Monday, March 1, 2021

The Central Bank raises the share of small and medium-sized companies to 25% of the banks’ credit portfolio

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Allowing banks to finance companies whose sales are less than 20 million pounds without obtaining financial statements

The Board of Directors of the Central Bank decided to oblige banks to increase financing directed to small and medium-sized companies from 20% to 25% of the bank’s credit facilities portfolio, which leads to an additional EGP 117 billion injection into this vital sector by the end of December 2022.

The bank said in a statement that the new decision contributed to providing financing 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.

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

The Central Bank, on the initiative of the President of the Republic, has already issued several initiatives since 2015 to urge banks to provide the necessary financing for it at subsidized interest rates, which resulted in granting credit facilities for these projects during the period from December 2015 to September 2020 at a value of LE 213 billion. Indeed, 81% of it is used for the industrial, agricultural and service sectors, for 126 thousand small and medium companies other than microfinance for more than 900 thousand micro-clients, in addition to the funding directed by banks to the companies and micro-finance associations, which amounted to about 14 billion EGP and enabled them to Reaching nearly 4 million borrowers.

Mai Abul-Naga “First Deputy Governor – Responsible for the Governor’s Technical Office and Financial Inclusion – Central Bank of Egypt”

In the same context, the Central Bank directed banks to pay special attention to small companies, as according to the new amendments, 10% of the banks ’portfolios were allocated to these companies, as a minimum, which would pump financing in the range of 55 billion pounds for this category until the end of 2022, and banks were also allowed to finance Companies and micro and small establishments, specifically those whose annual turnover is less than 20 million pounds without obtaining financial statements, and replacing them by analyzing alternative data for traditional credit granting requirements using digital evaluation forms based on customer behavior, social data and their financial and non-financial transactions, with the aim of providing means An easy and fast evaluation that supports the decision to grant credit, which attracts more non-banking clients and integrates them into the banking sector in a way that supports the rates of financial inclusion.

Rana Badawi " Deputy Governor - Supervisory Instructions / Supervision and Supervision Sector - Central Bank of Egypt"
Rana Badawy “Deputy Governor – Supervisory Instructions / Supervision and Supervision Sector – Central Bank of Egypt”

On the other hand, and with the aim of finding solutions other than financing, 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.

The article “Al Markazi” raises the share of SMEs to 25% of the banks’ credit portfolio, was written in the Al-Borsa newspaper.

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The Central Bank raises the share of small and medium-sized companies to 25% of the banks' credit portfolio