Decline in private sector's share of bank loans to 63.2% end-2017: CBE

Banks still prefer to lend to government, abandon role in providing credit to other sectors to enhance business, investment, says Aboul Fotouh

Private sector clinets' share of bank loans through December 2017 declined to 63.2% compared to 64.55% in May 2017 and 84% in 2014, according to the Central Bank of Egypt (CBE).
The CBE revealed in its monthly report that the value of the loan portfolios at banks reached EGP 1.45tn at the end of December 2017.
The CBE explained that the government obtained about EGP 373.831bn of the total of these loans, including EGP 167.59bn in local currency and about EGP 206.24bn in foreign currency.
According to the CBE, total non-governmental loans from banks were estimated to be EGP 1.08tn, including EGP 750.33bn in local currency and EGP 328.9bn in foreign currency.
The CBE also pointed out that the private business sector obtained 61.4% of the total credit facilitations given by banks to the non-governmental economic sectors at the end of December 2017.
Credit facilitations are more inclusive, as they include the loans provided by banks to their clients, in addition to letters of credit and letters of guarantee opened for them to cover import operations.
According to the CBE, the total amount of facilitations received by the government reached EGP 373.83bn by the end of December 2017, while credit facilitations offered by non-governmental banks reached EGP 1.09tn.
Regarding the most prominent economic activities that received credit facilitations from banks, the industrial sector ranked first, as it received about 35.5% of the total of these facilitations.
The services sector ranked second. Tourism is one of its most prominent activities, receiving 29.3% of the facilitations. The commerce sector received 9.6% and the agricultural sector received only 1.1%.
Based on the data from the CBE, the share of the remaining sectors was estimated to be 24.6% of the total credit facilitations.
The family sector is the most prominent of these sectors, which the CBE did not mention in detail, though its share is estimated to be nearly 17% of the total facilitations provided.
According to banking expert Hany Aboul Fotouh, the increase in the rate of credit facilitations provided to the government must be reconsidered, because government loaning is always at the expense of the funds available for the private business sector, which eventually affects the activity of markets and the ability to obtain funds from banks without the government crowding the way.
He added that while banks still prefer to lend to the government through local debt instruments as a safe and comfortable utilisation of liquidity, they abandon their conventional role of providing credit to other sectors in order to stimulate business and investment.
"It is known that government lending basically aims to fund a budget deficit; hence, it does not directly activate markets and generate jobs; on the contrary, providing funds to the private business sector contributes more to activating investment and reducing rates of unemployment and creating development," Aboul Fotouh said.