The Central Bank of Egypt (CBE) instructed the banking sector to increase allocations for micro, small and medium-sized enterprises (MSMEs) from 20 to 25 percent of their credit facilitations, the CBE stated on Monday.
The decision will result in pumping about EGP 117 billion to the MSMEs sector by the end of 2022.
The allocations will benefit more than 120 MSMEs that provide about a million job opportunities, said the CBE.
The central bank added the move is based on President Abdel-Fattah El-Sisi's directives to support the MSMEs sector due to its strategic importance in achieving Egypt’s economic growth.
The step is also meant to support the manufacturing sector, providing the chance for the informal sector to merge into the formal sector, as well as achieve economic, financial, and monetary sustainable stability.
Meanwhile, the CBE instructed banks to allocate a minimum of 10 percent of their portfolios for MSMEs, which is expected to inject around EGP 55 billion for the sector by the end of 2022.
The CBE also allowed banks to finance micro and small-sized enterprises (SMEs), particularly whose annual sales record less than EGP 20 million, without the need to submit their financial statements. These will be replaced with easier and faster instruments to evaluate their financial conditions.
The action aims at attracting more clients to join the banking sector, which, in turn, will support Egypt’s policies of financial inclusion, according to the CBE.
Moreover, the CBE instructed the banks to establish funds and companies to invest in SMEs in a bid to deal with other challenges besides shortages in finances.
The CBE explained that it has issued a number of initiatives since 2015 to finance MSMEs at low interest rates.
The initiatives resulted in providing EGP 213 billion in credit facilities to MSMEs, 81 percent of which were directed to 126 SMEs that work in the service, agricultural, and industrial sectors, while EGP 14 billion were dedicated to 900,000 clients in micro-size enterprises.
Egypt’s SMEs sector comprises a1.7 million businesses, which account for 44.6 percent of the establishments involved in the formal sector, according to the Ministry of Planning and Economic Development.
MSMEs is one of the sectors that were hard hit by the pandemic globally.
Despite the numerous initiatives the CBE has launched to support the private sector, especially SMEs in the manufacturing sector, the enterprises are still struggling to access the finances that the initiatives provide, especially amid the current pandemic crisis, according to a policy paper issued by the Alternative Policy Solutions, a public policy research project at the American University in Cairo last week.