CBE Governor directs banks to expand financing of SMEs

Restructuring the Credit Guarantee Co. S.A.E is an important step to provide financing for new companies, says Helal

Tarek Amer, Governor of the Central Bank of Egypt (CBE), stressed on the importance of cooperation between banks and the government agencies, governorates and chambers of industry and trade to finance development projects to boost investment, especially in the field of industrial, agricultural and service activities.

This came during the meeting held by Amer with heads of banks in the presence of deputy governors to discuss several issues, foremost of which is the need for banks to prepare for the expected transformation in the structure of assets from safe investment tools to loans to finance productive projects, emphasizing the foundations and philosophy of the new banking law, next to continuous consultation with all relevant parties in this regard and developments in monetary policy.
At the beginning, the meeting discussed the developments in financing the micro, small and medium enterprises sector and stimulate its activity through continuing to activate the existing initiatives to achieve the goals agreed upon with the President of the Republic on time. In addition to supporting the existing companies through the initiatives of the CBE, Amer recommend the need to support small companies under incorporation, which do not have an operational or credit history but have a viable investment ideas.
In this context, CBE Deputy Governor Lobna Helal point out the completion of restructuring of the Credit Guarantee Co. S.A.E procedures as one of the most important tools to encourage banks to grant financing for small businesses and private companies under establishment through the company to guarantee the credit risk of these facilities with banks.
For his part, Amer pointed out that the portfolios of the financing of some banks focus on a small number of customers, while the base must be expanded and spread to balance between the total lending to large and small companies.
Amer directed the banks to adopt an investment approach and not only the traditional business and the introduction of new products, with the creation of various investment funds for projects, including real estate investment funds to take advantage of the current real estate portfolios.

For their part, the heads of banks welcomed this matter in order to ensure the creation of risk balanced investment portfolios, expand the base of investments in the markets and benefit from the experience of investment managers in this field.
Sub-governor, Gamal Negm, recommended the need to understand the expected shift in the asset structure at banks from safe investments in government debt instruments to loans to individuals and companies, amid a low loans to deposits ratio across the banking market. This transformation will require a similar shift in the mechanisms of banks at all levels, especially with regard to human resource training and development of information systems. He pointed to the need for banks to start applying the international accounting standards, IFRS, in 2018.
In a related context, Amer Ali stressed the importance of the new banking law as a means to support the efficiency of banking in parallel with the expected change in the asset portfolio during the period of rapid economic growth in the coming years. He added that this stage requires full commitment to the foundations of good banking and governance.
He pointed to the importance of competitiveness in order to activate the quality and acceleration of work and the control of the boards of directors, in order to enhance monetary stability through enhancing social stability by creating jobs and production.
The Governor stressed the importance of focusing on creating leaderships that benefit the economic work through training abroad at the highest level reached by the banking and economic sciences. He pointed out that there are directives for foreign banks to empower Egyptian leaders and qualify them to work in foreign branches, so that Egypt can have promising leaders in the coming years. He pointed out the positive effects of shuffling the executive heads of banks and promoting new ones, adding that the continuation of the situation as it is for many years may not be the best situation to achieve the best possible performance. He also noted the need to develop risk management systems and that banks adopt external training courses on modern concepts in evaluating companies and project finance.
At the end of the meeting, a summary of CBE's monetary policy was presented since November 2016 and their impact on inflation, which has already began to decline starting from the first quarter and the beginning of the second quarter of the fiscal year 2017/2018.