“Scaling up Poverty Reduction” Commercial Microfinance in Egypt

1. “Scaling up Poverty Reduction”Commercial 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 SME’s 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 …(Cont’d…) • Weekly visits by credit officers to: - follow-up the loan utilization - assure development of client’s 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 • SME’s 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%

10. 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