Circular dated March 7, 2023 regarding the Council of Ministers’ approval to issue an initiative to finance industrial and agricultural private sector companies at a decreasing rate of return of 11%

Dear Mr. Chairman of the Board of Directors,

Greetings,

With reference to the Central Bank letter dated November 21, 2022, attached with the decision of Dr. Mr. Prime Minister No. 4151 of 2022, which included the work mechanism for ongoing initiatives, the applied interest rate, and the compensation mechanism and periodicity, as well as that the Ministry of Finance shall manage and monitor new and future initiatives, or any modifications to existing initiatives in accordance with the controls and provisions stipulated in the decision, subject to the approval of the Council of Ministers.

In light of the above, please be informed that the Council of Ministers, in its session No. 225, approved the issuance of an initiative to finance companies and establishments from the private sector operating in industrial and agricultural activities to support productive sectors at a reduced decreasing interest rate of 11%, in accordance with the specifications provided by the Ministry of Finance as follows:

1. The total value of the initiative in local currency is 150 billion EGP, as follows:

   • 140 billion EGP for financing working capital operations.
   • 10 billion EGP for financing the purchase of machinery and equipment.

2. The value of the initiative decreases by 20% each year.

3. The maximum duration of the initiative is 5 years. If financing extends for longer periods after the expiration of the five years, the client bears the full cost of financing.

4. The initiative benefits companies and establishments from the private sector operating in productive industrial and agricultural activities and new and renewable energy activities, as follows:

   • Medium and large companies and establishments according to the definition issued by the Central Bank.
   • Small companies and establishments linked to medium or large entities and institutions.
   • Factories within free zones.
   • Cooperative societies operating in the agricultural field that have activities permitted by their bylaws to borrow.

5. The maximum financing for a single client under the initiative is 75 million EGP, and for a single client and its related parties, 112.5 million EGP, including working capital financing and the purchase of machinery and equipment in light of business volume and organized banking rules.

6. The maximum number of transactions for a single client, as well as a single client and its related parties, with banks participating in the initiative is limited to two banks only. Client data shall be registered in the electronic system of the initiative at the Central Bank to strictly monitor these limits.

7. Emphasis is placed on making financing available to clients after obtaining the necessary documents and guarantees for obtaining the loan.

8. There shall be no linkage between the facilities granted under this initiative and the previous initiative issued to support the industrial, agricultural, and contracting private sector at a decreasing interest rate of 8%.

9. Benefiting clients are prohibited from using the credit facilities granted under this initiative to settle any other debts owed to the banking sector.

10. The interest rate taken as the basis for calculating compensation is the Central Bank discount rate + 1%. Companies obtaining facilities under the initiative bear a reduced interest rate of 11% decreasing, and the Ministry of Finance bears the difference in the interest rate (Central Bank discount rate + 1% - 11% decreasing). Compensation to participating banks in the initiative shall be paid quarterly.

11. In the event of rescheduling or settlement of credit facilities granted under the initiative, or if the client is classified as irregular, the interest rate shall be adjusted as deemed appropriate by the bank, and the client shall be excluded from the initiative.

12. The Ministry of Finance does not bear late interest accrued on client facilities under the initiative.

13. The bank must obtain the consent of the benefiting client to share the data of the facilities granted to them under the initiative with the Financing Sector of the Ministry of Finance.

14. The bank that the Central Audit Organization does not audit its accounts is committed to issuing a certificate quarterly regarding the value of compensation for the interest rate difference on credit facilities granted to its clients benefiting from the initiative. This certificate must be endorsed by the Head of the Internal Audit Sector and the Bank's CEO. The certificate mentioned shall be issued through the Central Audit Organization for banks whose accounts are audited by the Organization.

15. The bank is committed to providing the Banking Operations Sector of the Central Bank of Egypt with the value of compensation required for the interest rate difference during the first week of the month following the end of the quarterly period for which compensation is due. Payment shall be made immediately upon receipt of the certificate mentioned in the previous clause.

Please be advised to take the necessary action to implement the aforementioned initiative effective from its date.

Yours faithfully,
Gamal Naguib

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