Egypt’s collateral registry benefits banks: Moody’s

CAIRO – 15 March 2018: Moody's Investors Service expected that the collateral registry, launched on Sunday by Egypt’s Financial Regulatory Authority, will help banks reduce their credit risk, particularly for loans to small and midsize enterprises (SME).

Moody’s anticipated in a Thursday report that the collateral registry will especially benefit smaller and less-established SMEs, whose movable assets are often the main or only collateral available to a lender.

On Sunday March 11, Egypt’s Financial Regulatory Authority announced the launch of the country’s first movable collateral registry.

Moody’s said that this registry is a credit positive for Egyptian banks, explaining that it will inform banks’ credit decisions and improve their ability to secure movable collaterals, such as a borrower’s machinery, inventory, patents and crops, among other assets.

“The registry will allow banks to check whether pledges of movable assets are already pledged elsewhere, and will allow banks to establish the priority of creditors against third parties, diminishing their credit risk,” Moody’s added.

Moody’s said that according to its calculations, during 2016 and 2017, Egypt’s banks sourced around $560 million from the European Bank of Reconstruction and Development alone, up from $320 million in 2014-15.

The report estimated that the National Bank of Egypt SAE has the largest allocation of SME loans, which accounted for around 10 percent of gross loans as of December 2017, aiming to more than double its SME book to LE 72 billion by June 2020 to satisfy the Central Bank of Egypt’s (CBE) requirement.

Moody’s outlook for the National Bank of Egypt SAE is B3 stable, b31.

The Egyptian Banking Institute showed that the SME sector contributes significantly to Egypt’s economy and accounts for around 80 percent of GDP and 75 percent of employment.

SMEs employing fewer than 10 workers comprise 97 percent of all businesses, according to the state-run statistics body, Central Agency for Public Mobilization and Statistics.

By the end of 2017, Moody's Corporation expected a better performance of the banking sector in Egypt in 2018.