Ahmed Labib, CEO of Reefy for microfinance, has said that the company aims to offer a total of EGP 4.25bn worth loans during the year.
He added that these projections are based on the company’s success in offering EGP 1bn worth loans during the first quarter of the year, which represented 8% of the company’s total loans since its inception in 2007.
Labib said that the company’s average financing reached EGP 34,800 per minute or EGP 27,000 per client in the first quarter of 2023.
In an interview with Daily News Egypt, Labib stated that the company currently has 154 branches, and it aims to expand its geographical presence during the current year to 200 branches by the end of 2023.
He added that these expansions target all governorates, especially in Upper Egypt, which is a promising market due to the high, yet unmet demand for financing.
Labib said that Reefy obtained the approval of the Financial Regulatory Authority (FRA) to raise the financing limit per client to EGP 200,000 instead of EGP 100,000 in August 2022.
“The company is proud of its robust client base, as the percentage of customers who renew their financing comprises 46% of total clients, and the company targets to reach 50%, which is the optimal percentage,” Labib added.
Labib emphasized that the collection rates exceed 98% due to the quality of Reefy’s active client portfolio, which is a direct result of Reefy’s responsible loan disbursement, by which financing is calculated according to the forecasted cash flows of clients’ projects or businesses during the financing period.
In terms of the Reefy’s financial results, Labib stated: “Since CI Capital’s acquisition of a majority stake in Reefy in 2017, the Company has successfully continued to increase its profits from EGP 107m in 2018, to EGP 113m in 2019, and EGP 125m in 2020. Meanwhile, Reefy recorded a net profit of EGP 200m in 2021, a year-on-year increase of 60% over the previous year. Lastly, Reefy reported EGP 333m in net profits in 2022, which amounts to a 66% year-on-year increase.”
The Financial Times recently issued a list of Africa’s Top 100 Fastest Growing Companies, a list which featured Reefy among the fastest growing in the continent by compound annual growth rate (CAGR). Reefy achieved a compound annual growth rate (CAGR) of 27% between 2018 and 2021. Meanwhile, Reefy achieved a CAGR of 43.7% between 2019 and 2022.
In terms of financial inclusion, and within CI Capital’s strategy of operational integration between Reefy, CI Capital Holding and Banque Misr, Labib stated that there is full cooperation between all parties to facilitate client onboarding and loan disbursement through the issuance of Banque Misr’s “Meeza” card to Reefy’s clients.
Labib added, “In terms of digital transformation, Reefy has adopted a comprehensive plan to develop its technological infrastructure along with a thorough digitization of the company’s operations by 2024. Reefy also aims to launch a mobile application to accelerate its disbursement procedures, despite it being the fastest in the market with a maximum duration of two days.”
“The company also aims to utilize artificial intelligence in consumer and credit behavior analysis, as well as demographic data, to fully assess clients’ credit scores and financial needs,” Labib added.
Regarding the new lines of business, Labib stated that Reefy aims to initiate microlease pending the approval of the FRA.
Regarding services offered by the company, Labib indicated: “Reefy has five main products that suit the activities of customers, namely the “individual home” product, which targets customers who own small projects that are managed from their homes. The second offering is the “individual” product, which finances micro-enterprises that have a physical business address. The third service is “Clinic Equipment,” which provides microloans to clinics, laboratories, and radiology centers. The fourth is the “transportation” product, which finances the purchase or maintenance of vehicles.”
Labib added that the fifth product stems from Reefy’s women empowerment initiatives, stating that the “Quattro” product provides microloans for females between the ages of 18 to 21 at attractive rates. Our goal is to help create female entrepreneurs from an early age. In line with the Egyptian Government’s plan to empower women, Reefy is in the process of finalizing the launch of a new product called Alma, which targets businesswomen under the age of 45 who have two children at most.
Labib indicated that there are challenges facing the non-banking financial services sector after the interest rates rose by 1,000 basis points since March 2022, as the sector relies on banks as a main source of finance to its customers. He also indicated that Reefy relies on 10 local banks and a foreign bank to obtain the necessary funds for the company and its clients, which reduces the risk of concentration, and the company is conducting continuous negotiations with its long standing partner banks to increase its credit limit, in addition to negotiations that Reefy is conducting with international developmental institutions, particularly those supporting women.
Reefy had previously obtained a loan of EGP 200m from the EBRD, which will be re-lended to medium, small, and micro enterprises owned or led by young entrepreneurs, within the framework of the EBRD’s Youth Business Program, which contributes to expanding the company’s customer base and reaching new segments.
To achieve a balance in the company’s capital adequacy ratio, Labib indicated that Reefy is in the final stages of its first securitized bond issuance, which will enable the company to generate cash liquidity to settle banks’ credit facilities, to be reused again in the future.
Labib added: “Challenges facing the Egyptian economy at the present time are normal, as Egypt is not isolated from challenges facing the global economy, such as COVID-19 and the global repercussions of the Russian-Ukrainian conflict.”
“There is huge potential within informal economic sectors, which – if formalized – can be a driving force behind economic growth. Utilizing and formalizing this sector can achieve sustainable development of the economy,” Labib stated.
He also added that micro, very small and small businesses that rely on microfinance contribute to the Egyptian economy, and providing formal financing to this vast economic sector is essential to achieve sustainable growth in the long-run.
“The Financial Regulatory Authority decision to raise minimum capital requirements of microfinance companies from EGP 15m to EGP 75m was very positive, especially that the FRA thoroughly discussed the decision with stakeholders and market participants such as the Egyptian Federation for Financing MSMEs. Raising capital was vital and a positive step for the sector to ensure financial solvency,” He stated.
Meanwhile, Reefy increased its capital in two stages, from EGP 22.5m to EGP 50m, and more recently increased to EGP 100m.
Companies operating in the microfinance sector increased from 11 to 23 companies, while the number of microfinance associations increased from 920 to 1,050.
Labib concluded: “The FRA supports the microfinance industry and all its stakeholders, by taking some important measures such as applying the principles of responsible pricing, that ensure the sustainability for customers and companies alike, in addition to banning trust receipts and raising financing limits to clients. The maximum financing granted has recently increased by 10% to reach EGP 220,000, which helped project owners to support their business amidst current inflationary pressures.”
