CBE stirs debates over guaranteeing loans to SMEs

Central Bank of Egypt (CBE) is currently studying establishing an institute that will guarantee the loans offered by banks to SMEs, as part of CBE’s efforts in supporting SMEs as it announced last month launching the first database for 36 thousand SMEs.

Bankers have different opinions over this decision. Bankers with the decisions said that it will encourage banks to finance SMEs, as the latter have proved to be capable of developing countries. Other bankers said that this institute shall be independent from CBE.

CBE’s decision will encourage banks to expand in financing SMEs, especially after launching the 36 thousand SMEs database, Hamdy Azzam, member of board of Industrial Development and Workers Bank, said. This move is important as SMEs’ role in developing the country is increasing.

Azzam added that this institute shall also support specialized banks as they have a key role in boosting and developing national economy, while they lack adequate resources to expand in lending. This institute shall be directly subjected to CBE, Azzam confirmed.

This institute shall be totally independent from CBE and Federation of Egyptian Banks in order to guarantee transparency and avoid possible confusion, Hesham Ibrahim, banking expert, confirmed. SMEs are in need for a comprehensive system to develop, finance and market them. In addition, there shall be a body concerned in implementing the projects as well as holding courses to train workers at SMEs, Ibrahim said.

An insurance company, insuring SMEs against credit risks, has been working since 20 years, but its role is not effective because it has problems with banks because there are no clear rules for them to abide by, Ibrahim noted. Establishing a credit risk insurance company is essential so as to encourage banks to expand in lending which in turn will boost national economy and achieve development, Ibrahim concluded.