10th Global Conference on Business & Economics
ISBN : 978-0-9830452-1-2
10th Global Conference on Business and Economics
October 15-16, 2010
ENHANCING ACCESS TO FINANCE FOR MICRO AND SMALL
ENTERPRISES IN EGYPT
Dr. Sahar Nasr
World Bank, American University in Cairo, and British University in Egypt
Phone Number: +2-010-544-7706
October 15-16, 2010
Rome, Italy
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10th Global Conference on Business & Economics
ISBN : 978-0-9830452-1-2
10th Global Conference on Business and Economics
October 15-16, 2010
ENHANCING ACCESS TO FINANCE FOR MICRO AND SMALL ENTERPRISES IN EGYPT
Dr. Sahar Nasr
Lead Financial Economist and Associate Professor
The World Bank, the American University in Cairo, and the British University in Egypt
+20105447706
Abstract
Many governments of developing countries perceive micro, small, and medium enterprises as engines
of employment, poverty alleviation, and broad-based economic growth. Growth and development of micro and
small enterprises in developing countries can increase poor people’s opportunities, security, and empowerment.
Firms that start small but do a good job of responding to market demands become larger. With scale comes
productivity, bringing better salaries for workers. Larger firms tend to thrive for a longer period than smaller
ones. The challenge, then, is to create an environment in which new entrants with drive and good ideas can get
started in business, and good firms can grow.
Accessing finance is a make-or-break issue for many micro and small enterprises in the developing
world. Micro and small enterprises are major contributors to the gross domestic product and employment in
economies around the world, yet their financial needs are underserved, which holds back their growth. Where
financing is available, it is usually out of reach because of short payback periods and excessive collateral
requirements. Nonbank financing options, such as leasing, are not always available. In many developing
economies, certain segments of the population, primarily women, are excluded from business activity, because
traditionally they do not own land, which is often the preferred collateral for loans.
Enhancing access of micro and small enterprises to finance has always been an important component of
the Egyptian government’s agenda. This paper gives a broad overview on the micro and small enterprise sector
in Egypt, constraints impeding their growth, and policy efforts undertaken by the government. The paper would
also discuss how far did micro and small enterprises in Egypt get affected by the economic slowdown resulting
from the global financial crisis, in addition to suggesting means by which access to finance for micro and small
enterprises could be enhanced.
Keywords
Access, finance, micro, small, business, enterprise, Egypt, financial crisis
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I.
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INTRODUCTION
Many governments of developing countries perceive micro, small, and medium
enterprises as engines of employment, poverty alleviation, and broad-based economic
growth. Growth and development of micro and small enterprises in developing countries can
increase poor people’s opportunities, security, and empowerment. Firms that start small but
do a good job of responding to market demands become larger. With scale comes
productivity, bringing better salaries for workers. Larger firms tend to thrive for a longer
period than smaller ones. The challenge, then, is to create an environment in which new
entrants with drive and good ideas can get started in business, and good firms can grow.
Accessing finance is a make-or-break issue for many micro and small enterprises (MSEs)
in the developing world. MSEs are major contributors to the gross domestic product (GDP)
and employment in economies around the world, yet their financial needs are underserved,
which holds back their growth. Where financing is available, it is usually out of reach
because of short payback periods and excessive collateral requirements. Nonbank financing
options, such as leasing, are not always available. In many developing economies, certain
segments of the population, primarily women, are excluded from business activity, because
traditionally they do not own land, which is often the preferred collateral for loans.
Enhancing access of MSEs to finance has always been an important component of the
Egyptian government’s agenda. Over the last four years Egypt‘s government has
implemented significant structural reforms. These have included liberalization of trade, a
complete overhaul of the tax system, restructuring and improving financial sector regulation,
and privatization of state-owned enterprises (SOEs). These reforms led to a friendlier
investment climate which, in a favorable global economic environment, generated a strong
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private-sector supply response. Real GDP growth increased from an average of 3.5 percent
during FY01-04 to around seven percent between FY06 and FY08—a record compared to the
previous twenty-five years. Egypt also accumulated significant net international assets in
FY05-FY08, due to both internal and external factors.
Despite the progress made, Egypt faces many challenges in maintaining sustainable
economic growth, and addressing economic, social and regional inequalities. The global
economic slowdown that began in 2008 has adversely affected growth and employment in
Egypt. In FY09, growth decreased to 4.7 percent and is expected to increase to only 5.5
percent in FY10 as the global economy recovers. Employment growth is expected to fall to
2.3 percent, and the unemployment rate is expected to increase to about 10 percent by FY10.1
The real sector, especially MSEs have also been negatively affected by the slowdown in
economic growth, as evident in a recent World Bank survey of 200 firms. Such an adverse
impact is worrisome, as MSEs account for over 99 percent of Egyptian enterprises, 85
percent of non-agricultural private-sector employment, and, correspondingly, almost 40
percent of total employment. To meet these challenges, Egypt needs to diversify the sources
of economic and employment growth, and raise the efficiency of resource allocation without
exerting undue pressure on the already strained environment. One potential source of growth
is MSEs, which over the past ten years have made an important contribution to GDP growth,
job creation, and export earnings.
II.
STUDY METHODOLOGY
This paper gives a broad overview on the micro and small enterprise sector in Egypt,
constraints impeding their growth, and policy efforts undertaken by the government. The
paper would also discuss how far did micro and small enterprises in Egypt get affected by the
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10th Global Conference on Business & Economics
ISBN : 978-0-9830452-1-2
economic slowdown resulting from the global financial crisis, in addition to suggesting
means by which access to finance for micro and small enterprises could be enhanced. It
draws on data from the World Bank Investment Climate Assessment (ICA), Investment
Climate Survey (ICS), and the ICS recall questionnaire. The ICS of 1,156 enterprises from
the manufacturing sector was carried out in October 2008, using the World Bank standard
methodology. The recall questionnaire of 566 enterprises was conducted in October 2008.
About 70 percent of the ICS sample is made up of small and medium firms, about 85 percent
of which are owned by individuals or families. Large firms— firms employing more than 150
workers—account for about 30 percent of the sample. In about 35 percent of the sample, a
woman is a main shareholder; in 15 percent of these firms, women own the majority of the
firm. The limitation of the ICS is that it reflects only the perspective of entrepreneurs who
established firms; it does not reflect the views of those who were unable to do so because of
barriers in the business environment.
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III.
ISBN : 978-0-9830452-1-2
OVERVIEW OF MICRO AND SMALL ENTERPRISE SECTOR IN EGYPT
MSEs make up over 99 percent of private enterprises in Egypt and account for 85 percent
of non-agricultural private sector employment and almost 40 percent of total employment.
MSEs have been the primary absorber of labor force entrants over the past eight years and
contribute significantly to employment generation, albeit much of it is of an informal nature.
Micro and small enterprises are also the major provider of products and services for local
markets, particularly lower-income segments with limited purchasing power.
Although the stock of micro and small enterprises has grown at an average annual rate
of over four percent during the past ten years, and micro and small enterprise employment
has increased at an annual rate of over five percent, the micro and small enterprise sector is
highly vulnerable. The average Egyptian micro and small enterprise has only 2.3 workers,
and almost three-quarters of all private enterprises have fewer than 3 employees. Over 80
percent of micro and small enterprises are informal enterprises, with low value-added, low
production quality, and poor export performance.
