Scaling up Poverty Reduction Commercial Microfinance in Egypt

1
Scaling up Poverty ReductionCommercial
Microfinance in Egypt

• The case study of the
• National Bank for Development

By Mrs. Mona Mubarak 16th Dec. 2003
2
Introduction...

• Realizing the Role of Small Micro Enterprises
  SMEs in Poverty Alleviation Employment
  Creation
• NBD designed a Micro Credit Concept with the
  following main objectives

• To create an entrepreneurial climate
• To respond to short credit needs of entrepreneurs
  
• with no commercial record or license.

3
Objectives of the Program

• Provide loans to small borrowers,
• Improving the quality of life
• Enhancing self employment opportunities
• Providing new employment opportunities
• Preserving various types of handicrafts from
  obsoletion
• Help small borrowers develop their banking habits
  
• Increasing the clients, control over their income
• Learn how to apply simple forms of book-keeping

4
Target Groups Areas

• - Small borrowers in Rural Urban areas through
  out Egypt

Loan Size, Purpose and Period

• At the beginning 1987, loans ranged from LE 500
  -10000
• After the year 2000 max loan was LE 3000
• According to clients activity, production trade
  service
• From 3-12, months period

5
Methodology

• Depends on-foot publicity not in mass
  communication
• Study of income and production cycle to determine
  loan and payment methods
• Disbursed in cash within 5 days to 2 weeks
• Client must deposit 10 of the amount in a saving
  book
• NBD helps small borrowers develop their banking
  habit
• Increase saving awareness among its clients

6
Methodology (Contd)

• Weekly visits by credit officers to
• - follow-up the loan utilization
• - assure development of clients
  activities
• - assist in solving any obstacles
• - promoting the project to increase the
  program
• outreach
• It is worthy to note that
• - NBD has 67 branches
• - NBD is the only bank with a specialized
  department for its
• Microcredit Program

7
Special features of NBD-Micro Credit Program

• - NBD has matched credit funds by full utility of
  credit funds
• provided by International donors
• NBD provided employment opportunities to 450
  idividuals
• SMEs lending program is reapplicable to all
  geographical
• areas of Egypt
• Interests rates fees are set to cover all
  program
• expenses
• All projects are continuing on self sustaining
  basis

8
Impact of NBD Microcredit
Economically - A source of liquidity to
finance working capital Socially -
Eradicating extreme poverty and hunger -
Increase temporary permanent job opportunities to
unemployed
SME Training Center
- NBD is establishing an International Training
Center - Training Programs are tailored to
provide training not only to Egyptians but
to Asians and Africans as well.
9
Composite results of NBD in Microcredit Program
Results of all SME credit programs by NBD till
30/11/2003

• Total Number of disbursed loans
  343522
  
• Total Amount of disbursed loans
  LE 895,796,323
• Total Number of outstanding borrowers
  22,606
• Total Amount outstanding loans
  LE 51,635,275
• Total Number of disbursed women loans
  76148
• Total Amount of disbursed women loans
  LE 136,830,980
• Total Number of outstanding women borrowers
  6534
• Total Value of outstanding women loans
  LE 8,715,786
• Total Number of Beneficiaries
  104629
• Repayment Rate
  
  96

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Conclusion

• Most bankers believe that Microfinance is
• - Unprofitable
• - Too risky
• - High administrative cost
• - Socio-Economic Cultural barriers

As well as the following constraints -
Upper management commitment to Micro enterprise
- Financial methodologies should follow up
low income clientele - Belief in
recruiting, training retaining large number of
specialized staff - Reach
sustainability and cost effectiveness through
non subsidized interest rates -
Increase productivity and rapid expansion of
microenterprize
11
Nevertheless

• NBD has succeeded since 1987 to overcome
  constraints
• thus developing a program which has been
• Sustainable since 1987
• Covering its costs
• Realizing profit
• Expanding its outreach all over Egypt.

Thank You