Central Bank of Egypt issues loan guarantees worth LE100B for banks to fund investors

CAIRO – 19 May 2020: Governor of the Central Bank of Egypt (CBE) Tarek Amer announced the issuance of guarantees worth LE100 billion to banks so they would be encouraged to be part of an initiative offering loans of 8 percent diminishing balance interest rate to private investors in the sectors of manufacturing, agriculture, and constructions.

The initiative is within a bundle of measures taken to support the Egyptian economy, maintain the gains of the economic reform program launched in 2016, and back the private sector and businesses against the repercussions of COVID-19 crisis.

The CBE governor told the Middle East News Agency (MENA) that the guarantees come in light of the rise in business risks, particularly in financial markets. He added that the initiative aims at funding businesses to make ends meet.

Amer clarified that CBE is a shareholder in a credit risk guarantee company it chairs, and that the company will offer the guarantees to banks. He explained that CBE will issue the guarantees this week to the company that in turn will provide the banks with 80 percent of loans' value. As such, banks will only endure 20 percent of the risk.

The CBE governor pointed out that the company had guaranteed loans worth LE25 billion offered to SMEs', and that its system will be modified to guarantee loans to large companies.

In December, CBE launched an initiative to finance the private manufacturing sector with LE100 billion at 10 percent diminishing balance rate. In March, the rate was reduced to 8 percent and the agricultural sector was included in the initiative. In May, the initiative has been expanded to include the constructions sector. The changes were driven by COVID-19 crisis.

Deputy CBE Governor Rami Abou al-Naga stated earlier this week that the total value of initiatives launched by the bank is LE0.5 trillion directed at tourism, real estate, manufacturing, agriculture, and constructions sectors. That is in addition to initiatives embodied in postponement of loans payback, elimination of black lists, and writing off the debts of stumbling customers.