Regulatory Alerts2017-02-21
A periodic letter dated February 21, 2017 regarding the initiative of the Central Bank of Egypt to support the replacement and renovation of residence hotels, floating hotels, and tourist transportation fleets.
The Central Bank of Egypt has provided new guidelines for financing tourism facilities through banks. Here is a summary of the main conditions and requirements: 1. Financing will be available to individual investors or companies for the reconstruction, upgrade, or establishment of tourist facilities. 2. The maximum loan term is 10 years, with a grace period of up to two years. However, installments must be paid within this period, and installments are due quarterly. 3. The bank will contribute no more than 75% of the total financing cost for reconstruction or upgrading. The investor must cover the remaining 25%. This can be done through: - An upfront payment by the borrower before starting the renovation or upgrade work. - A guarantee from a property management company, provided that the value of the payment is compensated if the investor cannot repay the loan. - Payments made by the investor in proportion to the bank's financing amount based on the bank's analysis of the investor's cash flows. 4. The loan must be used for projects meeting new standards and specifications set by the Ministry of Tourism. 5. Banks must obtain technical studies (including feasibility studies) carried out by the company, along with a technical consultation to ensure that the project is viable and that completion rates match the loan repayment schedule. 6. The bank will only finance projects that comply with the new regulations issued by the Ministry of Tourism. 7. The investor must obtain a guarantee from a property management company if the facility is leased. 8. A minimum of 75% of the total project cost must be dedicated to locally manufactured products. 9. The borrower must secure a technical study (including feasibility study) carried out by the company, with the bank providing consultation by a specialized consultant to ensure that the project's costs and implementation plan meet standards. 10. The bank will cover the difference between the loan rate and the Central Bank of Egypt's deposit rate for loans used for tourism facility financing.