Chairperson and managing director of the United Bank in Egypt, Ashraf Elkady, said that Egypt’s future depends on increasing domestic and foreign investment.
He told Daily News Egypt that the Egyptian economy is now recognised as a war economy, urging Egyptians to stick together to safely overcome this stage. He added that this period requires everyone to rationalise consumption, reduce imports, increase exports, and promote tourism to have a direct positive impact on the currency exchange rate.
Moreover, he noted that small- and medium–sized enterprises (SMEs) can solve 70% of Egypt’s economic and social problems, highlighting the bank’s strategy that relies on expanding in SME financing, and supporting the state’s plans for sustainable development and improvement of citizens’ living standards.
How would you rate the current development of the Egyptian economy?
Egypt’s economy now is a war economy. All Egyptians must stick together to safely overcome this stage.
We are on the right track. Economic reform measures have begun. There are major projects underway across the country, including Egypt’s agreement with the International Monetary Fund (IMF) to obtain a $12bn loan over three years.
The agreement with the IMF in particular is a positive point. It is also a certificate of quality proving the feasibility of the Egyptian economic reform programme. This agreement will restore the confidence of investors in the Egyptian economy, driving back foreign direct and indirect investment to Egypt, and will increase the confidence of other donors in Egypt.
What do you think are the biggest challenges facing the Egyptian banking sector at the moment?
The banking sector is an integral part of the national economy. It is directly affected by the fluctuations of the economy. The more the national economy improves, the less risks face the banking system in Egypt.
Risks and challenges facing banks have increased, due to the fallout of several state sectors, including tourism and the remittances from Egyptians abroad, combined with a lack of production and the suspension of a number of factories.
What is the solution for Egypt’s foreign exchange rate crisis?
The foreign exchange rate is directly influenced by the strength of the economy, the size of foreign investments, the volume of exports and imports, as well as the volume of consumption.
In this sense, we need to rationalise consumption in general, reduce imports, increase exports, and work to promote tourism. Collectively, this would have a direct positive impact on the foreign exchange rate.
What role can banks play in serving the economy, while most of them direct their liquidity to debt instruments?
It is very likely that banks will reduce their investments in debt instruments after receiving the loan from the IMF, which is expected to partially bridge the budget gap. Banks will then have to find new credit channels to employ their liquidity, which would increase funds for projects and factories, especially as the return on investment in these projects is higher than the return on investment in debt instruments. This would mobilise the economy through new projects.
Some banks aim to employ 65% of their deposits in projects, which would also have a positive impact on the improvement of the economy.
Moreover, banks in Egypt, with the United Bank atop, strive to achieve financial inclusion and merge the informal economy into the formal economy. In my opinion, financial inclusion is the key for the competitiveness of Egyptian banking institutions, and maximising their central role in supporting the overall development process of the national economy.
Financial inclusion, in a broader sense, means accessing all segments of societies in different places, in addition to making banking products available to them in a complementary manner. This would offer clients affordable and effective financial solutions.
What is the role of the United Bank of Egypt in serving the economy, projects, and activities?
The United Bank’s strategy is built on the basis of expansion in financing SMEs in all governorates, as well as supporting the state’s plan for sustainable development and the improvement of citizens’ living standards.
That belief comes from the bank’s confidence that the future of Egypt depends on increasing domestic and foreign investment, in addition to the development of the SME sector, which can on its own resolve about 70% of Egypt’s economic and social problems.
We call upon the government to put together an overall strategy for the development of SMEs and to specify the types of activities and projects, along with the regions and industries that seek funding, especially as the government is fully aware of all the sectors in demand. This would help consumers target specific markets.
The United Bank of Egypt also finances micro-enterprises through its Intlaka programme. This scheme aims to finance new clients who do possess budgets worth 50,000 to EGP 100,000. There is also another programme, through which we offer up to EGP 400,000 of funding.
We do not only provide financing to these projects, but also offer technical support and financial consulting for the projects’ owners.
Furthermore, the bank aims to expand in granting financing to all economic sectors, whether big companies, SMEs, or micro-enterprises, and to individuals, mortgage finance, personal loans, credit cards, or even evaluation.
The current volume of the syndicated loans portfolio at the bank amounts to EGP 500m, across projects in the electricity and oil sectors. Most of these loans are granted to public sector companies. The United Bank of Egypt aims to take part in financing Telecom Egypt in obtaining the 4G license, which would cost EGP 5bn.
The bank targets growth rates of up to 20% in the retail banking sector.
In addition, the bank is keen on financing national projects, as well as social responsibility enterprises that would have a direct effect on citizens’ living standards. The bank has recently injected EGP 5m into the Al-Asmarat development project which aims to erode slums.
The bank also works to support the state’s scheme to convert banking fees into e-payments, instead of traditional payments.
The United Bank of Egypt was one of the first banks to offer electronic payment of taxes and customs, in cooperation with the ministry and e-finance company.
The bank also introduced a service for electronic collection of re-inquiry fees of the Egyptian Mortgage Guarantee Fund, in collaboration with e-finance. Through this, we aim to shorten proceedings and provide the highest level of service performance for mortgage clients.
The United Bank of Egypt has earlier begun to offer self-inquiry via bank portal services on credit scores for all its clients, including individuals, major companies, and SMEs through e-banking services, in cooperation with i-Score company.