Egypt's central bank obliges banks to increase financing directed to SMEs to 25%

CAIRO - 23 February 2021: The Board of Directors of the Central Bank of Egypt (CBE) decided to compel banks to increase financing directed to companies and micro, small and medium enterprises (SMEs) from 20 percent to 25 percent of the bank's credit facilities portfolio, which leads to an additional LE 117 billion injection into this vital sector by the end of December 2022.

CBE stated in a statement, Monday, that it had been decided to provide funding to more than 120,000 companies and establishments, which would create and maintain job opportunities of about one million jobs, assuming the minimum number of workers according to the size of the companies.

It indicated that banks were asked to develop plans to achieve the prescribed percentage, including governorates and targeted economic sectors, so that implementation would be followed up on a quarterly basis.

The Central Bank said that the decision comes in light of the President's directives to encourage financing of companies and micro, small and medium enterprises, given their strategic importance in achieving economic growth.

CBE noted the issuance of a package of measures and facilities to ensure that financing reaches the markets, create millions of job opportunities for young people, support the Egyptian industry in facing foreign products, achieve sustainable economic, financial and monetary stability, and provide an opportunity for the informal economy to integrate into the formal sector.

In the same context, the Central Bank directed banks to pay special attention to small companies, as according to the new amendments, 10 percent of the banks ’portfolios were allocated to these companies, as a minimum, which would pump financing in the range of LE 55 billion for this category until the end of 2022.

Banks have also been allowed to finance companies and micro and small enterprises, specifically those whose annual turnover is less than LE 20 million without obtaining financial statements, and replace them by analyzing alternative data for traditional credit granting requirements using digital evaluation forms based on customer behaviors, social data, their financial transactions, etc. Financial, with the aim of providing easy and fast evaluation methods that support the decision to grant credit.

The Central Bank stated that the decision attracts a greater number of non-bank clients and integrates them into the banking sector in a way that supports the rates of financial inclusion.

On the other hand, instructions have been issued to banks to establish funds and target companies to invest in the capital of small and medium-sized companies, especially the newly established ones, thus forming an integrated package of subsidized financing in addition to contributing capital with the small investor to his projects.

This comes within the framework of the comprehensive state plan and in light of presidential directives to support companies and micro, small and medium enterprises, as they are the engine of growth and with the aim of creating special job opportunities for young people, as the Central Bank of Egypt plays its role in providing all support to this sector.