Micro and small enterprises are subject to a legal and regulatory framework which is
cumbersome, bureaucratic and not sensitive to their operating realities. They face several
other constraints, including difficult access to formal financing, business development
services, markets, information, technology, skilled labor, and adequately priced inputs. In
spite of more open markets and increasing foreign direct investment, because of their limited
capacity and capability, the benefits from this are not trickling down to these enterprises. And
although the numbers of both micro and small enterprises, and micro and small enterprises
employment have been on the rise, this has not resulted in a reduction in the level of poverty;
in fact, poverty levels have increased in recent years.
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A.
ISBN : 978-0-9830452-1-2
Definition of Micro and Small Enterprises
There has been controversy regarding the definition of micro, small and medium
enterprises by different entities and organizations (Table 3.1). The Small Enterprise Law 141
of 2004 defines micro enterprises as companies or sole partnerships with paid-up capital less
then LE 50,000, and small enterprises as companies or sole proprietorships with paid-up
capital between LE 50,000 and LE 1 million, and with 6–50 employees. The Central Agency
for Public Mobilization and Statistics (CAPMAS) acknowledges this definition, but in
practice uses number of employees, defining micro-enterprises as up to 5 employees, small
enterprises as up to 50 employees, and medium and large enterprise as having over 50
employees.1
The definition of CBE is also broadly consistent with regard to number of employees,
but markedly different with regard to paid-up capital. Banks tend to use annual turnover as
the defining characteristic of enterprise client, given its relevance to loan analysis and
repayment capacity. SFD uses a cut-off between micro and small enterprise loans of
LE 25,000. This cut-off is broadly in line with the World Bank definition of micro as having
an average loan size of up to 3 times per capita GDP.
B.
Size Composition
Egypt’s enterprises, like enterprise sectors in most developing and developed
countries, are mostly micro in size. According to CAPMAS, 92.5 percent of enterprises are
micro, 7.3 percent small, and less than 1 percent (only 0.2 percent) is medium and large. Only
about 1.5 percent of private sector enterprises have more than 10 employees. While the
predominance of micro enterprises is not in itself unusual, the number of private sector
medium and large enterprises, and the proportion of the private sector workforce that they
employ is low by regional and international standards. Micro and small enterprises in Egypt
1
Definitions also vary among donors. For example, EU defines micro-enterprises as having up to 10 employees, small up to
50, and medium up to 250 employees (much higher than the small-medium enterprise cut-off used in Egypt), and also uses
considerably higher paid-in capital amounts.
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tend to have very small amounts of capital. Around 59 percent of enterprises with 1–4
workers have capital of less than LE 5,000 (less than US$ 1,000) and only 6 percent of all
enterprises have invested capital of more than LE 50,000 (less than US$ 10,000), according
to Labor Market Panel Survey Data for 2006.
The proportion of micro and small enterprises is growing. While micro and small
enterprises accounted for 73.5 percent of total private sector employment in 1996, their share
had jumped to more than 85 percent in 2008.
On the other hand, medium and large
enterprises witnessed a decline in their share of employment by almost half, from
26.5 percent to 14.7 percent during the same period (Table 3.2).
C.
Sectoral Breakdown
As is typical in developing countries, micro and small enterprises are concentrated in
the trade and services sectors. Of the total micro and small enterprises, 59 percent are in
wholesale and retail trade, 27 percent in services, and 14 percent in manufacture as of
December 2008 (Figure 3.1). The manufacturing share for small enterprises dropped from
46 percent in 1996 to 38 percent in 2006 and further to 14 percent in 2008. However, over
half (51 percent) of medium and large enterprises are in manufactures, up from 46 percent a
decade ago. Despite making up the vast majority of firms in Egypt’s private enterprise sector,
the contribution of micro and small enterprises to exports is very low–estimated at only
4 percent of total exports in 2008, by value.
D.
Gender in the Micro and Small Enterprises Sector
There is only limited participation of women in self employment and micro and small
enterprises ownership. Women-owned micro and small enterprises make up 18 percent of the
total number of micro and small enterprises. As size grows, levels of female ownership
decrease even further. Not only are women less likely than men to be involved as micro and
small enterprises owners, their enterprises are reportedly smaller, less likely to employ other
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workers, more likely to be in retail trade, less likely to export, less likely to be registered, and
to have lower levels of capitalization.
The presence of women in entrepreneurial and micro and small enterprises activity
mirrors their low participation in the labor force generally. The unemployment rate for
women in Egypt is four times greater than that for men. There are over one million women
in the labor force who would like to work but who cannot find employment. Therefore there
may actually be greater potential for women participation in the enterprise sector than men,
proportionately. The picture is better for microfinance, with women making up 74 percent of
the active clients of SFD-supported MFIs.
E.
Informality
Informality in Egypt’s enterprise sector is high, at an estimated 37 percent of GDP.
Egyptian Labor Market Survey Data for 2006 indicated that over 83 percent of enterprises are
informal and over 70 percent of private sector wage workers are engaged informally. Even
medium and large firms hire nearly a quarter of their workers informally (without a secure
contract, social security, etc). Manufacturing micro and small enterprises are much more
likely to be registered (70 percent) than retail and services (less than five percent).
F.
Constraints on Enterprises
The 2009 Investment Climate Survey (ICS) for Egypt indicated the primary
constraints for manufacturing firms were uncertainty about the macroeconomic and
regulatory environment, a shortage of skilled workers, tax rates, corruption and access to
finance and cost of financing.2 The gap between the small, medium and large enterprises is
especially severe in terms of access to finance (Figure 3.2). According to the Egyptian
2
The non-financial constraints are addressed by other Bank projects and/or by other development partners. The Bank is
providing technical assistance and advisory work on the macroeconomic environment through the 2009 Egypt
Macroeconomic Policy Note; on the regulatory policies through the 2008 Egypt Investment Climate Survey; on corruption
through the on-going joint work supporting the Egyptian Governance and Anti-corruption agenda; and on the lack of skilled
workers, there is the Egypt Skills Development Project. This is complemented by the work of other donors, and international
organizations, such as the IMF on the macroeconomic environment (taxation, inflation, monetary policy, and exchange rate),
ILO (skilled workers), and UNDP (governance and anti-corruption).
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National Competitiveness Council estimates in 2008, around 40-60 percent of the costs of
doing business arise from regulatory burden.
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IV.
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ACCESS TO FINANCE FOR EGYPTIAN MICRO AND SMALL ENTERPRISES
There is widespread consensus on the significant contribution of micro and small
enterprises to employment creation, poverty alleviation, economic growth, social cohesion,
and local and regional development. Lack of formal credit often hinders these enterprises
from formal entry or from developing their potential. The fact that micro and small
enterprises often receive less finance or face worse conditions than larger firms can put them
at a competitive disadvantage, and will seriously harm long-term growth and development
through under-investment, a waste of entrepreneurial resources, a reduction of productivity,
and a lower growth rate.
