UNDP’s Support to MSMEs in Egypt
Presented To
Dubai International Conference on
Innovative Sources to Finance SMEs
By
Ghada Waly
Assistant Resident Representative UNDP
Advisor to the Chairman
Egyptian Financial Supervisory Authority
February 2010
Overview of MSMEs in Egypt

In 2006: 2.4 million private establishments (70,000
new enterprises are established yearly).

Employment in MSEs climbed to 6.43 million in
2006 (60% since 1998)

The highest growth was in enterprises with 1-4
workers (50% of non-agricultural private sector
employment).

Employment in firms with more than 50 workers
has not grown at a comparable rate.
Sectoral Distribution of MSMEs in
Egypt
Sectoral Distribution of MSEs (CAPMAS, 20002001)
15%
16%
Manufacture
69%
Trade
Service
The Missing Middle
The Missing Middle: The Share of Manufacturing
Enterprises in Employment
Italy
Spain
Japan
Micro
SME
UK
Large
Jordan
Egypt
0%
20%
40%
60%
80%
100%
MF Industry In Egypt

Around 280 MF Programs (NGOs and Banks)
serve 1.13 million active clients with a total
outstanding portfolio of 1.8 billion EGP.

Average loan size is estimated at approximately
EGP 1,600 (low average due to step lending
methodology / group lending).

The estimated penetration rate is 6%

Almost 50% of the active clients are poor women
in MF
MF Industry In Egypt
Upper
Egypt,
499,088,
44.2%
Urban,
217,621 ,
19.3%
Lower
Egypt,
395,029 ,
35.0%
Frontier,
17,384 ,
1.5%
Low Share in Value Added
Share of Enterprise Size Categories in Total Private Sector
Manufacturing Net Value Added
1.44%
6.06%
19.05%
73.45%
Micro
Small
Medium
Large
UNDP’s Support to MSMEs
Poverty Reduction is at the center of UNDP’s
work in development as it relates to MDG Goal 1
aiming at cutting poverty in half
 UNDP in Egypt and the region supports
countries formulate, implement and monitor
policies and programs centered on inclusive
growth
 UNDP’s support includes strategy development,
diagnostic studies, capacity development, local and
national linking to international best practices and
promotion of South-South Cooperation

UNDP’s Support to MSMEs

UNDP also helps in creating an enabling
environment for access to a broad range
of financial services, supporting the role of
the private sector and MSEs as potential
vehicles for generating growth and
employment, reducing poverty, and
providing the poor with greater access to
markets, goods and services.
Supporting the Establishment of an
APEX Funding Agency – SFD
UNDP supported the creation of SFD in Egypt
to mitigate the impact of the economic
reform and structural adjustment program
and to promote and develop the MSMEs
sector by providing institutional and
technical support to date.
Since its establishment, SFD has mobilized
more than 11 billion EGP.
SFD created over a million jobs in small
enterprises and 800,000 jobs in
microenterprises.
Supporting the Establishment of an
APEX Funding Agency – SFD
Activities include:
◦ Development and finance for SMEs
◦ Develop capacity of intermediary funding
agencies, banks and NGOs
◦ Provide non-financial business development
services
◦ Improve job market by building capacity of
government employment offices
◦ Improve legal and policy environment for SMEs
(Law 141 of 2004 assigned SFD as the
coordination body and identified incentives for
MSMEs).
Introduced Best Practices of
Microfinance
MicroStart Program was developed in 1999
through a UNDP/UNCDF coordination
to support the development of the
microfinance sector
MicroStart was implemented by UNDP in
Egypt, Morocco, and Yemen. In Egypt, it
worked with SFD and three NGOs.
Introduced Best Practices of
Microfinance
Objectives:
◦ Provide SFD with a best practice model based
on CGAP’s policies and guidelines
◦ Develop at SFD a sustainable access to credit
model with a micro-capital grant component
◦ Build capacity of NGOs to transform into
MFIs with a strong MIS component
Business Development Services to
MSMEs
Based on a very successful job creation
program that UNDP implemented in
Bulgaria called JOBS, “BEST” was
developed (2004-2007).
BEST created a foundation for the
provision of business support services in
addition to credit to micro and small
enterprises in (4) poor governorates.
Business Development Services to
MSMEs
Among other services, BEST provided training
on:
-
Marketing
Pricing and Packaging
Foreign Languages
Taxes and Trade Laws
ICT services
Incubators for small beginning entrepreneurs
Linkages to market
Innovative products and services (bee hive
pharmacy)
Donor Coordination

