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New initiative helps SMEs gain access to credit

While new foreign investment retreats due to political instability, a new initiative should revitalise smaller Egyptian enterprises

Ahmed Feteha, Sunday 22 May 2011
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Small and medium size enterprises (SMEs) may have easier access to bank financing thanks to the new SME Credit Risk Initiative agreed between the General Authority for Investment (GAFI) and the Credit Guarantee Company (CGC).
 
The initiative, signed today, says that GAFI will provide technical and logistical assistance to CGC, helping it to provide its services to a wide spectrum of SMEs.
 
The CGC, established in 1989, aids SMEs in acquiring bank loans by guaranteeing them against credit default risks of up to 75 per cent of the credit facility, or LE2.5 million.
 
The initiative is part of GAFI’s move towards supporting SMEs during a time when large-scale investment is at low tide, according to Osama Saleh, GAFI’s president.
 
“They [SMEs] are the backbone of our economy; they employ 75 per cent of the work force while only receiving 10 per cent of bank financing. This has to change if we want to tackle unemployment and poverty,” Saleh explained.
 
GAFI says it will use its resources to assist CGC to guarantee SMEs with banks.
 
“We have direct channels with all SMEs; we will make it easier for CGC to provide guarantees relieving it from a lot of logistical, administrative and technical hassles,” said Reem El-Saady, executive officer of the SME unit at GAFI.
 
Access to bank finance has been problematic for SMEs as they often fall short in providing proper insurance against credit risk to commercial banks. The new initiative should help SMEs get over such obstacles, according to El-Saady.
 
However the Chairman of CGC, Mohamed Abdel Hamid, was not able to provide an estimate of the amount of business the initiative should generate.
 
“This is still an experimental phase, many market variables have changed after the revolution. We do not know what to expect,” Abdel Hamid told Ahram Online.
 
On the other hand, Essam El-Korashy, the vice president of the Social Fund for Development (SFD), has a lot of faith in the initiative.
 
“The amount of funding that the SFD provided in Q12011 is twice that of Q12010 despite political instability,” he stated. “People just want to work, and the initiative will grant SMEs better opportunities to grow and expand.”
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