Despite the numerous initiatives that the Central Bank of Egypt (CBE) has launched to support the private sector, especially the small and medium-sized enterprises (SMEs) in the manufacturing sector, the enterprises are still struggling to access the finances that the initiatives provide, especially amid the current pandemic crisis.
This find was published in a policy paper issued by the Alternative Policy Solutions, a public policy research project at the American University in Cairo (AUC).
According to the paper, limited or lack of access to finances is the major obstacle that SMEs face, which impacts their employment growth and sustainability, while they are considered as the key engine in employments in the Egyptian market.
“Access to finance from banks remains marginal among SMEs, particularly among those in the manufacturing sector. The impact of the CBE’s initiatives on employment generation therefor remains questionable,” said the paper.
The paper noted that Egypt has witnessed a sluggish growth of SMEs since the 1990s. Thus, the private sector has been unable to absorb the labour supply and provide decent jobs in a context of a continuous public sector employment decline, which contributed to converting precarious work into a norm.
The paper set a number of short-term and long-term actions that could help SMEs access the required finances for their businesses, especially with the current pandemic crisis.
The paper said that governments should start to evaluate all SME programmes that aim at facilitating access to finance.
It also said that the development of quantitative data on loans directed to SMEs to assess the efectiveness of these initiatives is imperative to understand the attitudes of banks and SMEs towards these initiatives. The data will also help assess the factors determining whether banks disburse SMEs' loans, and whether SMEs apply for such loans.
The paper called for designing specific financing programmes better-targeted towards SMEs, including loan programmes as well as creating a collateral registry, improving the regulatory environment, and adopting quick measures for liquidation to encourage banks to lend against moveable assets.
“Moreover, with the CBE funding initiatives approaching their end, it is highly recommended that the government starts piloting a partial credit fund guarantee programme that — if appropriately designed and rigorously monitored and evaluated — could spur a leap in access to fnance, growth and sustainability among small frms,” the paper noted.
It added that these efforts could be combined with promoting non-banking services and providing financing programmes alongside the banking system.