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SMEs gaining ground
Published in Al-Ahram Weekly on 03 - 06 - 2010

SMEs are given a new push to take off, Sherine Nasr reports
On 3 June, Egypt's small and medium-sized enterprise (SME) stock exchange, Nilex, will open for trade. It is expected that at least one of the 10 enlisted companies will have a public share offering.
One of the main aims in establishing the exchange is to provide SMEs the means to seek more finance, in order to expand their businesses and create more job opportunities.
According to Nora Helmy, first deputy chairman of Naeem Funds, Nilex will not only help SMEs obtain more funds, "it is also a means through which SMEs will position themselves strategically in the market."
According to Nilex listing requirements, each of the 10 enlisted companies must sell 10 per cent of their share to the public. Many regional funds have shown an interest in investing in the exchange.
While Nilex will hopefully give SMEs a forward push, tremendous work has been done on the grassroots level to enhance the sector. A major project to survey all SMEs in Egypt is being carried out by Bank of Alexandria in collaboration with the Central Bank of Egypt (CBE). According to Fatma Lotfy, consultant to the Micro/Small and Medium Enterprise Unit in the bank, by end of 2011, a full map of the SME projects -- their geographical locations, obstacles with regards to finance, etc -- will be drawn.
"We started with Sharqiya as a pilot governorate. In the meantime, an SME toolkit has been produced by the bank and is now available to both individuals and other banks to use," said Lotfy during a seminar organised by Global Trade Matters on Monday.
The toolkit provides extensive information to individuals who think of establishing a new project or aim at enhancing an already existing business. Useful information includes coverage of the legal aspects, the different sorts of documents needed, and the means to control operations, improve market share, and set a budget.
"The toolkit is distributed for free because we believe that this is part of the corporate social responsibility of the bank."
SMEs constitute the backbone of the Egyptian economy with almost 80 per cent of total enterprises in Egypt falling within this category. Experts underline that SMEs provide almost 32 per cent of paid salaries in Egypt, and contribute 56 per cent of total industrial production.
"While bank deposits are estimated at LE800 billion, only LE6 billion are directed to SMEs," said Lotfy.
But is finance for SME lacking? Not in the least, according to Hanaa El-Helali, director-general of planning and international cooperation at the Social Fund for Development (SFD), which announced that the World Bank (WB) has, in an unprecedented move, allocated $300 million to SMEs in Egypt.
"The fund will be ratified by the People's Assembly within the next few weeks along with a $70 million fund by the African Development Bank (ADB) meant to be directed to agro business in Egypt," said El-Helali who noted that two more funds have already been ratified -- of the Organisation for Petroleum Exporting Countries (OPEC) at $250 million, and the ADB's $40 million for franchise enterprises.
Moreover, the General Authority for Investment and Free Zones (GAFI) is in the process of selecting a licensed fund management company to run its LE1 billion fund to be launched in July to promote SME growth as a means to employment opportunities. "The fund will be directed to start ups and to growth companies with promising entrepreneurs. Although the fund has, in its core, a developmental purpose, it will be run on a commercial basis," said Reem El-Saady, executive director of the SMEs Unit in GAFI.
Meanwhile, GAFI is working closely with a number of banks to promote specially tailored packages for SMEs.
The Agha Khan Foundation provides a substantial service in the same field. According to Khaled Al-Gazawi, CEO of Agha Khan Agency for Microfinance, the agency has recently launched an SME funding programme to provide graduation loans to help small businesses grow. "Assistance is also provided to help with soft skills related to branding, designing, and packaging, along with other more sophisticated matters related to settling taxes, watching the books, planning and developing the business," said Al-Gazawi.
While lack of finance is not the problem, lack in coordination among different players in the market is. "Obviously, there is plenty of money in the market. What is missing is the linkage between lenders and borrowers," said James J R Hambric of Deloitte Consulting LLP, who added that what SMEs need most is advisory services that would enable them to grow into successful companies.
According to El-Helali, SMEs need an integrated package of services. "We cannot minimise those needs to accessing finance alone. Many of the small entities don't have the ability to pinpoint what the market really needs. Therefore, the package should include training and marketing as well," said El-Helali, underlining that microenterprises should be included in the bargain.
"It would be ridiculous to ignore the fact that there are 4500 villages in Egypt where the biggest percentage of the poor are concentrated. Banks still refrain from lending these people, despite the excess in deposit reserves," said El-Helali, noting that the "culture has to change".
Since it was established in 1992, the SFD has injected $2.9 billion to finance SMEs and helped create 2.9 million job opportunities in Egypt.


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