Could change how millions of Egypts small business people are financed
A £E400m securitisation of microfinance loans is on schedule for completion in June 2015 and could open the door to revolutionary change in the way millions of Egypts small business people are financed.
Speaking at the MEED Invest in Egypt conference, chairman and CEO of Egypts Tanmeyah Micro Enterprise Services, Amro Ibrahim Abouesh, said almost half of Egypts population live below the poverty line, with many more living close to it. But 2 per cent of the private sector get 98 per cent of the credit extended by Egyptian banks. The microfinance industry is trying to tackle this issue by providing adequate financial services in Egypt.
The potential market size depends on the products on offer. There are 10 million micro entrepreneurs in Egypt. Around 40 million-50 million people can access financial services and at least three quarters have microfinance potential, Abouesh said.
Banks that offer microfinance credits include Banque Du Caire, Bank of Alexandria, Banque Misr and Abu Dhabi Islamic Bank. Two non-bank institutions, one of which is Tanmeyah, are also in the market. The microfinance sector came under regulation by Egypts Financial Services Authority in November.
Tanmeyahs first microfinance securitisation deal is to be completed with the Egyptian Gulf Bank in June 2015. This will allow the company to expand its lending.
This is not going to be an asset-backed bond, it is going to be a paper-backed bond, because the money is not on our books but on the books of the Egyptian Gulf Bank, Abouesh said. Next we shall do a deal with the United Bank of Egypt for another £E200m.
There have been 21 or 22 asset backed securitisations, Abouesh said. This is the first of its type.
Abouesh said the average maturity of its loans is 11 months. About 80 per cent of borrowers borrow for 10-12 months. The average loan is EGP7,300 ($1,000).
However, the sector has struggled to get the support of government.
We have had frustrating discussions with the government about microfinance, he said. They say, why do we need to have non-banking institutions in this sector? We say we are best-placed to solicit savings from the streets.
Abouesh said the amount of cash in the hands of low-income people is enormous, adding that 95 per cent of civil servants withdraw all their earnings each month from ATMs.
We need insightful vision about how to liberate our markets and take things forward, he said. Maybe this is too much to ask of the current regime but may be it is not too much to hope for.
More from MEED Invest in Egypt
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- Egypt plans three PPP desalination projects
- Egyptian investors call for stability and reform
- Masdar investing in rooftop solar in Egypt
- Qalaa Holdings considering new capital raising in 2015
- Companies express interest in Egypt renewables scheme
- Egypts retail sector attractive but challenged
- Public-private partnerships to fund $4bn of Egypt projects
- Dana Gas to invest $350m in developing Egyptian gas
- Egypt strives to improve investment environment
- Egypt plans major housing, utility and infrastructure projects
- Arabtec deal a blueprint for Egypt housing projects
- Egypt looks to private sector for utilities investment
- Egypt needs 500,000 new homes a year
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