Access to finance is important for growth and economic development. Having an
efficient financial system that can deliver essential services can make a huge contribution to a
country’s economic development. Greater financial development increases growth, reduces
economic volatility, creates job opportunities and improves income distribution, as has been
established by a great deal of empirical literature. A well-functioning financial market plays a
critical role in channeling funds to their most productive uses, and allocates risks to those
who can best bear them.
Globally, micro and small enterprises’ credit limitations in access to formal finance
has been mainly attributed to the high administrative costs of small-scale lending, asymmetric
information, the high risk attributed to their lack of collateral and inadequate capacity to
prepare business plans and local applications. Although the reasons apply to industrial, as
well as, developing and emerging economies, they tend to be more significant in the latter,
where institutions underpinning credit markets are often less developed. The larger the firm,
the easier its access to bank credit and the better are the loan conditions it receives. Loans to
large customers are encouraged by banks through employee incentive schemes, which are
often based on the amount of credit granted.
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In addition, the vast array of alternatives to domestic bank loans available to large
firms, such as recourse to capital or international financial markets, augments their bargaining
power at the time of negotiating a loan contract. In contrast to large firms, micro and small
firms are often less able to meet their financing needs. Without sufficient finance, micro and
small enterprises are unable to expand their businesses and to introduce productivity
enhancing technology. This limits dynamism and competition, adversely affecting the
economy as a whole.
Enhancing access of MSEs to finance has always been an important component of the
Egyptian government’s agenda. Strengthening the legal and institutional architecture for
MSE finance is a key pillar in the government’s financial sector reform program. In
particular, while the first generation of the Financial Sector Reform Program (2004-2008)
focused on financial stability, the second generation reforms (2009–2013) focuses on
financial intermediation and improving access. Key components of this program include,
establishing under the Ministry of Investment the first Egyptian Financial Supervisory
Authority (EFSA); setting a legal framework that will define and regulate Microfinance
Institutions (MFIs); issuing CBE Decree 2408 of 2008, reducing reserve requirements on the
funds used for loans to small enterprises; the launching in 2008 of a stock exchange for
smaller firms—the NILEX to improve access to equity capital by small firms; issuing a new
law on secured lending; and further improvements in the services offered by the credit
bureau. In addition, SFD has recently launched a Micro and Small Enterprise Development
Strategy (2009–2013) aiming at improving the environment for MSEs.
Egypt has a large banking system, as indicated by a share of deposits to GDP of about 80
percent, far higher than what would be predicted by its per capita income, size, and
population density (Figure 4.1). Like other Middle East and North Africa (MENA) countries,
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it is possible that sustained flows of remittances from workers abroad have contributed to the
buildup of a large deposit base.
The share of private credit to GDP is also comparatively high, although the difference
from the predicted value is much smaller, as shown in Figure 4.2, due to a large share of
government financing. The share of private credit to GDP and loan to deposit ratio have
declined further in recent years (Figure 4.3), reflecting the restructuring program
implemented in recent years (entailing large scale loan provision and write-offs and tighter
regulatory standards reducing the pace of new lending to enterprises) and continued
government financing.
Moreover, credit to the private sector in Egypt remains very concentrated on the
largest and well established enterprises.
CBE reports that lending to small enterprises
amounts to less than 1 percent of total lending. Formal financing, whether from banks or
non-bank financial institutions, plays a limited role in financing enterprises, especially micro
and small firms. The large majority of Egyptian manufacturers rely exclusively on their own
funds; only 17.4 percent have access to finance from the financial sector. This is especially
striking for small firms—only 13 percent have access to finance, as opposed to 36 percent for
large firms. While the average for Egypt is comparable to the other countries in MENA, it is
significantly below that in other developing countries.
The microenterprises sector in Egypt is fragmented with 1.3 million active borrowers
as of December 2008. It is estimated that only 5 percent of the potential microfinance market
is being reached. According to the Poverty Assessment for Egypt, the estimated number or
poor and ‘near poor’ people in Egypt, of productive age, is 21.03 million. Lower Egypt
governorates have a penetration rate for microfinance of only 3.5 percent.
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SFD alone has financed 435 NGOs, and is actively financing 390, that are on-lending
to microenterprises, many of which are small in scale. The microfinance units within banks
operate within defined loan brackets, catering to specific segments. Products and services are
limited to conventional forms, while alternative credit and saving products remain largely
unused. These services are mainly associated with the SFD activities and the associated
guarantees.
Only a small portion of the funds mobilized by the banking system are lent to the
productive sector, and even less to the private sector.3 Banks are increasingly investing in
treasury bills and government bonds. They held about 91 percent of outstanding treasury bills
as of December 2008; state-owned banks alone held 70 percent. This reflects banks’
inefficiency in identifying profitable projects and their cautious investment policies.
Moreover, Figure 4.4 shows that as little as 0.19 percent of banks’ clients receive as much as
51 percent of banks’ credit (on an unconsolidated basis).
At the time of the project preparation, the Egyptian banking system has been very
liquid and neither CBE nor the commercial banks lack loanable funds. CBE has the ability to
issue financial bonds, and the financial institutions have extensive networks for deposit
taking. The fact the banks are willing to borrow under SFD is a reflection of their serious
commitment to adhere to the conditions for successful implementation of the project.
3
Furthermore, not all the increase in credit advances to the private sector can be considered a net credit or an indication of
fresh funding to the private sector, as there is an issue of rolling over or ever greening of loans. It is very hard to find
information and data that differentiate between fresh funding and rolling over of credit.
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The 2009 ICA provides rich data on access to finance and other constraints for
manufacturing enterprises of all sizes (Figure 4.5). The following analysis relies on that 2008
survey and on changes observed from earlier ICAs.4 It should be noted though that these
surveys do not cover trade and retail enterprises, which make up a majority of the micro and
small enterprise sector, and which may rely to a greater degree on access to credit for
replenishing or expanding stock and inventory.
Box 4.1: The Link between the Educational Level and Access to Finance
Usage increases substantially with the level of educational attainment. Fourteen percent of households headed by
someone with a university degree have formal savings or investment; 23 percent if the head of household holds a
graduate degree. Most in these two groups use bank savings. Indeed, those are the only two educational groups
for which bank savings are more prevalent than postal savings. Even at the highest education levels, however,
almost no households have formal credit or capital-market investments (stocks, bonds, and deposits in investment
companies).
Figure B4.1: Households’ Share in Access to Financial Services by
Educational Attainment
in Access
Egypt
Figure A2.5: Households’
Share in
to Financial
Services by Educational Attainment in Egypt
25%
20%
15%
10%
5%
0%
Illiter ate
Primar y
Sc hool
Univ er s ity
Degr ee
Gr aduate
Degr ee
Post Of f ic e Sav ings
Savings in Banks
Formal Sav ings or Inves tment
4
The informal sector ICA survey was conducted in June–July 2008, and the main ICA surveys were conducted in October
2008. The informal ICA survey was conducted on 500 firms, comprised of 56 small firms and 444 micro firms. Small and
micro firms represent 11.2 percent and 88.8 percent of the sample respectively. The manufacturing ICA survey was
conducted on 1,156 firms, comprised of 618 small firms, 196 medium firms, and 342 large firms. Small, medium, and large
firms represent 53.46 percent, 16.96 percent, and 29.58 percent of the sample respectively. The services ICA survey was
conducted on 374 firms, comprised of 312 small firms, 34 medium firms, and 28 large firms. Small, medium, and large firms
represent 83.42 percent, 9.09 percent, and 7.49 percent of the sample respectively.
