CAIRO: In questioning a panel of established financial services providers like Banque Misr, ministry of investment representatives, and innovators in the sector, Euromoney Middle East Director Richard Banks tried to create coherent framework for the future direction of financial services. Addressing general retail banking, microfinance as well as small and medium enterprises (SMEs), the discussion sometimes seemed to be comparing apples and oranges. But the general consensus - that Egyptian banking must and will become friendlier to smaller players - remained. Banque Misr Vice Chairman Mohamed Ozzalp began on a cautionary note, warning of the SME buzzword, saying that "the previous buzzwords of 'privatization' and 'BOT' met with limited success. He demanded that small entrepreneurs accept the responsibility of loan repayment, because rampant debt forgiveness programs prevent the evolution of the banking sector. Amro Abouesh, executive chairman of Tanmeyah Microfinance, disagreed, taking the discussion towards microfinance. He quoted microfinance portfolio risk as less than 2 percent nationwide, far lower than banks and corporations. He painted a rosy picture of 5 million potential clients in Egypt's microfinance market, 90 percent of whom are un-served due to the lack of product availability. Managing Director of Credit Agricole Egypt Henri Guillemin countered that Egyptian banks have invested heavily in expanding their branch networks, with the specific aim of retail banking. He called for greater leverage in order to truly meet clients' needs, because products such as mortgages are crucial to the development of retail banking in their promotion of accountability. Banks then asked Basil El-Hini, Banque Du Caire's managing director, whether banking in Egypt needed to be restructured in order to accommodate SME's, microfinanciers, and retail banking, or whether the current structure was satisfactory. "The right answer is the first. The real answer is the second, he said. Giving the disclaimer that he himself has no real solution, he called for financiers to "think outside the box and focus on the 90 percent of the Egyptian population still not served by the financial sector. "Otherwise we'll be back here next year fighting over the same pile. Yes, we'll make money, but in order to achieve real profitability we must expand our client base, he added. Senior Financial Economist and head of Capital Markets Unit at the Ministry of Investment Mohamed Farid spoke for the government, expressing optimism for the microfinance sector and citing a new law for microfinance regulation. Abouesh responded that microfinance is ready to take off, and Tanmeyah Microenterprise Services planning to establish 450 branches, 12 of which were already operational. "The labor intensive nature of microfinance will create 6,000 new jobs. While it is also cost intensive, it sells. People are desperate for this, he added. Clarifying the distinction between SMEs and microfinance, Ozzalp asserted that his concerns were geared towards small enterprises, giving the figure that "80 percent of start-ups fail. To address lack of available distributors of microfinance and small enterprise credit which can often contribute to failure, Farid brought up the possibility of using the Postal Service to serve areas still bereft of banks and waiting for Abouesh's promised microfinance offices.
