Hisham Okasha, National Bank of Egypt (NBE) Chairman, expressed his optimism on the future of Egypt’s economy in light of several indicators that were disclosed in the recent period. The most important of these is the presence of a clear vision for the economic direction of the state.
In an interview with Daily News Egypt, Okasha said that activity is beginning to show in some economic sectors already, including the real estate market. He expected the return of activity to the rest of the economic sectors, especially in light of the state’s direction in putting up major projects in the upcoming period.
Okasha said that small- and medium-sized enterprises (SMEs) have the fastest impact on the economy, due to their direct impact on reducing unemployment.
What are your expectations for the Egyptian economy in the upcoming period?
I expect to see activity in the sector once again. The real estate market is already seeing some activity. There have also been increases in companies’ capitals.
What is the reason behind this optimism?
During the recent period, there has been a clearer vision of the nature of projects, whether they were announced or not, for instance, the Suez Canal AxisDevelopment . They are all projects that can push the economy forward.The state’s economic direction is also becoming less vague. The government is taking an interest in the private sector, which represents 70% of the national production output and about 70% of employment opportunities.
This is a very important trend for foreign investors. They can now observe and analyse if the country is headed towards a free market or something different. It has been very clear in all messages of the state that we are heading towards a free market economy that takes social justice into account.
How do you view the role of banks in supporting the economy in the coming period?
Firstly, we must make it clear that the banks’ situation is different now than it was 10 years ago. They used to suffer from a large deficit in allocations.There have been several bankrupted banks that the Central Bank of Egypt (CBE) successfully merged together. The CBE’s instructions and regulations have protected the banks from the global financial crisis that hit the world’s largest banks recently.
Banks working in the Egyptian market have faced problems of different sizes and types. However, they survived and maintained their position as intermediaries to maintain foreign trade, and provide the market with its necessities and commodities, without any difficulties.
The CBE has played numerous roles during the last period, which increased everyone’s confidence in the Egyptian banking sector, and presented banks as a safe haven for depositors. This reflected on the growth of deposits in banks. This is why banks have been successfully managing the Suez Canal certificates system. Banks also support the economy in various fields and contribute to social responsibility. They will remain ready to provide more support to the economy and the state during the upcoming period.
Some accuse banks of failing to grant funding for projects and choosing the safer method of investing their liquidity in government debt instruments. What is your response to such accusations?
Banks have never been late granting funding for various projects, but in recent years, there was a reluctance from investors themselves to ask for credit, and freeze any expansion operations. They did so because they did not have a clear vision of the state’s political and economical direction.
Regarding banks directing most of their liquidity to invest in debt instruments during the last period, I must say this is normal. We [banks] fund all projects, whether in the public or private sector. The nature of the recent period was characterised by a reluctance of investors to invest and hold their projects’ expansions.
In all countries worldwide, banks employ surplus liquidity in government debt instruments. Once the investment comes back again and the demand for credit increases, this liquidity will be directed towards projects. The NBE alone has recently prepared syndicated loans of more than EGP 20m, next to the bank’s regular solo funds.I would also like to stress here that the first, and main role, of banks is financial intermediation. They earn more than the financing projects, thus investing in government debt instruments is only done with surplus liquidity.
What is the nature of the projects which the bank focuses on financing?
The NBE, as a commercial bank and a bank for Egyptians, does not focus on a particular sector, but deals with all sectors in the economy, provided that the project is economically feasible and for its founder to have creditworthiness.
What is the bank’s work strategy in the upcoming period?
The bank’s work strategy in the coming period depends on two main components, financing and customer services. Financing is divided into several sectors including the retail banking sector, which is a very important part in the bank’s activities as well as for the economy, as it supports the purchasing power of the citizen. The second of these sectors is the SMEs sector. This type of projects is very vital to the economy, as it increases the number of employees and reduces unemployment.
The importance of SMEs arises from their fast impact on the economy. They inject liquidity into the economy immediately, while major projects take time to be implemented, operated and absorb manpower. This does not mean they do not have bigger revenues, they do, but over the long term.
The bank’s attention to SMEs and retail banking is in line with its continued infusion of funding for companies and major projects, either directly or through syndicated loans.
What is the bank’s role in helping the CBE achieve the initiative for financial inclusion?
The bank has a plan to increase the number of its branches, which currently stands at 339 branches, by 200 new branch within three years. The bank is also very interested in raising the level of performance at the branches and developing them.
The bank’s keenness to increase the number of its branches comes for many reasons. We want to reach customers everywhere and assist in achieving financial inclusion by including more citizens in the banking sector. We also want to maintain the level of customer service, and ensure lack of overcrowding at current branches, as well as distributing branches all over the republic, according to the needs of each region.
The bank currently has more than 3.5 million customers, of whom 1.8 million clients have less than EGP 1,000 in their accounts. Some half a million clients have between EGP 1,000 to 5,000. At a time when some banks believe that these accounts are not profitable, the NBE does this role out of social responsibility and works to increase its customers and maximise their savings. We need, as a nation, to encourage the culture of dealing with the banks. It does not make sense that Egypt has 54 million voters and 100m mobile subscriptions, and only 6 to 8 million bank clients. This is very low.
As vice-president of the Federation of Egyptian Banks (FEB), what is your role in the initiative to achieve financial inclusion?
The FEB works on campaigns to raise people’s awareness on the importance of dealing with banks, but they are not enough. I believe that the media plays an important role in educating citizens on the importance of this matter, for themselves and their country’s economy. Suez Canal investment certificates have revealed that a number of citizens had EGP 17bn in savings outside the banking system. They overcame their fear of dealing with banks. Issuing these certificates raised the number of banks’ clients.
Finally, what form of cooperation is there between the NBE and foreign funding institutions?
The NBE is always keen to strengthen its relations with foreign financial institutions, to acquire low-interest loans from them, and re-inject those loans into various projects, especially SMEs. Last week, during the president’s visit to China, the bank signed an agreement with the China Development Bank, under which the NBE gets $100m to finance SMEs in Egypt. The NBE also signed an agreement with the European Investment Bank, on the sidelines of the economic conference in March,for a loan of €120m to support those projects working in the productive and services sectors. There is an ongoing cooperation between the NBE and the European Bank for Reconstruction and Development, as well as other international financing institutions.