Chapter Six: Vehicle Replacement Initiative

In light of the Central Bank of Egypt's orientation towards supporting the state in achieving sustainable development goals, including environmental and social elements, and in light of the state's orientation towards replacing fuel-operated vehicles with those operating on dual fuel and encouraging citizens to take this step by providing the necessary financing to them at low yield rates, the Board of Directors of the Central Bank of Egypt approved at its meeting held on 27 December 2020 the following decision:

1. Issuing an initiative through which an amount of 15 billion pounds is made available through banks at a yield rate of 3% (fixed yield) used to grant loans to individuals wishing to replace vehicles (owners, taxis, minibuses) to operate on dual fuel.

2. The loan term ranges from 7 to 10 years, and repayment is made in equal monthly installments.

3. Compensation for banks for the difference in yield rate is based on the following: Credit and discount rate + 2% - 3% (fixed yield)

4. Compensation for the difference in yield rate is provided on a monthly basis according to a letter addressed to the Central Operations Sector of the Central Bank.

5. The yield rate includes all expenses and commissions except for credit risk guarantee expenses.

6. And insurance expenses for vehicles or individuals and expenses for taxes and stamps in accordance with prevailing laws.

7. The scrap value of old vehicles is considered as a minimum down payment for new dual-fuel vehicles. Beneficiaries of the Vehicle Replacement Initiative are exempted from the percentage of loans granted to individuals for consumer purposes to their monthly income.

8. No early repayment commission is deducted, in order to encourage individuals to repay loans before their due date.

9. The Central Bank issues a commitment worth 15 billion Egyptian pounds - in tranches - in favor of the Credit Risk Guarantee Company as a umbrella to guarantee balances of guarantees issued by the company in favor of banks, with the company covering 80% of the risks associated with financing individuals within the initiative under this commitment, and banks bearing the remaining portion (20%).

In the same context, coordination will be carried out with concerned parties to announce: -1 Sales outlets for these cars, which commit to the required technical specifications in coordination with the Ministry of Trade and Industry.

-2 The executive steps that must be taken to include financing in the initiative once coordination steps with all parties are completed.

This is while ensuring that banks issue electronic cards for customers who obtained loans under this initiative for use in settling their due installments, with the aim of encouraging them to use electronic tools and reducing pressure on bank branches.

And according to the decision of Dr. / the Chairman of the Council of Ministers No. 4151 for the year 2022 issued on 19 November 2022 (attached), which included only the working mechanism for ongoing initiatives (through which banks are compensated for the difference in yield rate over prevailing rates), and the applied yield rate, and the mechanism and periodicity of compensation, 2 The Ministry of Finance will bear compensating banks for the interest rate difference related to the initiative using the mechanism mentioned in the decision.