Cairo: 5 March 2017

Dear Mr. Chairman of the Board of Directors

Bank

Greetings,

With reference to the initiatives issued by the Central Bank of Egypt during 2015 and 2016 aimed at encouraging banks to finance companies and small and medium enterprises (SMEs), which began with issuing a unified definition for them across the banking sector on December 7, 2015, followed by the initiative issued on January 11, 2016 regarding granting financing to micro, small, and very small companies and establishments, and finally the initiative issued on February 22, 2016 which included granting medium-term and long-term financing to medium-sized companies and establishments operating in the industrial and agricultural sectors at a low interest rate of 7%. This, along with meetings held with banks to consult with them to resolve difficulties encountered during the granting of loans and credit facilities, resulted in the need to review the issued definition and provide credit facilities to finance working capital for medium-sized companies and establishments. Therefore, a decision was issued by the Board of Directors of the Central Bank of Egypt in its session held on February 28, 2017, stipulating the following:

:Amendment of some provisions of the Circular issued on December 7, 2015 as follows:

First

	Existing List	New List
Micro Enterprises	Workforce < 10 individuals<br>Paid-up Capital < 1 Million EGP<br>Sales/Revenue < 5 Million EGP	Workforce < 10 individuals<br>Paid-up Capital < 50 Million EGP<br>Sales/Revenue < 10 Million EGP
Small Enterprises	Workforce < 50 individuals<br>Paid-up Capital < 5 Million EGP<br>Sales/Revenue < 30 Million EGP (Industrial)<br>Sales/Revenue < 15 Million EGP (Non-Industrial)	Workforce < 200 individuals<br>Paid-up Capital < 50 Million EGP<br>Sales/Revenue < 50 Million EGP (Industrial)<br>Sales/Revenue < 25 Million EGP (Non-Industrial)
Medium Enterprises	Workforce < 200 individuals<br>Paid-up Capital < 50 Million EGP<br>Sales/Revenue < 200 Million EGP	Workforce < 200 individuals<br>Paid-up Capital < 50 Million EGP<br>Sales/Revenue < 200 Million EGP

• Workforce size is indicative and not definitive for defining a company or establishment.

Paid-up capital is used for new companies and establishments instead of sales volume, for a period of one year from the start of activity until data on sales volume becomes available. Thus, this classification is temporary, and after that, the original existing definition applies to sales volume.

1. Amendment of the definition of micro, small, and medium enterprises to be as follows:

2. Amendment of Clause (-5a) to be as follows:

"...reflecting his/her 'Financial Position Analysis' results for at least three consecutive years", so that banks are allowed to finance micro and small enterprises (with a maximum sales volume less than 10 million Egyptian Pounds), and for a maximum of two years from the date of granting, without obtaining audited financial statements from an external auditor. This is under the assumption that most of them operate in the informal sector and allowing sufficient time to gradually qualify them to prepare audited statements and financial reports. This is while ensuring that the bank's credit policy includes appropriate controls consistent with financing this type of company, ensuring the verification of the soundness of the customer's financial position.

3. Amendment of Clause (-5c) to be as follows:

"Thirdly, Credit Risk Management and Classification Basis for Companies and Establishments - Amendment of the clause 'Micro and Small' according to the new unified definition."

:Amendment of what was stated in the Circular issued on December 29, 2016 to be as follows:

Second

Amendment of one of the determinants of exposures to small enterprises related to "Customer" according to supervisory standards, giving a weight of 75%, to apply only to micro and small companies and establishments – excluding medium-sized ones – with a maximum annual sales volume of less than 20 million Egyptian Pounds (instead of an annual sales volume of 10 million Egyptian Pounds), while the rest of the other standards remain in effect without amendment.

:Regarding Medium-Sized Companies and Establishments:

Third

1. The new and renewable energy sector is added to the initiative for medium-sized companies and establishments issued on February 22, 2016, to include all sectors of Industry, Agriculture, and New and Renewable Energy.

2. The maximum limit determined for each individual client to benefit from the initiative issued on February 22, 2016 is amended to become 40 million Egyptian Pounds (instead of 20 million Egyptian Pounds).

3. Availability of an amount of 10 billion Egyptian Pounds (in tranches) through banks at an interest rate of 12% to be used in granting short-term credit facilities to finance working capital for medium-sized companies and establishments operating in the industrial, agricultural manufacturing, and new and renewable energy sectors only, with due care and priority given to those companies operating in the export or import substitution field.

4. Compensation of banks for the interest rate difference, through the Central Bank of Egypt, based on the following:
   Overnight Lending Rate + 1% - 12%

:Reports Prepared on the Portfolio of Micro, Small, and Medium Enterprises:

Fourth

Banks are requested to review the database for micro, small, and medium enterprises according to the categories mentioned in the new definition above to include more data on the type of activity, sales volume, and number of accounts for these companies and establishments divided by sector (industrial/agricultural/service/commercial/......), according to the forms to be prepared by the Supervision and Inspection Sector.

Please be kind enough to instruct taking the necessary action to implement the aforementioned decision.

And please accept our highest respect.

Gamal Najem

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