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Access to finance is a significant constraint. Overall, more than 28.5 percent of the
firms surveyed perceive access to finance is a major or severe constraint, while 38.5 percent
view the cost of finance as a significant hindrance. The problem is more severe for micro and
small firms that perceive access to finance and the cost of financing in particular as major
constraints. For example, over half of informal microenterprises and small manufacturing
firms, and over 70 percent of small service firms find the cost of finance constraining,
compared to 41 percent of medium-sized manufacturers and only 30 percent of large
manufacturers. Similarly, access is identified as a constraint by 37 percent of
microenterprises surveyed, 40 percent of small manufacturers and service firms, as opposed
to 26 percent of medium-sized manufacturers and only 18 percent of large firms (Figure 4.6).
A relatively low proportion of Egyptian firms, of all sizes, have a loan or credit line
compared to the MENA average or other developing countries (Figure 4.7, 4.8).
Manufacturing enterprises in Egypt do not appear to make extensive use of loans, and
rely primarily on internally-generated earnings. This holds true for all sizes of firms.
Moreover, the proportion of working capital financed through loans dropped by nearly
60 percent between 2006 (39.2 percent) and 2008 (16.6 percent). Likewise, fewer firms
(16.4 percent in 2008) are using loans to finance investment (down from 51 percent in 2006Figure 4.9).
Microenterprises that do get loans generally obtain them on less favorable terms than
larger enterprises. The ICA survey data indicates that loans to microenterprises and small
firms are more likely to require collateral than loans to medium and large firms. They require
a higher level of collateral and are of shorter duration than loans to larger firms (Table 4.1).
Moderating this, about 16 percent of loans received by microenterprises were from NGOs
and another 21 percent reportedly from unspecified “other” sources. However, micro
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entrepreneurs are also quite likely to have to pledge personal assets against the loan—40
percent of those with loans say they did so.
Microenterprises have limited access to any financial services—only 3.5 percent
report having a checking account and 4.4 percent have a savings account. Microenterprises
who don’t have loans are much less likely to cite lack of need for a loan as an explanation.
Around 97 percent of microenterprises without a loan never applied for one, similar to the 95
percent for formal manufacturing firms. But of those that never applied, only 39 percent said
it was because they did not need one, as opposed to 45 percent of small formal
manufacturers, 58 percent of medium firms and 68 percent of large firms that hadn’t applied
for loans. Around 21 percent of respondents from microenterprises that didn’t apply say they
don’t want to deal in interest, 18 percent indicate that interest rates are too high, and 13
percent say application procedures are too burdensome (Figure 4.10).
Lack of access to finance is constraining productivity and efficiency, especially in the
manufacturing sector. Firms showing higher productivity (for example, as measured by
improved average capacity utilization from 2006 to 2007) complain less about access/cost of
financing. This phenomenon is more prominent when firms are segregated by efficiency i.e.
the degree to which a firm is operating at optimum capacity (defined here as 75 percent of
existing capacity). Statistical analysis of manufacturing survey data shows that only 20.7
percent of efficient firms complain about the severity of access to finance compared to 38.4
percent of inefficient firms. Likewise, 32.33 percent of efficient firms complain about cost of
financing, compared to 50.8 percent of inefficient firms (Figure 4.11).
Firms that have loans or overdrafts are more likely to be efficient than firms without
access to finance: 15.3 percent of efficient firms have loans compared to 11.69 percent of
inefficient firms; and the proportion of higher productivity and efficient firms with overdrafts
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is nearly twice those of lower productivity and inefficient firms.5 However, efficiency is also
a determinant of access to overdrafts, suggesting that banks are selecting better projects (i.e.
better credit risks) for financing.
Access to bank loans or overdrafts is also an important determinant in employment
growth within firms. Around 28 percent of firms that grew in terms of increased staffing
have loans or overdrafts, compared to 17 percent of firms that did not increase staff numbers
(Figure 4.12). However, access to bank finance does not strongly relate to capital asset
growth (investment). Econometric analysis for the ICA 2009 confirms that access to finance
has a positive and statistically significant impact on increase in total firm employment, but
not on investment measured by fixed asset value.6
According to ICA 2009, microenterprises express a clear desire for more working
capital. Informal microenterprises would like to keep inventories of their leading input or
5
The issue of the relevance of access to finance for productivity and efficiency is empirically examined in the 2008 survey
using two logistic models. In the first model, productivity is the dependent variable (i.e. firms with higher productivity take
the value of 1or 0 otherwise) and in the second model, efficiency (firms operating at 75 percent or more of capacity take the
value of 1 or 0 if below 75 percent). The explanatory variables in the models are the same i.e. access to loans, access to
overdraft, and many control variables including size, age of firm, ownership, region, gender, degree of foreign trade,
education and experience of owner/manager, etc. Using robust standard errors, access to overdraft turned out positive in both
models, but is only statistically significant (at 5percent level) in the model of efficiency. Access to loans is positive but not
statistically significant in either model. Therefore, lack of access to overdrafts is a key constraint on firm’s efficiency,
supporting evidence of a positive correlation between short-term credit and productive efficiency in previous studies (e.g.
Fisman (2001), Trade Credit and Productive Efficiency in Developing Countries, World Development 29 (2) pp. 311–321).
6 Two logistic models were employed to statistically assess the impact of access to finance (having a loan or overdraft) on
firms’ growth. In the first model, the change (from 2006 to 2007) in net book value of the firm’s fixed assets is the
dependent variable (taking the value one if positive and zero otherwise) and in the second change in the average number of
employees is the dependent variable (taking value one if positive and zero otherwise). Explanatory variables were the same
in both models: access to financing (taking the value one if the firm has a loan/overdraft and zero otherwise), efficiency,
regulatory compliance (takes value 1 if more than 5 percent of time in the last 12 months is spent complying with
government regulations and zero otherwise), infrastructure (subdivided into electricity, water, transport – each taking the
value of 1 if the firm has suffered any loss in sales as a result of inefficiency in each sector), factors influencing changes in
employment (subdivided into law and regulation, union agreements, high minimum wage, fear of workers strikes, - each
taking the value 1 if it is the main reason affecting staff hiring and firing and zero otherwise), education (value 1 if university
and zero otherwise), experience of top manager (value 1 if more than 5 years and zero otherwise), and competition (value 1
if firm lowers prices in response to domestic or foreign competition and zero otherwise). Control variables include: size,
region, gender, audited financial statements, degree of foreign trade, age of firm, and firm activity (garments, textiles, etc).
As noted in the text, the results support the hypothesis that access to finance has a positive and statistically significant impact
on increase in staff size but not on fixed asset investment. Other significant variables in the growth via employee model
include: efficiency (i.e. efficiency leads to staff increases), education (university-educated managers improve growth
prospects), and electricity (with positive coefficient i.e. firms with sales losses arising from power outages are increasing
number of employees). Significant explanatory variables in the fixed investment growth model include regulatory
compliance (negative coefficient i.e. time spent complying with regulations is constraining growth), and water (positive
coefficient i.e. firms’ losing sales as a result of water shortages are spending on fixed assets). In addition, it appears that
much of growth in assets can be linked to firms involved in the metals sector. An interesting finding: the dummy variable
associated with female-owned firms is statistically significant in both models.
