The Central Bank of Egypt (CBE) launched last week three initiatives to support the tourism sector and its workers. The tourism sector is of great importance and is one of Egypt's major pillars of the national economy as it provides hard currency and creates jobs. EGP 50bn finances with 10% falling interest The first initiative launched by the CBE to support the tourism sector will allocate EGP 50bn loans with a 10% falling interest as an alternative for a previous initiative of EGP 5bn only. The CBE said that this initiative comes as a continuation of the previous initiatives launched by the bank to support tourism. The loans can be extended for up to 15 years, based on a credit study for each client. The CBE will also be working with distressed borrowers from the tourism industry, based on a case-by-case study. Banks will finance 75% of the cost for renewal and renovation of tourist facilities, while customers must pay the remaining value. Banks will also conduct technical studies, including a feasibility study, and shall seek the assistance of a specialised consultant to ascertain the feasibility of the project and follow up with the implementation and approval of its completion. Disbursement of funds must match completion ratios. Funds granted under the initiative cannot be used to repay older loans. The CBE will compensate banks for the interest rate margin on quarterly basis depending on the CBE's own credit and discount rate, as it will add 2% and cut 10% from the rate. Extending the first support initiative until the end of 2020 The CBE has also decided to extend the tourism support and tourism workers' retail loans initiatives for an additional year, to end on December 2020. The CBE said that during this period, any requests for postponing the banks' entitlements will be accepted for a maximum period of three years, to be decided based on a case-by-case study. The CBE launched the tourism support initiative on 23 February 2019, and launched the retail loans initiative for tourism workers on 7 December 2015, and renewed the latter initiative several times. With regard to the retail loans initiative, the CBE stated that during this year, banks will be allowed to post the clients' due loan instalments for consumer purposes and mortgage loans 6 months from the due date, for regular customers only. The CBE stressed that banks cannot compromise the allocations that they created due to the defaulting of these clients, taking into account the requirements of the International Financial Reporting Standard (IFRS9). It pointed out that in order to facilitate procedures, tourism workers who benefitted from the initiative since its announcement in 2015 can also postpone their dues. More support for tourism defaulters The CBE also decided to add tourism companies with debts of EGP 10m or more in the non-performing debt settlement initiative launched by the CBE on 12 December 2019, including those who are being sued in courts, and clients in credit categories 9 and 10 with loans less than EGP 10m. This initiative is valid until 31 December 2020. Any customer making payments, whether in cash or otherwise, of over 50% of their debt shall be removed from the ban list in the CBE and i-Score. This client will also be tagged as an initiative client for two years after paying the 50% as historical information only, with the ban on this debt not in effect, and waiving all court cases as soon as the client agrees with the banks on payment terms. According to the CBE, the value of debt forgiveness is determined according to what the bank decides in light of the customer's credit study, with an emphasis on the necessity of conducting a customer's credit study, so that grants are based on each case's credit feasibility, and relying on project revenues as a source of debt payment. The CBE also stressed the importance of taking the necessary action to activate the initiative, such as informing clients who meet the conditions. New controls for defaulters with less than EGP 10m debts The Board of Directors of the CBE had also decided to amend some of the provisions of the initiative issued on 12 December 2019, regarding the settlement of companies' debts whose debts are under EGP 10m in credit category 9 and 10. Customers who make a payment over 50% of the debt shall be removed from the negative list in CBE and i-Score. The banks will drop all court cases against said customer as soon as the two parties agree on the terms of payment and sign the guarantees. About 20% of the remaining 50% shall be paid before 30 June 2020, while the remaining 30% must be paid before December 2020. The CBE stressed the banks should not resort to courts unless the customer's evasion is proven and there is clear need for a client's credit study. It also stressed that banks should not obtain checks as collateral for credit facilities and should only obtain promissory bonds.
