The Central Bank of Egypt plans to spend 20 billion Egyptian pounds (Dh4bn) on microfinance projects as part of efforts to create jobs and boost the largest economy in North Africa, its central bank governor said on Sunday.
“Previously, banks were more caring about only mega-projects, but these projects need a lot of money and they do not create many jobs,” Tarek Amer said in Abu Dhabi. “Therefore, for the last two years,we are talking to institutions for microfinance and central bank of Egypt will assign 20bn Egyptian pounds for this because such bodies have an extensive network of 680 service institutions in Egypt reaching 3 million Egyptians.”
Microfinance, also referred to as microcredit, is a form of low-interest loans targeted at unemployed or low-income people or groups who otherwise have no access to financial services. The credit amount can range form $100 to $25,000.
Egypt, the most populous Arab country, is implementing a slew of reforms to bolster its economy which has faced headwinds since the revolution in 2011.
The country obtained a $12bn International Monetary Fund aid package in 2016 that helped avert a liquidity crunch, which was accompanied by reforms including devaluation of the pound that year, new taxes and cuts to energy subsidies.
This 20bn pound initiative will create 3 million jobs directly and another 3 million indirectly in a country with a population of around 100 million, said Mr Amer.
“Our main aim is to improve the Egyptian economy in the coming years,” he said. “We have the calibre to reach several sectors in the country and they will be financed to create new jobs in a faster way.”
The bank will also create a 1bn-pound innovation fund next year as part of its efforts to boost job creation.
The Egyptian government’s efforts to lift growth are already paying off.
Economic growth in the 2017-18 fiscal year ending June 30 reached 5.4 per cent, up from 4.2 per cent in the year earlier period. The government is targeting growth of up to 8 per cent for the 2021-22 fiscal year.
In the past two years, Egypt introduced at least 10 legislations intended to expand the private sector and improve economic growth, including laws related to investment, companies and bankruptcy.
Other reforms to strengthen the country's business environment include tax incentives, eased bureaucracy and an investor centre – a one-stop shop to simplify the process of establishing a company. The measures have helped improve Egypt's reputation as a business friendly environment. The country rose eight places to 120th in the World Bank’s 2019 Ease of Doing Business index, published in November.