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supply that is 48 percent higher than their current levels, if not for lack of financing (Figure
4.13). Manufacturers in the informal sector would like 47 days of inventory on hand, but can
only finance a 19-day supply. Given supply uncertainties, this lack of working capital may
make these firms vulnerable to interruptions in production.
About half (50.9 percent) of the firms surveyed in 2008 are voluntarily excluded from
the credit market and only 5 percent of those not currently served applied for bank loans in
the past year. This high level of ‘self exclusion’ is an important feature of the Egyptian credit
market. The entrepreneurs surveyed as part of the ICA most commonly cited high interest
rates, the lack of Islamic financial products, and burdensome loan application procedures, as
reasons for not using loans from financial institutions. But a very significant proportion
(60 percent) simply did not think they needed a loan.
The availability of collateral is still the basis for obtaining bank loans. 92 percent of
rejections of loan applications were reportedly based on the lack of acceptable collateral in
the 2008 survey. About 84.6 percent of loans require collateral (higher than global averages),
and this does not vary much between SMEs (86 percent) and large firms (82 percent), which
suggests that banks do not have well developed SME lending technologies. From the panel
data, the rate of collateralization has increased slightly to 90 percent in 2008, from 77 percent
in 2006, and 88.6 percent in 2004. This recent sharp rise in 2008 may reflect the systematic
increase in risk aversion in the global credit market (Figure 4.14).
The percentage of collateral to loan value required has, however, fallen below
100 percent, to about 85 percent, which places Egypt more favorably in international
rankings in that regard (Figure 4.15).
A preference for Islamic financing (as reflected by ‘non-interest rate’ financing) is
becoming more pronounced and significant, with the proportion citing this as a severe
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constraint growing between 2004 and 2008. This appears to have significant implications for
enterprise access to finance (Figure 4.16).
Box 4.2: Small and Medium Enterprise Finance in Egypt — Findings from In-depth World Bank
Interviews
In the context of a wider survey on Small and Medium Enterprise (SME) financing in MENA, three banks with
very different characteristics were interviewed in Egypt. The objective of the survey is to identify the main
constraints for expanding SME finance, as understanding these constraints would enable policymakers to design
appropriate solutions that would benefit both SMEs and banks. Despite their different backgrounds, the three
banks painted a similar picture of SME financing in Egypt. This box summarizes the main findings of the
interviews held in October 2009.
While they did not agree on the strength of competition in the segment, all banks stated that SMEs are an
underbanked segment, and stressed their interest in expanding SME banking. Two of the three banks
interviewed saw the small enterprise segment as less competitive and more open for expansion, noting that SE
clients tend to only deal with one bank, whereas the ME market was more competitive and MEs were able to
access several banks. As in many other countries, banks see Egyptian SMEs as a high risk and high return
market, where several constraints in the areas of financial infrastructure and the informality of small enterprises
contribute greatly to the risks in SME lending.
The importance of SMEs is indicated by the existence of a separate unit managing the banking relation with
SMEs in all three banks. Banks emphasized portfolio diversification, growth potential, supply chain links, crossselling potential, and, in the case of the Islamic bank, social mission as the most important drivers of their
involvement with SMEs.
The three banks offer similar products to SMEs, namely loan, deposit and cash management, as well as payment
products. A striking difference compared to many other developing and emerging countries is the lack of leasing
and insurance products among banks’ products for SMEs. This is in line with the underdevelopment of the
leasing and insurance sectors not only in Egypt but also in MENA in general.
There was consistency among the two conventional banks about the most important obstacles to their exposure
to sector: SME-specific factors (e.g. poor quality of financial statements, informality, lack of adequate collateral,
lack of business skills) and credit information (lack or poor functioning of credit bureaus) were listed as the top
obstacles. Banks suggested a whole range of measures the government could take to increase the appeal of
lending to SMEs. These measures include: establishing a commercial court, reforming the credit guarantee
scheme, setting up business development services for SMEs to help with standardized business plans, and
capacity building for SMEs.
Risk management practices related to the SME portfolio are improving, and the credit risk assessment of SMEs
generally corresponds to international practices. The interviewed banks use similar techniques to evaluate
SMEs: while no bank reported the use of internal credit scoring, internal credit ratings based on the regulatory
rating requirements are used. External credit scoring is expected to be available soon from I-SCORE and banks
plan to incorporate it in their credit risk assessment process. Automated decision-making for lending to SMEs
with high scores is not planned. All banks do financial analysis of the targeted SMEs, and with the exception of
the bank with the largest SME portfolio, they also do a financial analysis of the SME owner.
Although there are some differences in how banks deal with SMEs with emerging concerns and overdue
payment, all banks agreed that they try to avoid taking the judicial route. They noted that the judicial system is
overstretched and the court process can take years.
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Box 4.3: Access to Finance in Egypt—A Gender Dimension
Ensuring that investors, both men and women, have equal access to the financial market is essential.
There is a need to allocate funding to its most productive uses; otherwise economic growth will be hampered.
Hence removing any gender bias is crucial. Enhancing the active participation of women in entrepreneurship
activities and giving them access to markets, especially financial markets, is essential, as it leads to a rise in the
number of economically active members in the society; this will ultimately result in long-run economic
prosperity.
While access to finance remains a business constraint for both men and women, evidence seems to
suggest that women are facing higher hurdles, particularly for small enterprises. The ICA shows that women
suffer more from constrained access to finance compared to men, whether in terms of the cost of finance, ability
to gain approval for financing, or legal disputes and conflict resolution in case of bankruptcy (Figure 2). In
addition, banks request more strict collateral requirements when dealing with women investors. In fact, the
proportion of women who complained about collateral requirements was double that of men.
Women often have difficulty in providing collateral because, although the law gives women ownership
rights of property, they often lack independence in managing these assets (being under the guardianship of their
brother, husband, or even son). In many cases they are prevented from using their property as collateral for
loans, limiting their ability to participate as independent agents in private-sector activity. The allocation of
resources within the family is greatly influenced by the perception of roles, where the men are seen as the main,
if not the sole, bread-earners (even in the cases when they are not).
Women are more active in the informal credit market compared to men, and are more likely to draw on
funds from family and friends. Very few women entrepreneurs resort to commercial banks for credit (around 20
percent), but those who do are confronted with higher rejection rates (6 percent compared to 4.5 percent for men)
as shown in Figure 2. Banks estimate that women account for 10 to 25 percent of bank clients, most of whom are
microfinance clients. Banks in Egypt do not systematically collect gender-disaggregated portfolio information
and so do not have a good understanding of the needs of women SME owners as potential customers. In contrast,
women are a majority of microfinance clients in Egypt. The proportion of women clients in SFD-supported
microfinance portfolios is high and has increased from 66 percent in 2007 to 74 percent in 2008. There are a
number of SFD-supported NGOs that solely or primarily serve women and as a result the women who are most
in need of this credit will benefit greatly from the proposed operation.
