El-Sayed El-Kosayer, head of the Egyptian Agricultural Bank (EAB), said he expected that bank’s basic system to be decided on and set up within two months, as part of the bank’s restructuring affairs to suit Law no. 84 of 2016, which was approved by the Egyptian parliament in November 2016.
Previously, there were the Development and Agricultural Credit Banks for Upper Egypt and for Lower Egypt and the Principle Bank for Development and Agricultural Credit (PBDAC), which supervised the work of the two banks and is located in Cairo.
The government’s new bank law stipulates merging the Upper and Lower Egypt banks into EAB.
The law also stipulates that the board of directors includes a chairperson, two deputies, two representatives of the Ministry of Finance, two from the Ministry of Supply, and two from the Ministry of Agriculture, in addition to six specialists in the banking, monetary, financial, economic, agricultural, and legal affairs.
On 18 January, the cabinet decided to hire Samy Abdel Sadek and Tamer Gomaa as deputies of the bank’s chairperson.
According to El-Kosayer, there are ongoing consultations with the minister of agriculture and the governor of the Central Bank of Egypt (CBE) to continue the formation of the board as an enforcement of the new law.
He added that in compliance with the law, the general assembly of the bank has completed the approval of the bank’s business results last week to include the period until 30 June 2016, in the presence of Abdul Moneim El-Banna, the Minister of Agriculture.
In a related context, El-Kosayer revealed that the EAB has obtained EGP 2.5bn from the CBE in the form of a support deposit for 10 years without interest as part of the CBE’s support to the bank to help it implement its restructuring plan and take the right path towards helping Egyptian farmers.
El-Kosayer explained that the amount is considered only an initial amount until the bank’s total needs are made clear. He stressed that the capital base of the bank is now in negative numbers—after the losses it bore reached EGP 6bn throughout the past years—so it was necessary to obtain support from the CBE in order to improve the bank’s situation and decreases its losses.
According to El-Kosayer, the bank’s losses are the result of its inability to generate revenues that cover costs and expenses. Moreover, there are several assets that do not bring revenues anymore and others that are not utilised optimally. The bank’s internal environment is also weak, lacks a monitoring system, and is unable to follow the work controls issued by the CBE, he said.
The irregular loan portfolio in the bank is estimated at EGP 4bn, and there is an allocation gap of EGP 2bn.
The bank has dues owed by the Ministry of Finance that were estimated at EGP 3.5bn, from which it was able to obtain EGP 1bn. It is currently negotiating to obtain the rest, according to El-Kosayer. He pointed out that discussions are taking place with Prime Minister Sherif Ismail in order to reach a solution for the dues crisis through converting the dues into investments in the treasury bonds and bills offered by the Ministry of Finance.
According to El-Kosayer, the bank’s management is doing its best to complete the implementation of the restructuring plan, which started with approving the new bank law, completing the merger of the Upper and Lower Egypt banks, and finally putting into place the bank’s basic system. He pointed out that these matters are happening parallel with supporting the bank’s capital base and forming an infrastructure to help it launch. Moreover, workers in the bank are being trained to understand the services the bank will be providing.
He added that during its meeting last week, the bank’s board of directors approved the bank’s restructuring plan and the separation to take place between the support and business departments of the bank. This is in order to help it activate its governance, which requires this separation between specialties and responsibilities. He noted that there is a plan to provide the bank with some expertise to help it play its role correctly.
“A strategic plan was prepared for the bank to adopt throughout the next three years. It includes supporting the bank’s financial position, as well as supporting revenues to decrease losses through achieving an annual growth rate of 15% in all activities of the bank,” El-Kosayer said.
He pointed out that the bank is currently cooperating with the Egyptian Banking Institute (EBI), in coordination with the CBE, to train a large number of workers in the bank and qualify them for working in the sector of small and medium enterprises (SMEs), which the bank plans to establish in several governorates over the upcoming period.
El-Kosayer revealed that the deposit portfolio of the bank has exceeded the barrier of EGP 40bn, whereas the volume of the loan portfolio reached EGP 23bn. He noted that the bank has provided financing worth EGP 5.5bn to about 800,000 customers working in the field of plant production and strategic crops, with a revenue of 5% every year in order to serve Egyptian farmers.
He added that the bank deals with about three million clients, who represent 25%-30% of the total number of clients in the Egyptian banking sector. It also has 1,210 branches that represent 30% of the total number of branches of the banks working in the Egyptian market. This shows the great role the bank can play in achieving financial inclusion and reaching clients everywhere.
“Throughout the upcoming period, EAB plans to provide financing to the clients of the national project to reclaim 1.5m feddans (1.557m acres) as part of its strategic work plan, which is in line with the state’s development plan,” El-Kosayer said. He added that the bank aims to expand in the system of electronic services, especially in the field of wages, payments, transfers, and the dissemination of a wide ATM network.