Posted by: Daniel Gies, Senior Consultant, Inclusive Finance
This year, the National Bank of Egypt (NBE), the largest bank in Egypt with over $30 billion in assets, has worked with Enclude to commit itself to implementing a new strategy to increase the size, effectiveness and efficiency of its lending to the agricultural sector. Over the course of seven months in 2014, Enclude assisted the NBE in developing its agricultural finance strategy and business plan in order to help the bank to realize this commitment. The development of the new lending strategy for the bank is a part of the Rural Income and Economic Enhancement Project (RIEEP), which is financed by the African Development Bank (AfDB) and implemented by Enclude as a major subcontractor to the Social Fund for Development (SFD) of Egypt.
The five-person Enclude team brought together a high level of targeted agricultural expertise and local research to facilitate the development of the bank’s new strategy, which is aimed directly at seven key sectors in the local agricultural value chain. Inside the bank, the Enclude team worked closely with NBE staff to review the bank’s current strategy and position in the overall Egyptian financial marketplace, as well as NBE’s current loan portfolio and credit risk management system, SME loan products, agricultural lending, and Islamic banking activities. This internal assessment was then combined with a number of local market assessment initiatives, including a diagnostic of the SME landscape, an analysis of the agricultural value chain, and a survey of the borrowing needs of over 500 current NBE clients.
Enclude’s work with the bank will significantly increase its ability to make loans that make a difference to the agricultural SMEs and producers that have been identified as a key future target of the bank. NBE’s goal in the development of its new agricultural lending strategy is to complement the country’s SME strategy and also to increase its lending to key sectors where strong growth and profitability is anticipated. Enclude’s agricultural lending experts were able to assess the strengths and weaknesses of agricultural production and processing in the targeted governorates of Kafr-El-Sheikh, Dakhalia, Minya, and Assuit in order to make its recommendations about where NBE should focus its additional lending commitments for the upcoming five years.
These new lending commitments will focus in particular on the vegetables, herbs/spices, dairy and livestock production sectors. Additionally, the new strategy will include the formation and training of an Agricultural Lending Unit within NBE’s SME Department and commitment of an EGP 3 billion (USD 415 million) increase in its agricultural lending for the bank. The increased rural market focus and outreach measures proposed in the new strategy will strengthen the bank’s capacity to support this important and growing sector in the evolving Egyptian landscape, and more importantly to increase its number of agricultural borrowers by over 16,000. Enclude is proud to play such a significant role in increasing the access to finance of the new borrowers as well as supporting the growth of Egypt’s most important bank.
This post is dedicated to the Enclude Team Leader of this project, Mr. Colin Lancaster, who sadly passed away from natural causes on 25 October 2014 during the programme’s implementation.