Finance in Common Project in Egypt

The Egyptian Government’s national sustainable development strategy (Egypt Vision 2030) aims to facilitate private sector development within inclusive and sustainable value chains. The Egyptian authorities have understood that this requires creating an enabling environment for the development of micro, small and medium-sized enterprises (MSMEs) and mid-cap companies.

In Egypt, MSMEs account for about 95% of companies and 75% of jobs. They play a crucial role in absorbing the 700,000 new labour market entrants every year resulting from the high level of population growth. MSMEs are key players in economic and social inclusion. They also make a major contribution to the achievement of various Sustainable Development Goals (SDGs), such as reducing poverty, strengthening social cohesion, and providing access to essential needs. Yet, still today, the lack of appropriate financing instruments and restrictive banking regulations remain major barriers to the growth of these actors. In 2019, only 22% of MSMEs benefited from access to basic banking services. In this context, a commitment by the public financial system (90% of loans to MSMEs) is essential.

The Central Bank of Egypt has thus initiated a transition of the banking sector for the implementation of Vision 2030. This includes encouraging a redirection of 25% of the portfolios of bank assets towards SMEs. In July 2021, it also published its first directive on sustainable finance, followed in November 2022 by binding regulations on sustainable finance in the banking sector.

In the context of the Finance in Common project, Expertise France is assisting the Central Bank, the financial market regulatory authority, and public banks with the implementation of sustainable financial strategies and practices. Financed by the European Union and AFD, the project aims to assist the Egyptian financial system with its contribution to the objectives of the Egyptian Government’s Vision 2030 for the achievement of the SDGs.

More specifically, the project aims to:

• Assist public actors in the Egyptian financial system with a transition process towards sustainable finance
• Help redirect investments by the Egyptian private sector towards a virtuous path aimed at achieving the SDGs

The Finance in Common project is based on three main complementary lines of action:

1. Three credit lines are made available to three Egyptian public banks by AFD to finance investments that make a positive contribution to the achievement of the SDGs (30% will be required to have a climate co-benefit).

2. A premium scheme, financed by the European Union, aims to encourage MSMEs that propose investments with a high impact on gender equality and the climate or, in a more innovative way, that implement action plans to improve their internal practices on these issues.

3. A technical assistance programme which:

• Supports the internal transformation of partner banks in terms of a sustainable development analysis, environmental and social risk management, and the integration of climate risks  
• Helps build eligible investment portfolios, as well as the gender and/or climate transformation of the beneficiary MSMEs
• Assists financial regulators with the implementation of their sustainable finance initiatives

The project started in October 2022 for a duration of 5 years, while the mission entrusted to Expertise France started in July 2023 for a duration of 24 months.

A consortium of two companies, Business & Finance Consulting and Chemonics Egypt Consultants, has been selected to implement the technical assistance provided by this programme. To this end, the technical assistance consultant has put together a team of international and local experts to support the main beneficiaries of the programme and their clients. Following a preparation and start-up phase (from February to April 2023), activities have started on all the components of the technical assistance.

At the same time, Expertise France has recruited a project coordinator to coordinate all the aspects of the project, facilitate communication between the various stakeholders, and organise study tours for the project beneficiaries, as well as dedicated cooperation for the Central Bank of Egypt.