SMEs have acquired nearly 7.5% of the sum of Emirates NBD Egypt’s loan portfolio, says deputy managing director and chief risk officer at the bank Sahar El-Damaty.
In an interview with Daily News Egypt, El-Damaty said the bank finished setting a plan to grant loans comprising 20% of the portfolio to these projects within four years. This comes in the framework of executing the initiative that the Central Bank of Egypt (CBE) launched at the beginning of this year to support these projects.
First of all, what is the size of the SMEs’ loans at the bank?
Before working in accordance with the new definitions the CBE set for the SMEs in December 2015, the bank used to set its own definition for them. Therefore, these projects used to acquire around 30% of the total loan portfolio of the bank.
After redefining these projects, the size of the loans directed to these projects at the bank reaches between 7.5% and 8% of its total loan portfolio.
The CBE obliged banks to make the size of loans directed to SMEs no less than 20% of their total loans within four years. Did you set a plan to achieve this goal?
Yes, the bank has already set a plan to implement the CBE’s initiative, which was delivered to the Banking Supervision Department at the CBE at the end of February.
What are the most prominent features of this plan?
The plan includes increasing the bank’s geographical presence so as to reach the owners of these projects everywhere across the country.
We aim to increase the bank’s branches to 100 by the end of 2019. These branches include mini-branches that can serve the owners of these projects.
The bank is currently located in a number of governorates, especially in Greater Cairo and Alexandria. We aim to breakthrough to new areas such as the Delta and Upper Egypt. Our presence will not be limited to the capitals of governorates. We aim to be present in the countries affiliated to these capitals as well.
Moreover, the bank’s plan to expand in financing SMEs includes also initiating departments specialised in marketing as well as granting loans to these projects, which has already been done. Meanwhile, the employees in these departments are being trained on how to deal with the owners of these projects.
And what about financing micro-enterprises?
To a certain extent, the banks were distanced from financing these projects directly; they used to finance the organisations that were funding these projects.
Meanwhile, the CBE and the Credit Guarantee Company (CGC) are implementing a vision by which the CGC will guarantee 50% of the loans that banks will grant these projects, which will encourage the banks to finance these projects directly.
Intensive meetings are expected to be held between the banks and the CGC in the ongoing days to study this matter and discuss the way of cooperation between the two parties to support these projects.
In addition, the new definition of micro-enterprises set by the CBE—which stipulates the sales’ size of these projects should be EGP 1m per project—will encourage the banks to fund them.
Has the bank decided a certain percentage of its loans to be directed to each sector of the small, medium, very small, and micro enterprises?
No, the medium enterprises in particular are the ones that currently acquire the highest percentage of the loans directed to these projects now, followed by the small enterprises. However, we, as will all the banks operating in the local market, will finance all segments of these projects so they can acquire 20% of the total loans portfolio of the bank within four years, as I said before.
What is the current size of the loans and deposits at the bank?
The bank indicators at the end of March are currently being revised; therefore, I will not be able to reveal them now.
However, according to December 2015 figures, the size of the loans at the bank is about EGP 15bn, of which about EGP 4bn are commercial loans such as documentary credits and letters of guarantee. As for the size of deposits, it is approximately EGP 20bn.
What is the growth percentage that the bank targets to achieve in the loans and deposits portfolios by the end of the current year?
We target to achieve a growth of at least 25% in all the bank’s activities by the end of 2016.
What are the most prominent sectors that the bank is financing aside from SMEs?
The bank provides financing to about 25 sectors, the most prominent of which are the new and renewable energy, electricity, petroleum, communication, contracting, steel, cement, and foods. In the next phase, the bank will focus more on projects of the energy sector, as well as the mega projects in which Emirati businesspeople will be involved, or those mega projects launched by Emirati businesspeople in the Egyptian market.
Recently, the bank granted EGP 2bn in financing to the Egyptian Electricity Holding Company, which is considered the biggest loan the bank has ever granted to one sector. Furthermore, it is considered one of the biggest loans in the Egyptian market.
The bank has solely granted this loan to the electricity sector without the participation of any other banks.
This loan is directed to financing the establishment of a 4800MW-capacity power plant in the New Administrative Capital, as well as the Borollos-Kafr El-Sheikh’s power plant with a capacity of 4800 MW. The repayment period is 15 years, three years of which account for a grace period.
In addition, the bank previously granted the Suez Canal Authority a $100m loan as part of a $1bn syndicated loan the Suez Canal Authority obtained from a number of banks.
This illustrates the bank’s keenness to support and finance the national projects established in Egypt, whatever the sector they belong to, as long as they are economically feasible.
Will the bank pump new loans into the next period?
We are already studying a number of loans to several different economic sectors during the current period, but it is difficult to reveal them until their completion.
What are your expectations for the growth of the volume of loans in the Egyptian market during the next period?
I expect the next period to see the arrangement of a large number of syndicated loans for a number of mega projects, especially with the government’s direction to launch a number of projects in the water, electricity, and sanitation sectors, along with the infrastructure projects of the New Administrative Capital.
Is the bank interested in such projects?
Yes, we are very interested in any national projects proposed, and we have enough liquidity in Egyptian pounds to finance these projects.
There was information circulated recently that a number of syndicated loans were cut down due to the lack of foreign exchange to finance the projects’ imports; is this true?
We may have a foreign exchange crisis in Egypt, but, we, at the bank, did not face such a thing. All the syndicated loans we were involved in were already granted and were not stopped.
What are your expectations for the foreign exchange crisis the Egyptian market is experiencing?
Lately, the problem of the lack of foreign exchange is handled very well, either by the government or the CBE. It is important to note that the CBE is not responsible for the provision of foreign exchange, but for managing it.
The government and the CBE are making a great effort in alleviating the crisis, both by reducing the demand on the dollar and preventing the import of non-essential goods, or by working on increasing the country’s foreign exchange resources by preparing the investment environment to attract foreign investments.
I see that working through the hedging contracts approved by the CBE recently will attract foreign investors to invest in the Egyptian debt instruments and in the Egyptian Exchange as well.
There are also efforts being made to limit the import of wheat and to be self-sufficient in this regard, which will save a lot of foreign exchange used to import it.
Moreover, the CBE and the public banks are making great efforts to attract the remittances of Egyptians working abroad and to encourage these Egyptians to invest in their country as well. All of these are efforts that will lead to a significant improvement in the currency crisis.
It was decided that $5bn will be given to the CBE by the Emirates and Saudi Arabia. $2bn of the Emirates’ share will be given to the CBE before the end of this month, and $3bn from Saudi Arabia during May, June, and July: $1bn per month.
These deposits will contribute to increasing the foreign exchange reserves from $17bn to $22bn, which will help the CBE to intervene and adjust the exchange market and to eliminate speculations on the dollar.
The dollar reached EGP 11 in the informal market. Is this a realistic price for the dollar against the pound?
Certainly not, this price was the result of speculations on the dollar’s price. I expect the dollar to be back to its real level soon.
What is the bank’s role in alleviating the foreign exchange crisis?
The bank is trying to help by providing currency to import essential commodities and limiting the use of electronic payment cards abroad, along with other efforts that will be revealed soon.
What is the bank’s role in attracting Emirati investors to invest in Egypt?
The Emirati investors are already really interested in the Egyptian market, and they, of course, are customers at the bank. In case they need financing, the bank will be ready to carry out this role.