Egypt—Technical Assistance Improving Access to Finance by Facilitating Business Expansion of Promising and Growing Small and Medium Enterprises

The Middle East and North Africa Enterprise Survey findings from 2016 show that Egyptian small and medium enterprises (SMEs) are largely excluded from the banking system. Egyptians themselves like to describe their economy as a cash economy, with evidence that only 6 percent of SMEs in Egypt have a bank loan outstanding, compared to 38 percent in the other countries of the Southern Neighbourhood. The small footprint of the banking system reflects both weak demand for and limited supply of loans. In Egypt, complex application procedures, unfavourable interest rates, strict collateral requirements, and a likely rejection discourage applicants from even applying, more so than in other countries of the Southern Neighbourhood.

In this context, the European Investment Bank (EIB) sought to expand sustainable lending to SMEs in Egypt, thus contributing to the broadening and deepening of the financial sector, supporting SMEs, and promoting the development of the private sector, as well as creating and securing employment and income in strategic sectors of Egypt.

DAI’s technical assistance increased access to capital and financial resources for underserved groups of SMEs by working with the Bank of Alexandria (AlexBank) in enhancing understanding of the issues specific to SME lending, introducing the best lending and advisory practices, helping to design and roll out the programme that includes nonfinancial services aiming to improve financial literacy among final beneficiaries.

Sample Activities

• Assist AlexBank’s lending and advising activities in the SME sector.
• Facilitate access to finance and to additional capital resources for dynamic, growing SMEs.
• Foster higher levels of financial sophistication and inclusion in the SME sector through the provision of innovative financial and nonfinancial services.
• Design and roll out a tailor-made programme, the “Advanced Support Programme for Growing SMEs,” aiming to bring dynamic, growing SMEs to “listing ready” status in the Nile Stock Exchange (NILEX) and thus overcoming constraints limiting their further expansion.
• Support the development of AlexBank in its role of nominated advisor for NILEX.
• Strengthen the institutional capacity of AlexBank in order to enable further expansion (deepening and broadening) of its activities in SME lending, with particular focus on the delivery of nonfinancial services to SMEs.

Select Results

• Developed selection criteria for listing.
• Shortlisted 17 SMEs from AlexBank’s portfolio for engagement.
• Developed a tool for SME outreach and engagement.