The headquarters of Egypt's Central Bank are seen in downtown Cairo (Reuters)
The Central Bank of Egypt (CBE) has approved the issuing of assurances worth EGP 100 billion for banks in order to incentivise them to provide loans to private sector companies through the manufacturing, agriculture and contracting support initiative.
The CBE’s manufacturing, agriculture and contracting support initiative provides loans for these sectors with an 8 percent decreasing interest rate.
CBE Governor Tarek Amer said in statements to Egypt’s Middle East News Agency (MENA) that the initiative aims to support the Egyptian economy, keep the country’s economic reform programme gains, and to support the private sector against the COVID-19 outbreak’s implications.
He added that the move aims to counter the high risk of doing business in all markets, including Egypt, amid the current crisis.
The action aims at aiding loan initiatives, especially those headed to companies to help them attain their economic objectives. It will also incentivise banks to provide loans to private sector companies to maintain their solvency and to keep their workforce, according to Amer.
Governor Amer clarified that these assurances will be extended through the Credit Guarantee Company, which is chaired by the CBE.
Amer added that the CBE is going to hand the EGP 100 billion assurances over to the Credit Guarantee Company this week. The assurances are expected to cover up to 80 percent of the total loan, while banks will shoulder only 20 percent.
Amer stated that the Credit Guarantee Company has carried out credit risk operations for small and medium enterprises (SMEs) worth EGP 25 billion so far, unveiling that the company’s charter will be amended in order to allow it to engage mega companies in loan assurances.
In December 2019, the CBE launched an initiative to support the industrial sector that afforded manufacturing and agriculture sector loans at a decreasing interest rate of 10 percent.
The CBE then began to engage more sectors as beneficiaries and adjusted the interest rate to 8 percent in order to contain the negative consequences of the Covid-19 crisis.
On Thursday, the CBE decided to engage the contracting sector in the initiative, through giving loans at an 8 percent decreasing interest rate as an attempt to support vital sectors of the economy against the harsh impacts of the Covid-19 pandemic crisis.
Total sums provided through CBE initiatives so far have exceed EGP 700 billion, including EGP 360 billion to back the SME sector, EGP 100 billion to support the industrial and agricultural sectors, EGP 100 billion to support the real estate sector, EGP 50 billion for real estate developers and EGP 50 billion for real estate housing for the low income classes. Also, there are a number of initiatives to support the tourism sector, lift the debts of stalled factories, and postpone loan repayment instalments.