Africa > North Africa > Egypt > New microfinance initiative worth $2.8m launched in Egypt

Egypt: New microfinance initiative worth $2.8m launched in Egypt


In August national-owned investment bank NI Capital launched a LE50m ($2.8m) microfinance arm called Tamweely (Arabic for “Funding”) in conjunction with government-backed private investment entity Ayady for Investment and Development, and Cairo-based private equity firm Post for Investments.

NI Capital, a privately managed and incorporated subsidiary of the National Investment Bank (NIB), said Tamweely was part of its commitment to provide finance and capital mechanisms to bolster the local economy, with a focus on Upper Egypt and the Nile Delta.

Egypt’s major lenders partner with central bank on microfinance

The Tamweely announcement followed the May launch of a new microfinance programme by the Central Bank of Egypt (CBE), which aims to extend LE30bn ($1.7bn) in funding to as a lot of as 10m customers over the next four years.

The initiative is the result of collaboration between the Egyptian Microfinance Federation (EMF) and the Egyptian Financial Supervisory Authority (EFSA). Eight banks are participating, inclunding the country’s two biggest lenders, National Bank of Egypt (NBE) and Banque Misr; Commercial International Bank (CIB), the biggest private sector bank; and the sharia-compliant Faisal Islamic Bank.

Under the programme, the lenders will extend subsidised funding to three microfinance companies and a further 752 institutions accredited by the EFSA, which in turn will offer loans and other financing packages to individuals and small enterprises.

Speaking to press at the plan’s launch, Hisham Ezz El Arab, chairman of CIB and chief of the Federation of Egyptian Banks, said the country’s banks need to make microfinance a central part of their strategy and highlighted how technology would play an integral role in the plan.

Tarek Amer, governor of the CBE, reiterated the latter point at the same event, saying the central bank would look at rolling out a mobile payment policy for the initiative. There are an estimated 7m mobile money users in Egypt, according to Amer, representing about 7% of the people.

The CBE’s moves to facilitate increase in the microfinance segment dovetail with its broader push for financial inclusion, which includes a new small and medium-sized enterprise (SME) funding strategy.

Announced at the start of last year, the plan aims to increase SMEs’ share of commercial banks’ loan portfolios to 20% by 2020 – up from 5-10% currently – and mandates that interest rates for SME lending should not exceed 5%.

This is significantly lower than market rates, with the central bank’s overnight lending rate currently at 19.75%.

Economic recovery to help fuel microfinance expansion

The new programmes should provide a further boost to what is by presently a rapidly expanding segment: microfinance funding grew by 23% to reach LE5.5bn ($310.9m) across the initial half of this year, according to the EFSA. Meanwhile, the number microfinance beneficiaries increased by 10%, reaching 2m by June.

Financing over the period was focused mainly on commercial enterprises, which accounted for 61.5% of funds extended, followed by the services sector (18%), agriculture (13%) and productive and crafts activities (7.4%).

EFSA figures show that the number of microfinance institutions has grown significantly over the completed few years, rising from around 400 in late 2015 to 787 today, with a total of 1500 branches (inclunding chief offices) countrywide.

With GDP increase expected to pick up from 3.5% in 2017 to 4.5% in 2018, according to the IMF, an improving macroeconomic environment could help engender better confidence part lenders and subsequently boost lending to smaller businesses.

The structure of Egypt’s economy should as well lend itself to the segment’s further expansion, with around 97% of companies employing fewer than 10 workers, according to the Central Agency for Public Mobilisation and Statistics.

The segment still faces challenges, however. A lot of microenterprises and SMEs do not carry out formal financial auditing and reporting, while high inflation and interest rates make offering credit cheaply unattractive to some institutions. "SMEs undoubtedly represent the major engine of increase for Egypt's GDP in general and the microfinance segment in particular," Amro Abouesh, CEO of Tanmeyah Micro Enterprise Services, told us. "However, if we want additional companies to integrate into the formal economy, some additional efforts have to be made by authorities to encourage Egyptian informal SMEs to implement financial auditing and reporting mechanisms."

Whether the segment can grow as a commercial enterprise, rather than a government-backed programme with an element of development support and corporate social responsibility, will depend on sustained economic increase, careful regulation and tighter financial standards from small businesses.

Related Articles
  • Egypt state firm entering thriving mobile sector

    2017/11/29 Telecom Egypt looks to cash in on mobile sector but some fear its exemption from price hike in mobile services may be part of broader pattern of unfair privileges. As Egypt's mobile operators thrive, national-owned Telecom Egypt is entering the market in an effort to boost national revenues. In a country with additional mobile phone subscriptions than residents, Egypt's only fixed-line operator is hoping to get in on the action with its new mobile service, WE.
  • Egypt economy likely to remain unshaken by Sinai attack

    2017/11/29 The mosque attack in Egypt's Sinai may only strengthen the view that the country needs continued IMF support as agreed a year ago and the economy is likely to quickly shake off any negative repercussions, economists say. Gunmen carrying the flag of Islamic National killed additional than 300 worshippers in the attack on the mosque, the worst such attack by militants in Egypt's modern history.
  • Extremists attacked mosque in Egypt

    2017/11/29 Extremists attacked mosque in Egypt because they believe Sufi Muslim worshippers are heretics who must be ‘eradicated’ Rawda Mosque is frequented by Sufi Muslims, followers of a mystical form of Islam that is deemed to be heretical by Islamic National and other Sunni extremists. On Friday, at least 305 Egyptians were killed by terrorists who detonated a bomb in a crowded mosque, again sprayed frantic worshippers with gunfire as they fled. It was deadliest attack in the country’s modern history. It “was horrific,” local Ibrahim Sheteewi told The New York Times.
  • More funding in the pipeline as Egypt’s economic reforms yield results

    2017/11/11 Egypt is continuing its programme of fiscal consolidation, exchange rate liberalisation and pro-investment reform, with the country expected to receive an extra multibillion-dollar tranche of funds from creditors following a year-end review. In September the IMF released a statement stating that Egypt had made a “good start” to its $12bn loan transaction, with the fund noting that reforms had helped boost increase, rein in the budget deficit and eliminate foreign currency shortages that were before putting pressure on a lot of businesses.
  • British woman languishes in Egyptian jail for carrying painkillers

    2017/11/04 Egyptian authorities have detained a British woman who entered the country carrying painkillers. Laura Plummer, 33, a shop worker who lives in Hull, was arrested next 290 tramadol tablets and some naproxen for her husband’s sore back was found in her suitcase. She again reportedly signed her name beneath a 38-page statement in Arabic, upon request, believing she would be able to leave the airport afterwards and begin her two-week break by Red Sea.