On Feb. 22, EGY CB increased percentage of micro, SME loan portfolio.
EGY CB circular amended circulars dated Jan. 11, 2016 and Mar. 5, 2017, to increase bank's loan portfolio for micro, small, medium, firms to 25% of bank's credit portfolio.
As well as to allow financing of certain small, micro firms without audited financials, and issued circular on assessing risks of these firms via behavioral scoring models.
Separate circular encouraged banks to invest in private equity funds targeting SMEs.
Follows 2019 circular requiring banks to increase loan portfolio for SMEs, see #60449.
Revisions to Jan. 2016 Circular
Increased loan/credit portfolio for Medium, small, micro, enterprises (MSMEs) from 20% to 25% of bank's credit portfolios; banks must achieve 25% by Dec. 31, 2022.
Included method for calculating ratio, conditions for amount granted to single client.
Banks must submit report to EGY CB, by Mar. 31, 2021, with plan to reach the 25%.
EGY CB to follow up with banks on quarterly basis; in the event the required ratios are not reached, bank is to deposit the supplementary balance without interest with CB.
Revisions to 2017 Circular, Behavior Scoring
Permitted banks to finance small and micro enterprises with sales volume of less than EGP 20 million without obtaining financial statements approved by auditor.
Provided banks use alternatives to assess risk, including via behavior scoring models.
If granting financing based on behavioral scoring models, must be in local currency.
Also, bank must establish policies for digital evaluation model, submit to EGY CB.
Create digital evaluation form, inform EGY CB when bank starts using the form, and submit comprehensive quarterly reports of total granted financing done via the form.
Investing in SMEs Funds
Bank contribution to funds targeting small and medium enterprises (SMEs), including emerging firms, must be 25% of total credit portfolio directed to micro firms, SMEs.
Value of bank's share or total contribution, whichever higher, is calculated from the date of investing in the fund as follows: during first year, 70% of total contribution.
In second year, 50%; third year, 30%; and fourth year, as per value of bank's share.
Banks are to provide EGY CB with quarterly reports clarifying value of bank's share.
Calculate relative risk weight of 20% on banks' contributions to capital of all funds.
Specifications for risk weight calculation, include, among others, that total bank share not exceed 50% of capital of funds; capital adequacy ratio over minimum standard.
Fund's articles of association provide for bank exit starting from fourth year of fund’s start date, especially if no profits made for period of three consecutive years later.
Effectiveness
Banks must achieve the 25% credit portfolio for micro firms, SMEs by Dec. 31, 2022.
Requirements for investing in funds that target SMEs are effective on Feb. 22, 2021.
Dec. 2022 EGY CB Extension
On Dec. 15, 2022, EGY CB extended period to comply with obligation to achieve 25% of bank's credit portfolio for financing MSMEs, from Dec. 31, 2022 to Dec. 31, 2023.
Additionally, directed that 10% of this amount be for financing small enterprises.
Jan. 18, 2024 Extension
On Jan. 18, 2024, EGY CB extended period to comply with obligation to achieve 25% of bank's credit portfolio for financing SMEs, from Dec. 31, 2023, to Dec. 31, 2024.
In addition to directing 10% of this amount for financing the small entreprises.
Banks are free to collect all appropriate guarantees for granted credit facilities in light of the studies that are prepared for the customers and obtaining checks if necessary.
