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CAIRO – 21 November 2017: Some businessmen manipulated banks by acquiring SMEs loans to enjoy 5 percent interest rates under the Central Bank of Egypt (CBE) initiative, Chairman Egyptian Small and Medium-Sized Enterprises Association Alaa El-Saqty said.
As media reported claims of well-established businessmen using small and medium enterprises (SMEs) banking loans, stakeholders of the sector voiced concerns and called for tightening the procedures.
Speaking to Egypt Today, Saqty explained that the manipulation can be done through establishing new companies that can be eligible for the initiative.
“These businessmen benefited from the low-interest loans to achieve higher profits from the difference in interest rates,” Saqty said. Banks are always announcing that they are directing huge amounts to SMEs, “but we never heard of a new factory or a project launched under this initiative,” he added.
On the value of losses as a result of this act, Saqty noted that there is no accurate statistics with the value of these loans, “but the funds are not little,” he affirmed.
Saqty said banks are the only party that can uncover and stop these violations through tightening procedures.
The Egyptian Businessmen Association (EBA) denied knowledge of the matter as head of the SMEs committee Hassan El-Shafie commented that there should be legal sanctions if any businessman is proven to have done so.
“But we should take care that disseminating rumors might harm the initiative.
Banks operating in the Egyptian market have allocated 12-13 percent of their loan portfolio to small and medium enterprises (SMEs), board member in the Federation of Egyptian Banks Akram Tenawy told Egypt Today.
The volume of the new small and medium enterprises (SMEs) that was established in 2017 reached 17,000 with total finances of LE 19 billion ($1.1 billion), the governor of the Central Bank of Egypt (CBE) Tarek Amer said in September.
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 between LE 10-50 million and LE 50-200 million respectively.
Under the CBE initiative, the 5-percent interest rates on SME loans is considered profitable for the banks as they used to refrain from financing SMEs without making use of the liquidity they have, especially since those loans are given to enterprises producing high-quality products.