Egypt: CBE, FRA call on financial agencies to improve microfinance services
- 12 January 2022 / News / 57 / Amira
The Central Bank of Egypt (CBE) and the Financial Regulatory Authority (FRA) launched a joint announcement this morning from the Smart Village calling on multiple agencies that engage in microfinance to improve the quality of financial services provided in the Egyptian market.
This is due to the initiative adopted by the Federation of Egyptian Funds for Micro, Small, and Medium Enterprises with the support of the Ministry of International Cooperation and the Micro, Small, and Medium Enterprises Development Agency.
Vice-Chairperson of the FRA Eslam Azzam said that the joint declaration between the FRA and the CBE aims to support and encourage the application of the principles of responsible finance in accordance with international best practices and the protection of clients’ rights in the microfinance industry.
Azzam explained that the financing mechanism that follows the principles of responsible financing includes important measurement tools for the client and the financing authority, which allows identifying the client’s ability to borrow and repay instalments on their due dates.
He stated that this coincided with the launch of the joint declaration of the initiative for responsible financing and the protection of customer rights, and the implementation of the first programme to build institutional capacities for members of the Egyptian Federation for the Financing of micro-, small-, and medium-sized enterprises (MSMEs) in this regard. This will continue throughout 2022 in cooperation with the World Bank, which provided the financing required for training.
This qualifies them to obtain rating certificates from international institutions specialised in responsible finance, which are currently SMTPF and CERISE. The current certificate includes three different levels of rating (gold, silver, and bronze).
Azzam added that the World Bank will provide institutional technical support, as a first stage, to rehabilitate the largest six companies, the 10 largest NGOs and category A institutions, in addition to the four largest banks engaged in microfinance activity in terms of the number of clients and portfolio size to obtain that certificate or international classification directly from the relevant international institutions.
Furthermore, Sherif Lokman, the Deputy Governor of the CBE, stressed that the federation’s initiative represents rational behaviour, “which we hope will prevail among the various financing agencies, especially microfinance project financiers, to achieve the process of financial inclusion in accordance with international best practices,” he said. He also valued the efforts of all parties that support responsible financing and protect customer rights.
Mona Zulficar, the President of the Egyptian Federation for the Financing of MSMEs, expressed her appreciation for the supervisory authorities in the financial sector on the part of the FRA and the CBE for showing full support for the implementation of responsible financing practices with this joint declaration that supports the initiative.
She said that the microfinance industry witnessed a state of continuous development of this important and challenging industry, so that the number of beneficiaries jumped during the 2017-2022 period from 2 million to more than 4 million beneficiaries, and from a financing volume of EGP 6bn to nearly EGP 50bn.
Mark Ahren, an economist at the World Bank, explained that the World Bank will — in a second stage — arrange with the relevant international institutions for the Financial Services Institute and the Egyptian Banking Institute to obtain a license as locally accredited institutions to grant this certificate in the future.
The aim of this measure is to maintain the sustainability of this initiative in the Egyptian market and provide an opportunity to obtain the certificate and international classification for the rest of the members of the Egyptian Federation for the financing of MSMEs.
During the joint announcement, Mohamed Omran — the Chairman of the FRA — witnessed the signing ceremony of a cooperation protocol between Baheya Foundation for Early Detection and Treatment of Breast Cancer and the Egyptian Federation for Financing MSMEs.
The protocol aims to sustain the societal contribution provided by members of the Federation to Baheya to raise awareness among women on the importance of early detection of breast cancer and the facilitation of conducting it in the various governorates of Egypt.
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