The Central Bank decided to increase the percentage of direct and indirect loans and credit facilities for companies, establishments, and small and medium enterprises and microfinance to 25% of the bank’s credit facilities portfolio, instead of 20% previously.
He explained that this includes grants directly to persons, companies and establishments, or through associations, civil institutions and microfinance companies – according to the definition issued under the circular dated March 5, 2017.
In a periodic letter, the Central Bank specified the mechanism for punishing the violating banks by obliging them to deposit funds with no return in case they did not reach the established rates.
He said that this step came in order to provide more support for micro, small and medium companies. Meetings were held with officials in charge of this sector in all banks in stages to find out the obstacles that still face the granting of finance and ways to overcome them, and with the aim of motivating banks to continue financing this The sector because of its strategic importance and a major role in economic growth.
The Central Bank has set several determinants for financing the sector, namely:
1. Banks are obligated to achieve the aforementioned 25% until December 31, 2022, provided that the basis for calculating the ratio is the net portfolio of loans and direct and indirect credit facilities granted to clients after excluding all guarantees that are considered when making provisions contained in the instructions issued on the basis of valuation. The creditworthiness of customers and the formation of provisions, except for the guarantee of the credit risk guarantee company, are not excluded by the numerator and denominator, according to the Center on December 31, 2020 and for the prescribed period.
2. Covered loans and credit facilities are outside the scope of application of that percentage.
3. The highest achieved percentage of direct and indirect loans and credit facilities is considered until December 31, 2022.
4. A minimum of 10% of the net portfolio of direct and indirect loans and credit facilities, according to the center, should be directed to companies and small establishments on December 31, 2020.
5. Banks are free to finance associations, non-governmental institutions and microfinance companies according to their internal policies, provided that the aforementioned percentage is calculated as a maximum of 2.5% of the net loan portfolio and direct and indirect credit facilities according to the center on December 31, 2020, so that it does not exceed The facilities granted to a single customer are 0.5% of the net of the same portfolio, without prejudice to the instructions issued regarding the maximum limits for employment of one client and the parties related to him.
6. The Central Bank shall be provided, by a date no later than March 31, 2021, of the bank’s plan prepared to achieve the established 25%, including the governorates and targeted economic sectors, the number of employees in the bank’s small and medium-sized companies ’sector, and the risk sector designated for small and medium-sized companies.
7. After the plan is received by the Central Bank, the 25% rate will be followed up with the banks on a quarterly basis and according to the model that will be circulated later to the banks.
Punishment for violators
8. In the event that the aforementioned offspring is not achieved during the period until December 31, 2022, the violating bank is obligated to deposit the complementary balance for each without return with the central bank, and in the event that both of them are not achieved, the complementary balance of the largest percentage without return is deposited with the central bank, according to the clause. G ”of Article 144 of the Central Bank and Banking System Law promulgated by Law No. 194 of 2020.
9. After the end of the prescribed period December 31, 2022, the achieved percentage shall be reviewed periodically, quarterly, in order to return the percentage achieved by the bank.
The Central Bank allowed banks to finance companies, enterprises and micro and small enterprises with a maximum sales volume of less than 20 million pounds, instead of 10 million pounds previously, without obtaining financial statements approved by the auditor, given that most of them work in the informal sector, taking into account that The bank’s credit policy includes the appropriate controls that are consistent with financing this type of company.
The banks shall work to provide other alternatives for studying these companies and assessing their risks, including the use and analysis of alternative credit evaluation data through digital evaluation models based on customer behavior, social data and their financial and non-financial transactions, in accordance with the controls that will be issued by the Central Bank In this regard.
The article “Al Markazi” sets penalties for banks not complying with the rates of lending to small and medium-sized companies. It was written in the Al-Borsa newspaper.