Figure B4.2: Finance as a Major Constraint
Facing Women Entrepreneurs in Egypt
Figure B4.3: Banks Loan Rejection
Rates in Egypt by Gender
60
7
50
6
40
5
30
4
3
20
2
10
1
0
Cos t of
f inanc ing
w omen
A c c es s to
f inanc e
0
Legal s y s tem &
c onf lic t
r es olution
Women
men
Source: ICA (2009).
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Men
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POLICY IMPLICATIONS AND RECOMMENDATIONS
The speedy completion of the Egyptian government’s financial sector reform program
and the restructuring of state-owned financial institutions are essential to enhance access to
financial services. Equally important is improving the quality of the institutional environment
and corporate governance. Enhancing the role of banks that have a huge branch network, of
the postal system, and of microfinance institutions is crucial for the access agenda. It is
essential to improve and widen the availability of financial services in Egypt, especially for
micro and small firms as well as poor households, to enhance growth in the economy. The
securities issuance system; institutional investment deregulation; and the regulatory capacity
and policy framework should be reformed to enhance the primary markets. Ultimately, the
combination of financial restructuring and institutional reform will make Egypt’s financial
sector more developed and efficient, leading it to provide better-quality financial products
and services, exhibiting a lower cost of financial intermediation, and being more competitive.
The gains of better financial-sector development apply especially to MSEs. MSEs that
have proven their ability to survive and grow in the marketplace can be important engines of
innovation, job creation, and growth. Although both large and small firms need efficient
access to financial products to remain competitive, small firms are typically much more
growth-constrained by lack of finance. MSEs’ opportunities to develop into large, successful
firms are influenced by a conducive overall investment climate—easy entry and exit, clearly
established and protected property rights and good contract enforcement. Thus, improving
access to finance allows them to capitalize on their growth opportunities, operate on a larger
scale, and contribute more fully to economic growth.
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Restructuring the state-owned banks is important, not only for stability and reducing
fiscal costs and contingent liabilities, but also for access to finance. The government should
also continue the institutional restructuring of the state-owned banks that are likely to remain
in public hands for some time, to assure they support a competitive market. Once the stateowned banks have been restructured and privatization is solidly underway, incentives for
sound financial intermediation and a more competitive market structure will emerge. As
private banks identify their comparative advantage and competitive niches, and as margins
are squeezed in traditional markets, access to financial services for MSEs and households can
be expected to increase and the quality of financial services enhanced. However, lessons from
other countries suggest that reaping benefits of banking reform require a comprehensive
approach. In depth restructuring of the state-owned banks will take time to be completely
implemented, but does ultimately pay off.
On the postal’s system, its potential contribution to improved access to financial services
is great, especially in rural areas, and is crucial for enhancing access in Egypt as a whole.
Authorities can make better use of the network of postal offices to expand access by
encouraging Egypt Post to diversify the range of services it offers. Such diversification may
entail distribution of credit, provided it is regulated by CBE, which would require postal
financial services being institutionally split from Egypt Post. Another option would be for
Egypt Post to distribute credit on behalf of a commercial bank through a strategic partnership,
which would not require a banking license. Such an ambitious diversification strategy entails
capacity-building in many fields, including cost accounting, negotiations, market-driven
product development, and information technologies. The government should promote the
complete integration of all postal outlets into its online network to enhance postal payments
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and savings products, and consider using this distribution and IT infrastructure for credit
extension, tapping relevant international expertise to promote successful expansion.
Microfinance offers a mean of addressing the household and MSEs’ demand for access to
financial services. Egypt appears relatively well advanced in its adoption of the business and
lending practices associated with the commercially sustainable provision of microfinance.
This experience could be tapped to improve access to financial services, especially credit.
Microfinance business practices, involving specialized lending techniques, incentive-based
loan officer compensation policies, and information technology capabilities, have broad
application to the MSE lending market. Some banks might therefore profitably apply
microfinance policies and practices toward the MSE sector. State-owned banks should be
encouraged to make full use of the opportunity. At the same time, banks that have recently
penetrated the small-business finance market and have been active in providing microfinance
should be cautious in selecting credit policies or procedures and in employing sufficiently
skilled staff. It is also important to ensure that the current banks’ regulatory and supervisory
practices do not unnecessarily inhibit the broader adoption of these practices. Thus, pursuing
and leveraging the National Strategy for Microfinance is an important action.
To enhance access to finance, it is essential to improve the quality and credibility of the
credit information system. Operationalizing the private credit bureau is an important step
forward. The private credit bureau should set up its own credit-information database of bank
and non-bank financial institutions, as well as combine the data of the public and private
credit bureau, which would be available to qualified users. Alternatively, there could be an
interface linking the public credit registry and a private credit bureau. The public credit
registry would continue to exist to meet its legal mandate, until a decision is made about
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whether it would be combined with the private credit bureau or an interface would link both.
The current credit marketplace’s focus on aggressive growth in the retail business requires
continuing the expansion of the public credit registry at CBE.
Also, the institutional infrastructure of Egypt’s financial sector is coming into place
for more efficient financial intermediation. Regulatory gaps are being filled, and new
institutions are being created. The overall direction is right, but deeper institution-building,
especially in the judicial area, is still needed and will take much more time to facilitate easy
access to financial services. The speedy and adequate completion of the Financial Sector
Reform is essential to enhance access to financial services. Ensuring sustainability and
maintaining the course of the reform program, and promoting competition will be essential to
reap the benefits in the form of an efficient financial system capable of providing better
financial products and services at low costs, catering to all types of clients. Ultimately, a
more developed and well-functioning financial system will enhance economic growth and
development in Egypt.
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REFERENCES
Barth, James, Gerard Caprio, and Ross Levine. 2000. “Banking Systems Around the Globe: Do Regulation and
Ownership Affect Performance and Stability?” Policy Research Working Paper No. 2325. World Bank.
Washington D.C.
Beck, Thorsten, Demirguc-Kunt, and Maria Soledad Martinez Peria. 2005. "Measuring Banking Sector
Outreach, Indicators of Access to and Use of Financial Services across Countries,” World Bank.
Washington D.C.
Bencivenga, V.R. and B.D. Smith. 1991. Financial Intermediation and Endogenous Growth, Review of
Economic Studies, LVIII, pp. 195-209.
Boyd, J.H. and B.D. Smith. 1992. Intermediation and the Equilibrium Allocation of Investment: Implications for
Economic Development, Journal of Monetary Economics, Vol. 27, pp. 409-432.
CAPMAS. 2005. Egyptian Household Survey of Income and Expenditure. Cairo, Egypt.
Caprio, Gerard and Maria Martinez Peria. 2000. “Avoiding Disaster: Policies to Reduce the Risk of Banking
Crises,” Working Paper No.47, Cairo: Egyptian Center for Economic Studies, November.
———, and Robert Cull. 2000. Bank Privatization and Regulation for Egypt, Distinguished Lecture Series 15,
Cairo: Egyptian Center for Economic Studies.
Central Bank of Egypt. Annual Report (various issues).
Claessens, Stijn. 2005. “Access to Financial Services: A Review of the Issues and Public Policy Objectives.”
