The Washington-based International Finance Corporation (IFC) is negotiating five small and medium enterprise (SME) credit lines in US dollars with Egyptian banks.

It has already agreed to lend the National Bank of Kuwait in Egypt $50m to finance SMEs in the country.

“The SME sector is a priority and there is a lot of work and a lot of demand,” says Makhlouf. “We have requests from the banking sector for credit lines to lend in to SMEs which, if all our pipeline closes, will be between $300m to $500m with six banks.”

Egypt’s Central Bank has instructed banks to bring the proportion of SME lending on their books to 20 per cent by 2020.

Banks have been submitting their SME financing proposals to the Central Bank, according to local press.

Lebanon-based Bank Audi in Egypt has also signed a $30m credit line with the European Bank for Reconstruction & Development.

Many SMEs are part of the import, manufacturing and export value chains. The IFC loans will improve their access to hard currency and allow them to continue doing business through Egypt’s foreign currency shortage.

This follows similar IFC schemes in other Arab countries such as Tunisia, Jordan, Lebanon and Morocco.

While the IFC does not lend in the GCC, it has been advising banks on how to structure and ramp up finance for SMEs.

“We advise on SME structures and this was very successful in Saudi Arabia, where we started with Riyadh Bank seven or eight years ago, and Bank Muscat at the same time. Other Omani banks did the same to catch some market share,” says Makhlouf. “They had no idea how to do it so we helped them build an SME unit and increase their SME loan books 10 or 20 times. We haven’t done this in the UAE as we have not seen the demand.”

Lending to small and medium enterprises makes up just 2 per cent of lending in the GCC and 13 per cent in the rest of the Middle East and North Africa (Mena), well below global averages.

SMEs tend to be a driver of economic growth and job creation, providing around 30 per cent of formal private sector jobs in Mena, according to IFC research.

“SMEs get very little support, one of the lowest globally,” says Makhlouf. “Governments should do more – banks struggle as the regulative framework is not conducive to SME lending. We have been working with the UAE government on a secured lending law.”

Regulatory systems mean that banks require collateral on loans. SMEs are more likely to have movable than property assets, which severely limits how much they can borrow. But with the creation of an assets registry, movable assets can be used as collateral.

This is aimed to stop UAE banks pulling back from SME lending due to higher risks, as has occurred in the last six months.