors, in addition to more than 900,000 micro clients.
In addition, banks have provided about EGP 14bn in financing to micro enterprises and associations, reaching nearly 4 million borrowers.
In the same context, the CBE has directed banks to pay special attention to SMEs, as according to the new amendments, 10% of the banks’ portfolios were allocated to these companies, as a minimum. This would be pumped into financing in the range of EGP 55bn for this category until the end of 2022.
Banks have also been allowed to finance micro and small enterprises, specifically those whose annual turnover is less than EGP 20m, without obtaining financial statements.
These would be replaced by analysing alternative data on traditional credit granting requirements using digital evaluation forms based on customer behaviour and their social data.
This aims to provide easy and fast evaluation methods that support the decision to grant credit. It would, in turn, attract a greater number of non-bank clients and integrate them into the banking sector, in a way that supports the rates of financial inclusion.
On the other hand, with the aim of finding solutions other than financing, instructions have been issued to banks to establish funds and target companies. This would take place with the aim of investing in the capital of SMEs, especially newly established ones. This creates an integrated package of subsidized financing in addition to helping small investors with their capital.
This comes within the framework of the comprehensive state plan, and in light of the presidential directives to support SMEs and micro enterprises as the engine of growth.
It also aims to generate special job opportunities for young people, as the CBE plays its role in providing all support to this sector.
The CBE spares no effort in identifying the obstacles that this sector still faces in gaining grants and ways to overcome it, in coordination with the concerned parties across the country.