Policy Research Working Paper No. 3589. World Bank. Washington D.C.
Cull, Demirguc-Kunt, and Morduch. 2006. “Financial Performance and Outreach: A Global Analysis of Leading
Microbanks.” World Bank. Washington D.C.
Demirgüç-Kunt, Asli. 2007. “Finance for All: Policies and Pitfalls in Expanding Access” A World Bank Policy
Research Report. Washington, D.C.
Egyptian Insurance Supervisory Authority (EISA). Annual Report. (various issues).
FinScope Africa. 2005. Financial Survey for South Africa. (various issues).
Goldstein, Morris and Philip Turner. 1996. “The Roots of Banking Crises: The Macroeconomic Context”, in
Banking Crises in Latin America, by editors Hausmann and Rojas-Suarez, Washington, D.C.: World
Bank.
Greenwood, J. and B. Jovanovic. 1990. Financial Development, Growth, and the Distribution of Income,
Journal of Political Economy XCVIII, pp. 1076-1107.
Impavido, Gregorio et al., 2001. Contractual Savings, Capital Markets and Firms’ Financing Choices, World
Bank, Washington D.C.
International Financial Statistics Yearbook. 2000-2006. International Monetary Fund: Washington, D.C.
International Monetary Fund. 1998. Egypt: Beyond Stabilization, Toward a Dynamic Market Economy, IMF
Occasional Paper 163, Washington, D.C.
———. 2000a. Macroeconomic Indicators of Financial System Soundness, Occasional Paper No. 192.
Washington, D.C.
La Porta, Rafael, Florencio Lopez-de-Silanes, and Andrei Shleifer. 2002. “Government Ownership of Banks,”
The Journal of Finance, Vol. 57, No. 1, pp. 265-301.
Lindgren, Carl-Johan. 1997. “How to Keep the Banking System Sound in a Period of Change,” in Banking
Soundness and Monetary Policy: Issues and Experience in the Global Economy, by editors C. Enoch
and J. Green, Washington, D.C.: International Monetary Fund.
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———, Carl-Johan, Gillian Garcia, and Matthew I. Saal. 1996. Bank Soundness and Macroeconomic Policy,
Washington, D.C.: International Monetary Fund.
Ministry of Finance. 2006. Financial Monthly (various issues)
Ministry of Investment. 2006. (various issues).
Mohieldin, Mahmoud. 1997. “Islamic finance in Egypt”. Egyptian Center for Economic Studies (ECES),
Working Paper Number 15, July 1997.
———, and Sahar Nasr. 2003. “Financial Policy in Egypt,” an Analytical Study prepared for the Economic
Research Forum (ERF) and Forum Euro-Mediterraneaeen des Institutes Economiques. September
2003.
———, and Sahar Nasr. 2006. “On Bank Privatization: The Case of Egypt,” The Quarterly Review of
Economics and Finance, December 2006.
Moody’s Investors Service. 2000. “Egypt: Banking System Outlook,” Global Credit Research, New York,
November.
Nasr, Sahar. 2000. “Privatization in Egypt: Achievements and Challenges,” World Bank, Egypt Country
Department, June 2000.
———. 2006. “Access to Finance and Growth in Egypt” Middle East and North Africa Department, World
Bank, Washington, D.C.
———. 2006. “Financial Leasing in MENA Region: An Analysis of Financial, Legal and Institutional
Aspects,” Working Paper Series in the Economic Research Forum (ERF), presented at the ERF 12th
Annual Conference, Cairo, Egypt. December 2006.
Pagano, M. 1993. Financial Markets and Growth: An Overview, European Economic Review 37, pp. 613-622.
Roe, Alan R.. 1998. The Egyptian Banking System: Liberalization, Competition and Privatization, Cairo:
Egyptian Center for Economic Studies, Working Paper No. 28, June.
Safavian, M.Fleisig, H. and Stienbuks, J. 2006.
USAID. 2006. Report on Government Debt Market Development. (various issues)
Wood, P. 1995. Comparative Law on Securities and Guarantees. p.5
World Bank. 2007. Financial Sector Strategy for the World Bank Group. Washington D.C.
——— .2004. Egypt: Investment Climate Assessment. Washington D.C.
——— .2005. Egypt: Individual Banks Survey. Washington D.C.
———. 2005. Insurance Sector Survey. Washington D.C.
———. 2002. Report of Observance of Standards and Codes. Washington D.C.
World Federation of Exchanges. 2000-2004. Annual Reports.
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TABLES
Table 3.1: Various Definitions of MSE in Egypt
Micro
Employees
Small
Medium
CAPMAS: up to 5
CAPMAS: up to 50
CAPMAS: 50+
CBE: up to 5
CBE: up to 50
CBE: 50-99
Law 141: up to 50
Paid-up Capital
Law 141: <LE 50,000
Law 141: LE50,000LE 1 million
CBE (for SMEs): LE 1 million–LE 20 million
CBE (for SMEs): LE 250,000–LE 5 million
Annual Sales
Turnover
Loan Size
SFD: up to LE 25,000
SFD: LE 25,000– LE 2 million.
Source: World Bank ICA (2009).
Table 3.2: Enterprise Sector Composition by Size and Employment
Microenterprises
Small
enterprises
Medium and
large
enterprises
Total
Number of enterprises
2,167,142
171,144
5,015
2,343,301
Number of workers
4,075,150
1,389,448
938,570
6,403,168
Share in private enterprises sector
(percent)
92.5
7.3
0.2
Share in private employment sector
(percent)
63.6
21.7
14.7
Source: CAPMAS (2006).
Table 4.1: Constraints of Most Recent Loans for Micro, Small, Medium and Large Firms, 2008
Micro
Informal
Small
Manufacturin
g
Medium
Manufacturing
Large
Manufacturing
What was the approximate value
of the collateral required as a
percentage of the loan value?
104.4
93.6
82.6
78.6
What is the total duration of the
loan (months)
23.5
82.1
83.4
83.5
What was the rate of interest?
13.7
13.2
15.6
12.7
Was there also a fee to obtain
the loan? Percent saying yes
35.1
48.8
59.4
60.3
Conditions of most recent loan
Source: World Bank ICA (2009).
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GRAPHS
Figure 3.1: Distribution of Micro and Small
Enterprises by sector
14, 14%
Wholesale and retail trade
Services
Manufacturing
27, 27%
59, 59%
Source: World Bank ICA (2009).
Figure 3.2: Leading Constraints to Egyptian Manufacturing Firms by Size
Macroeconomic Uncertainty (Ex: inflation, exch. rate)
Illegal Competition from the informal sector/smuggling and dumping
Regulatory Policy Uncertainty
Skills and Education of Available Workers
Corruption
Tax Rates
Cost of Financing (Ex: interest rates)
Price of land
Access to Financing (Ex: Collateral)
Tax Administration
Labor Regulations (Like Social Insurance)
Access to Land
Customs and Trade Regulations
Illegal Competition from the formal sector
Transportation
0
10
20
30
40
50
60
70
80
percentage
Small
Micro
Micro
Source: World Bank ICA (2009).
Medium
Small
Large
Medium
90
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Figure 4.1: Bank Deposits to GDP,
Figure 4.2: Private Credit to GDP,
Actual and Predicted
Actual and Predicted
Source: IFS, FPDFS Database.
