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Experts debate role of banks in supporting competitiveness
Published in Daily News Egypt on 05 - 12 - 2010

CAIRO: “Financing the private sector is a real problem in Egypt, and [the country] would have [grown] at a faster rate if financing was more readily available to medium and smaller [sized] companies,” said Mohamed Taymour, the chairman of Pharos Holding, at a conference last week.
Banking institutions have not been successful in fueling private sector growth, since they have somewhat failed in helping companies grow, Taymour said at a session discussing the role of banks in supporting competitiveness.
Taymour pondered aloud as to whether or not the banking sector's missed opportunity could be attributed to the government's crowding of the private sector, creating an investment environment that makes it more attractive for investors to invest their money into government treasury bills. Taymour added that the loan-to-deposit ratio is currently 50-55 percent — much lower than the global average.
“I'm not here to defend the banks, and I'm the first one to point the finger at myself if something is wrong,” responded Basel El-Hini, the managing director of Banque Du Caire.
According to El-Hini, if central bank regulations and requirements for deposits were taken into consideration, the country's loan-to-deposit ratio would be much higher.
Small- and medium-sized enterprises (SMEs) do not have the proper financial tools and systems to warrant financing, El-Hini said, pointing to the importance and lack of financial information necessary to properly assess a loan.
Egypt's businesses suffer from the lack of information culture, an issue that needs to be tackled by businesses and the government, said Dora Fiani, CEO of Coface Egypt.
“It is not difficult to understand that you need to check on your client before dealing with them, and the need for looking for information about your customer, and on the borrower's side, making the information available,” Fiani stated.
“Most small and medium companies are not eligible for financing on the corporate level due to the financial assessment requirements of the CBE [Central Bank of Egypt] ,” said El-Hini. “If there are any who are eligible, I guarantee that they will be financed.”
Samy Hamboly, the chairman and CEO of Ameco Medical Industries — a business registered in the Nilex as an SME — talked about his company's experiences in acquiring startup funding.
“When building our factories, it was difficult to receive any facilities,” Hamboly said. “We did it on our own, and we increased our capital on our own. No bank would finance us.”
Eventually Hamboly's company was able to acquire a loan through a program offered by the European Investment Bank and the National Bank of Egypt. Hamboly, however, mainly credited the European side for his company's loan, stating that the Europeans' guidance and support enabled his company to expand and increase its profits.
Awad Fawzy, himself an SME owner currently in search of financing, affirmed that there is indeed a lack of funding available for SMEs like his company and asked the bank representatives at the conference if they were currently offering any products that target SMEs.
El-Hini stated that he hopes banks will start to devise retail programs that cater to SMEs, and that Banque Du Caire is currently looking into starting such a program.
“For SME financing, I don't think we should wait for these instruments and financial capabilities because the SMEs are not eligible and will not be eligible soon — not enough financial information is available about them and we cannot wait for this culture to be instilled,” El-Hini added.
Mounir El-Zahid, the managing director of HSBC Egypt, spoke of his bank's recently established website — — which helps SMEs organize and structure their financials, providing them with expert advice and guidance on a wide range of sectors and import/export activities.
“We are all trying to raise awareness as we recognize the importance of this sector to the economy,” El-Zahid said.
Another main problem raised at the seminar is that facilities for long-term investments are not as readily available in Egypt as they are in other countries. Fouad Younis, a developer currently involved in many infrastructure projects, said that this lack of long-term investment facilities was a very large concern for both himself as well as many other land developers. In addition to land development, the inadequate sources for long-term investment have raised problems for other sectors as well.
“Financing for agriculture has been quite a challenge because it's a long-term investment, and the framework for that has not really developed here,” said Ramzi Nasrallah, vice president of Wadi Group, a family-run agri-business firm.
According to Nasrallah, banks were reluctant to grant a growing business a loan that would last longer than five or six years and only offered loans with high interest rates. As a result, Nasrallah stated that the Wadi Group instead pursued financing from outside the country.
Nasrallah added that the Wadi Group approached the International Finance Corporation (IFC) and was granted a long-term loan that was more affordable. In addition to better loan terms, Nasrallah stated that the guidance his company received from the IFC was superior to the guidance provided by banks in Egypt as well.
“If I compare Egyptian banks and our relationship to the IFC, we will find it is very different,” said Nasrallah. “They look at our strategy and our figures and they act as shareholders; local banks do not really get into that, and do not really help or guide us in our investments even though they have valuable market information.”
El-Hini encouraged the Egyptian government to develop and reform the corporate bond market, which would increase long- and medium-term facilities.
He concluded that this issue is a point of concern for him “as a member of the banking community, and as an Egyptian” who understands the importance of infrastructure and private public partnerships — each of which desperately require this type of funding in order to succeed.

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