Senior officials highlight motivational measures for SMEs

CAIRO – 6 July 2017: The Egyptian Canadian Business Council (ECBC) organized a lecture on Wednesday titled “Small Projects: Opportunities and Challenges” hosting as speakers many official figures to discuss motivational and developmental measures taken by the state to encourage Small and Medium Enterprises (SMEs).

The panel of speakers included Mohamed el-Etreby, chairman of Banque Misr; Tarek Shash, board member of Small and Medium Enterprises Development Agency; Nermine el-Tahri, general manager of Banking Reform in the Central Bank of Egypt (CBE); Ms. Reem Al-Saadi, program director in the European Bank for Reconstruction and Development (EBRD); Mohsen Adel, PhD, vice president of the Egyptian Association for Finance and Investment Studies; and Hanaa El Hilaly, United Nations expert for sustainable development.

The lecture was inaugurated by ECBC President Moataz Raslan who highlighted that all giant companies abroad started as small projects, stressing that SMEs are a must to eliminate unemployment. Raslan described the establishing of the Small and Medium Enterprises Development Agency in April as a great initiative.

Etreby said that LE 200 billion ($11 billion) is the value of loans given to SMEs in Egypt throughout four years starting 2016.

“We want to encourage youth to create jobs for themselves instead of seeking employment in the public sector,” Etreby said.

Helaly said that sustainable development revolves around youth and women empowerment.

SMEs are usually businesses hiring less than 500 employees. However, the banking terms in Egypt identifying the size of businesses receiving loans signify that small and medium enterprises as those generating an annual turnover of LE 10-50 million and LE 50-200 million respectively.

The percentage of bank customers in Egypt out of the total population is 10 to 15 percent, which makes the informal sector prosperous, according to Etreby who said that soft loans encourage enterprises in the informal sector to shift to the formal sector.

Banque of Misr, National Bank of Egypt, Agricultural Bank of Egypt, and Housing and Development Banks provide through municipalities loans of LE 10,000 each. Etreby said that the delinquency rate for these loans is 0.5 percent.

Etreby said that Banque Misr offers a type of loan for enterprises called ‘My Project’ in a value ranging between LE 50,000 and LE 2 million. That was Etreby’s answer to accusations that the bank does not fund start-ups.

Etreby added that after the launching of the campaign of “MY Project” in 2016, the bank’s call center received thousands of calls to inquire on the loans, and that in the following three months the value of loans provided for small projects rose up to LE 300 million from LE 100 million.

He added that the bank is also doing cluster financing, such as loans given to businesses in industrial zones. A case in point is Robeiky industrial zone exclusive to leather manufacturing.

Banque Misr chairman said that CBE is obliging banks to provide loans for SMEs in an interest rate of five percent. That is profitable for the banks as they used to refrain from financing SMEs without making use of the liquidity they have, especially that loans are given to enterprises producing high-quality products.

Etreby added that there is a non-refunding insurance company operating to secure banks against delinquency.
Tahri said that the Banking Reform sector at CBE currently has four main goals that are import substitution, enlarging exports, employment, and automation.

The sector manager said that CBE developed the ‘Peasant Card’ in collaboration with the Egyptian Agricultural Bank. The card serves giving loans to peasants, and providing them with financial subsidies.

Tahri added that the sector is giving care to cluster financing and value chain financing. The sector also aims to introduce credit reports on institutions in I-score as currently it just provides reports on institutions only.

The sector manager stated that Matrix Management Teams are formed of best bankers to come up with programs that best fit SMEs.

Medium enterprises receive loans on equipment imports in a value up to LE 20 million in an interest rate of seven percent, while they receive interest rates of 12 percent on their bank accounts.

Shash clarified that the agencies’ role was at first helping to create jobs by providing financial and technical support for enterprises to grow. “Currently, we are evaluated upon the number of establishments, number of jobs created, boosting exports, and imports substitution,” Shash said.

Shash announced that when the agency first started SME’s owners registered had only 2,000 patents which now jumped to 150 million. Many of these patents are issued for school graduates, and a significant number of which are issued from developed countries like Germany.

Saady explained how the EBRD was founded and what its mission is. The EBRD was founded in 1991 following the fall of the Soviet Union to assist countries facing economic hardships. Egypt was one of the founders.

The Southern and Eastern Mediterranean Region sector currently comprises Egypt, Tunisia, Jordan, and Morocco, while Lebanon and Gaza Strip will join soon, according to Saady. Generally speaking, the EBRD operate in 36 countries.

Saady said that it is not right to promote the stereotype that small and medium entrepreneurs have to be young; they can be individuals who have been employed for years, but decided to leave the job and start their own business.

“Our role is helping entrepreneurs prepare their business plans to be able to apply for loans in banks. We also coordinate with banks to refer to us applicants with incomplete plans,” Saady said.

Saady shed light on the problem that some SMEs get different budget plans stamped by same auditors, usually small ones. The plan differs according to the entity they are submitted to. For instance, the budget plan delivered to banks is different from those delivered to partners.

EBRD program director highlighted another issue which is the facts that licensing the business can be expensive and that businesses can be operating in unlicensed areas and are not capable of moving.

These issues were identified in a study conducted by EBRD in collaboration with the Social Development Fund.

Saady referred to the mechanism adopted by the European Commission when articulating the Small Business Act (SBA) that was promulgated in 2008 after 10,000 SMEs’ representatives took an online survey giving insight on challenges and needs.

Adel expressed his agreement on Saady’s point of the necessity to conduct a “huge survey” upon SMEs’ owners in order to be acquire knowledge on the minor problems we are not aware of, and that must be remedied through legislative reforms.

“We organized sessions for women entrepreneurs to teach them how to deal with banks and ask the right questions, and how to read financial and auditing reports, as well as teaching them basics of digital marketing and leadership skills,” Saady said.

Etreby revealed for the first time that Banque Misr is establishing an academy to train entrepreneurs.

Adel added that these enterprises would be integrated in the supply chain in Egypt. “The information we are going to get from small projects when applying for loans on big suppliers in the informal sector will be very important,” Adel said.

Adel stipulated that non-banking incentives must be developed such as easing licenses, facilities, and services.

“SME’s owners turn into firefighters dealing with a lot of problems daily. They must have care takers to guide them,” Saady said.

Adel said that the amended bankruptcy law was promulgated in January 2017, and that ideas of abolishing the acts of imprisonment punishment, and prohibition from borrowing are considered.