In line with its strategic coordination role,
UNDP has established and co-shared with
CIDA for the period of 2003-2009 the
MSME Sub-donor group where all donors
funding MSMEs were invited to a monthly
meeting. Government, private sector and
NGOs were invited to this forum as
relevant.
Donor Coordination
Objectives:
◦
◦
◦
◦
Information sharing
Planning coordination
Implementing joint activities
Adopting common policy position and
advocate together
The group proved to be of strategic
importance and impact
A National Strategy for
Microfinance
In 2005, UNDP led the development of a National
Strategy for MF which was launched and adopted
by the government.
Approach: consultative and inclusive of all
stakeholders
Ownership: Nationally led by EBI (training arm of
CBE)
Process: included roundtable discussions,
background policy papers, field visits to countries
with advanced experiences, policy briefs.
A National Strategy for
Microfinance


The National Strategy was developed in 2004
and launched in 2005 with the objective of
“developing a microfinance industry in which
sustainable financial services for lower market
segments are integrated into the overall
development of a broad, inclusive, and diverse
financial sector”
The Strategy set a number of
recommendations on the institutional,
supporting infrastructure and regulatory
environment levels
A National Strategy for
Microfinance
Among Key Recommendations:
 Regulations - Revise legislation to allow for
the establishment of non-bank commercial
MFIs, and the transformation of successful
NGOs into commercial MFIs.
 Infrastructure - Support the establishment of
an MFI network
 Institutional – Support product development
and diversification; and standardization of
reporting
UNDP and Growing Inclusive
Markets (GIM)
The GIM report was launched globally with an
Egypt GIM report 2007/2008, documenting CSR
models of PS where inclusion of MSMEs was core.
 The Egypt Report entitled Business Solutions for
Human Development focused on enterprise
solutions that accelerate and sustain access by the
poor to needed goods and services. Poor were
included as consumers, producers or service
providers. Inclusive business models were
documented in urban and rural areas.

UNDP and Growing Inclusive
Markets (GIM)

Both reports had as goals:
◦ Raise awareness about doing business with
the poor, how beneficial it is for businesses
and the poor
◦ Show how to create value for all cooperation
models between government, CSO and PS
◦ Inspire the PS to include MSMEs in value
chains
GSB Model – Growth of Sustainable
Businesses 2009


Pro-poor programming introduced the
concept of inclusive markets programming
which develops markets that include the
poor in the demand side as clients,
customers, and the supply side as employers,
producers, and business owners along value
chains.
The project is being implemented with
Ministry of Industry to have large
enterprises include MSMEs in the production
chain.
Challenges Facing MSMEs in Egypt

Demand Related:
◦
◦
◦
◦
Weak Effective Demand
Exports
Limited, Non-structured, and
Uncoordinated Marketing Channels
Lack of Linkages with Larger Firms
Challenges Facing MSMEs in Egypt

Input Constraints
◦
◦
◦
◦
◦

Technology
Lack of Access to Finance
Limited Access to Adequately Priced Inputs
Lack of Access to Information
Lack of Access to Business Development Services
Process Constraints
◦
◦
◦
◦
Management know-how
Quality control
Just in time production
Skilled labor
Challenges Facing MSMEs in Egypt

Education and Training
◦ Little formal technical, entrepreneurial or management
training
◦ Only 3.4% of entrepreneurs received any technical
education prior to starting the enterprise
◦ Often with limited basic education.
◦ Know-how acquired in a family business or previous
employment.
◦ Dissolution of traditional apprenticeship system.
◦ Less than 10% of enterprises reported that their
workers received any form of training
Challenges Facing MSMEs in Egypt

Legal and Regulatory
◦ Advances made by Egypt in this field are mainly
related to FDI and large businesses.
◦ Egyptian entrepreneurs spend 35% of their
time solving problems related to government
regulation.
◦ Red tape impacts more negatively on MSEs,
since they lack the human and material
resources to deal with bureaucratic
procedures.
Waqf Support to SMEs
Waqf Funds can be used to:
 Develop Islamic Finance Products
designed for micro, small and medium
enterprises
 Establish a Regional Finance Institute to
build the capacity of practitioners in
banking and non-banking financial services
 Fund access to new technologies to
include MSMEs in value chains
Waqf Support to SMEs
Provide special support to start up
projects in strategic sectors usually
declined from regular financial institutions
 Help develop intermediaries who in their
turn should support market integration of
MSMEs

UNDP Support
UNDP can support in:
 Designing
 Setting up management structures
 Providing policy advice
Thank you