Source: IFS, FPDFS Database.
Figure 4.3: Loan-to-Deposits Ratio
Figure 4.4: Credit Extended to Private Sector
Goes to a Small Number of Large Firms
0.19 % of
clients
Source: CBE (2009).
Source: Central Bank of Egypt (2008).
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Figure 4.5: Percentage of Firms for which Access to Finance is a Major or Severe Constraint—
International Comparisons
70
60
percentage
50
40
30
20
10
ru
Pe
ur
Ph key
ili
pp
in
es
R
us
si
a
T
So Ind
ut ia
h
A
fr
ic
a
M
ex
ic
o
l
R e
om
an
i
M a
C al
ze a
ch ys
i
R a
ep
ub
lic
In
do
ne
si
a
C
ro
at
ia
na
C
hi
C
hi
Sy
ri
a
ha
ila
nd
Jo
rd
an
H
un
ga
ry
M
E
N
A
T
B
ra
zi
l
A
lg
er
i
L a
eb
an
o
A n
rg
en
ti
na
Pa
ki
st
an
Po
la
n
M d
or
E occ
gy o
pt
(2
00
8)
0
Source: World Bank ICA (2009).
Figure 4.6: Size Disparity in Firm’s Perception of the Access and Cost of Finance Problem
Source: World Bank ICA (2009).
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Figure 4.7: Percentage of Firms with Line of Credit or Loans from Financial Institutions- International
Comparisons
80
70
60
percentage
50
40
30
20
10
N
ig
er
ra
gu
ay
U
ru
gu
a
B y
ul
ga
N ria
ic
ar
ag
A ua
rg
en
t
T ina
aj
ik
is
t
M an
or
oc
c
U o
kr
ai
ne
A
So lge
ut ria
h
A
fr
ic
a
Jo
rd
Pa
an
ne M
l
E
W firm NA
es
s
t B (2
an 00
k 4)
&
E G
Pa gy aza
p
ne t(
l f 20
Pa irm 08
ne s ( )
l f 20
irm 08
s )
(2
00
6)
Pa
ur
ke
y
cu
ad
C or
ol
o
B mb
an ia
gl
ad
es
h
B
ol
iv
ia
B
e
E laru
lS s
al
va
do
r
E
T
le
at
ia
C
ro
ru
C
hi
Pe
T
ha
i
la
nd
0
Source: World Bank ICA (2009).
Figure 4.8: Share of Enterprises with a Loan from a Bank or Financial Institutions by Size
80
70
Medium
60
Small
percentage
50
Micro
40
30
20
10
0
Yemen
Lebanon
small
Morocco
Saudi Arabia
Syria
medium
DZA
WBG
Egypt 2006
Egypt 2008
large
Source: World Bank ICA (2009).
Figure 4.9: Sources of Working Capital, Egyptian Manufacturing Firms, 2008
Jordan
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100%
Other (specify)
Informal sources (e.g. money lender)
80%
Family, friends
Equity, sale of stock
60%
Credit cards
Trade credit (supplier or customer credit)
40%
Special development financing/ or public financing
(Government agencies) / or other public services
International commercial banks
Domestic commercial banks (loan, overdraft)
20%
Internal funds or retained earnings
0%
Small
Medium
Large
Source: World Bank ICA (2009).
Figure 4.10: Micro-informal Enterprises in Egypt, 2008
Micro-Informal Enterprises
Do not need loans
2.02
3.79
Application procedures for bank loans
are too burdensome
20.71
37.37
0.25
Collateral requirements of bank loans
are too strict
Interest rates are too high
0.25
0.25
It is necessary to have contacts or give
informal payments to get the loans
(Corruption in the allocation of bank
credit)
18.18
3.54
Source: World Bank ICA (2009).
13.64
Did not think that it would be approved
10th Global Conference on Business & Economics
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Figure 4.11: Days to Produce Goods and Days of Inventory in Informal Firms
Days to produce goods and days of inventory in informal firms
50
47
45
44
43
42
40
40
36
number of days
35
33
33
32
At the time you receive delivery of more
of your most important input or supply,
how many days could you have kept on
producing your goods?
If financing were not a problem how
many days of your most important
input or supply would you want to keep
to be profitable?
29
28
30
27
23
25
19
20
15
10
5
ic
es
an
se
rv
uf
ac
tu
ri
ng
er
gi
st
re
eg
m
no
tr
ed
d
is
te
re
ic
ro
m
al
l
sm
al
li
nf
or
m
al
0
Source: World Bank ICA (2009
Figure 4.12: Impact of Access to Credit on Firm
Employment Growth
20
18
16
14
percentage
12
10
8
6
4
2
0
No Growth Firms
Growth firms
* Calculated as the increase in the average number of workers from
2006 to 2007
Source: World Bank ICA (2009).
10th Global Conference on Business & Economics
ISBN : 978-0-9830452-1-2
Figure 4.13: Segmentation of the Credit Market in Egypt – 2008 Survey
Source: World Bank ICA (2009).
Figure 4.14: Percentage of Loans Requiring Collateral-International Comparisons
100
90
80
70
percentage
60
50
40
30
20
10
Source: World Bank ICA (2009).
le
C
hi
na
u
So rke
ut y
h
A
fr
ic
A a
rg
en
ti
na
T
l
zi
C
hi
B
ra
a
eb
an
on
L
ri
a
In
di
Sy
Jo
rd
an
R
om
an
i
Pa H a
ne un
l f ga
ir ry
m
s
(2
00
8
Pa M )
ne o
l F ro
ir cco
m
s
(2
00
4)
R
us
si
a
T
ha
E ilan
g
W yp d
es t (2
tb 0
an 08
k )
C &G
ze
ch az
a
R
ep
E ubl
gy ic
pt
(2
00
6)
M
E
A N
ll A
co
un
tr
ie
s
Pa
ne A
l
l F ge
ir ria
m
s
(2
00
6)
0
10th Global Conference on Business & Economics
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Figure 4.15: International Comparisons-Value of Collateral-to-loans
250
200
percentage
150
100
50
le
ur
ke
y
T
ru
C
hi
Pe
C
E hin
g
Pa yp a
t
ne (2
l F 00
8
ir
m )
s
(2
00
Ph 8)
ill
ip
pi
ne
s
tB
W
es
Po
la
nd
Pa R
ne om
lF a
ir nia
m
s
(2
00
6)
R
us
si
a
L
eb
a
So no
ut n
h
A
E fric
gy
a
pt
(2
00
A
ll 6)
co
un
tr
ie
s
Jo
rd
an
Pa
ne
l F In
ir dia
m
s
(2
00
4)
o
H
un
g
an ary
k
&
G
az
a
M
E
N
A
or
oc
c
M
er
i
lg
A
Sy
ri
a
a
0
Source: World Bank ICA (2009).
Figure 4.16: Obstacles to Access to Finance
Percentage of Firms Barred from Loan Applications
35
30
percentage
25
20
15
10
5
0
Interest rates prohibited
High interest rates
Application procedure
Large firms
Source: World Bank ICA (2008).
Collateral requirements
Will not be approved
SMEs
Other