CBE Instructions to Consider Bank E
CBE Instructions to Consider Bank Equity in SMEs as Fulfilling of SME-Financing Initiative
Dated 26 May 2019, the Central Bank of Egypt (“CBE”) issued new instructions to Egyptian banks regarding the mandatory minimum portion of their loans and credit facilities portfolios to be offered to micro, small, and medium enterprises (“SMEs”) which according to the CBE’s 2016 instructions on the matter, must have been raised to at least 20% of bank portfolio before the end of 2019. In this context, new instructions were issued last week, allowing bank investments in private equity funds that target SMEs to count towards the 20% threshold.[1]
Background
On 11 January 2016, the CBE board issued a circular regarding bank financing to micro, very small, small, and medium-sized enterprises by increasing the size of loans and credit facilities portfolio (direct and indirect) of these banks to reach at least 20% of the total amount of credit facilities provided by each bank over the subsequent four years, i.e., until January 2020 (“SME-Financing Initiative”).The New Circular: Bank Investments in Private Equity Funds
With the aim of offering additional funding channels to SMEs, the new circular includes bank investments in private equity funds that target small startups at their various phases within the SME-Financing Initiative such that these investments count toward the specified percentage of the total amount of banks’ credit facilities allocated to SMEs. The relative risk of these investments will be calculated at 0%, provided that these investments do not exceed 10% of the bank’s core capital and that the bank’s share does not exceed half of the fund’s capital. In addition, an activity license must be obtained from the Financial Regulatory Authority, which supervises this activity given that these funds are non-banking financial vehicles. Yet despite the fact that the circular is aimed at facilitating the situation for banks as the deadline for reaching the 20% threshold approaches, in reality it will only benefit the few banks that undertake such specific forms of investments. [1] CBE Circular dated 26 May 2019 on the inclusion of bank investments in SME-focused private equity funds in the 20% threshold of total amount of credit facilities given to SMEs, available through this link (in Arabic).
بتاريخ 26 مايو 2019، أصدر البنك المركزي المصري ("البنك المركزي") تعليمات جديدة إلى البنوك المصرية بشأن الضوابط المتعلقة بالنسبة الواجب توجيهها من محافظ البنوك للشركات متناهية الصغر والصغيرة والمتوسطة.[1] والمعروف أن البنك المركزي كان قد أصدر عام 2016 تعليمات تلزم كافة البنوك بزيادة نسبة قروضها وتسهيلاتها الائتمانية الممنوحة للشركات الصغيرة والمتوسطة ومتناهية الصغر إلى 20% قبل نهاية عام 2019. وفي هذا الإطار صدرت تعليمات الأسبوع الماضي بجواز اعتبار مساهمات البنوك في صناديق الاستثمار المباشر التي تستهدف الشركات الصغيرة ضمن نسبة الـ ٢٠٪ المشار إليها.