Detailed rules and procedures for encouraging banks to finance small and medium-sized companies and enterprises

Dear Sir,

Greetings,

Further to our letter dated 21/12/2008, attached with a copy of the Board of Directors of the Central Bank of Egypt Decision No. 2008/2408 issued at its meeting held on 16 December 2008 regarding encouraging banks to finance small and medium-sized companies and enterprises, and based on what was stated in Article Three of the aforementioned Decision, please find enclosed the detailed rules and procedures for implementing the provisions of Articles One and Two of the aforementioned Decision.

We also request that you provide the Supervision and Inspection Sector with the limits and balances of users of direct loans and facilities for small and medium-sized companies and enterprises that meet the conditions stipulated in the aforementioned Board Decision, according to the financial center as of 31/12/2008, no later than the end of January 2009. In the context of the aforementioned Decision, we would like to draw your bank's attention to the necessity of preparing for this type of financing, not only by training staff on the methodology of preparing studies and evaluation foundations for this segment of companies and enterprises, which differs from large companies and institutions, so as to establish a complete financing and follow-up system, in addition to updating internal systems to align with the specific requirements for entering this field.

Please be so kind as to take the necessary action in this regard.

Accept our highest regards, Gamal Nagim

Detailed Rules and Procedures for the Decision of the Board of Directors of the Central Bank of Egypt No. 2008/2408 dated 16 December 2008

Based on Article Three of the Decision of the Board of Directors of the Central Bank of Egypt No. 2008/2408 dated 16 December 2008 and what was stated in Articles One and Two thereof, the following detailed rules and procedures are set out, which banks must follow in implementing the aforementioned Decision. In this regard, banks are committed to the following:

1. Instructions issued by the Central Bank of Egypt regarding the controls for granting banking credit.

2. The exemption certificate issued in Article One of the aforementioned Decision is considered effective from 1/1/2009 on the balances used in Egyptian Pounds from direct loans and facilities (debit balances) without contingent liabilities for each of the following: a. Loans and facilities granted to new customers from small and medium-sized companies and enterprises starting from 1/1/2009. b. The increase in existing loans and facilities for small and medium-sized companies and enterprises, provided that the balances as of 31 December 2008 for existing loans and facilities for these companies and enterprises are considered the basis for calculating the value of the increase subject to the aforementioned exemption.

3. Banks must provide the Supervision and Inspection Sector with all of the revised Forms No. 400 and 410 (attached 1, 2) according to the deadlines established in this regard. The two forms must include a summary of the total balances subject to exemption according to the illustrative example in Attachment No. 3. Also, attached to the revised Forms 400 and 410, a breakdown on CD (showing details of loans and facilities according to Attachments No. 4a and 4b).

4. The total balances subject to exemption are excluded from "Customer Deposits and Payables to Banks and External Financial Institutions in Local Currency" (Reserve Ratio Base) for any period and are recorded in the column "Average Daily Balance during the Period", effective from the period ending on 26 January 2009.

5. This exemption does not apply to credit loans and facilities granted to small and medium-sized companies and enterprises that are financed and/or guaranteed by third parties (such as loans and facilities granted in cooperation with the Social Development Fund) or foreign entities, whether in the form of loans or deposits provided by those entities.

6. According to Article Two of the Decision, "Companies and enterprises are considered small and medium-sized, and the provisions apply to the financing granted to them, provided that the following two conditions are met:

   • Their annual assets or sales do not exceed one million Egyptian pounds and do not exceed twenty million Egyptian pounds.
   • Their paid-up capital does not fall below two hundred and fifty thousand Egyptian pounds, and does not exceed five million Egyptian pounds."

   And that this must be proven by obtaining any of the following: a. A recent extract from the Commercial Register not exceeding one year from the date of submission. b. An approved budget for the last financial year. c. A certificate issued by the auditor of the company stating the size of the company's assets or sales for the financial year.

   And banks must adhere to what was stated in the letter from the Supervision and Inspection Sector dated 7 March 2005 regarding "The Advisory Controls for the Ratio for Auditors who review the financial statements of customers who apply to banks for credit facilities", specifically what was stated in item No. (3) of these controls. (Attachment No. 5)

7. The Central Bank of Egypt's Supervision and Inspection Sector will verify the accuracy of the bank's data and its classification of small and medium-sized projects.

Attachment No. (1)

Bank ........................ (Form No. 400 "Rate" Every Two Weeks)

Statement of Customer Deposits and Payables to Banks and External Financial Institutions During the period ending on ) (1 in Local Currency Monday corresponding to ...................

	Statement
		Date
		Balance
		Customer Deposits
Value in Millions
Pounds			Without External Financial Institutions )(2 (1)
		Savings Systems with a term of three years )(3 or more (4)	Total
(2+1)=(3)
		Payable Balance
		To Banks
		And External Financial Institutions (2)
		Total of
		Customer Deposits,
		And Payable to Banks
		And External Financial Institutions after deducting exclusions (5+4)=(6)
		Total Balance
		Subject to Exemption from Direct Loans and Facilities Granted to Small and Medium-sized Companies and Enterprises )(4 and (5)	Tuesday
		Wednesday
		Thursday
		Friday
		Saturday
		Sunday
		Monday
		Tuesday
		Wednesday
		Thursday
		Friday
		Saturday
		Sunday
		Monday
		Total Balance
		For the days of the period
		Average Daily Balance during the period
		We certify the
		Accuracy of the
		Statements contained in this form
		,,,

)(5 Name of person signing the form and his title: Signature ................. ....................... ............... ......................

1. Based on the Decision of the Board of Directors of the Central Bank of Egypt No. 2008/2408 at its meeting held on 16 December 2008 and the detailed procedures prepared by the Supervision and Inspection Sector.
2. Includes customer deposits regardless of the deposit term.
3. For all banks except banks with real estate, industrial, and agricultural activities.
4. Based on the contract term.
5. This form is signed by two bank management officials, and one signature may suffice if the signatory is authorized to sign individually for the bank.

Attachment No. (2)

Bank ........................ (Form No. 410 "Rate" Every Two Weeks) Statement of Customer Deposits and Payables to Banks and External Financial Institutions In Local Currency during the period ending on Monday corresponding to .......

	Banks
	Real Estate
	And
	Industrial
	And Bank for Development and
	Resettlement
Value in Millions
Pounds
	Statement
	Date
	Customer Deposits without External Financial Institutions )(1 (1)
	Excess
(8-7) =(9)	Paid Capital and Reserves (8)
	Savings Systems Balance
	With a term of three
	years or more (4)	Total
(2+1)=(3)
)(2		Payable Balance
		To Banks and External Financial Institutions (2)
		Total of
		Customer Deposits,
		And Payable
		To Banks and External Financial Institutions after deducting exclusions (6-3)=(7)
		Total Balance
		Subject to Exemption from Direct Loans and Facilities Granted to Small and Medium-sized Companies and Enterprises )(3 and (5)	Tuesday
		Wednesday
		Thursday
		Friday
		Saturday
		Sunday
		Monday
		Tuesday
		Wednesday
		Thursday
		Friday
		Saturday
		Sunday
		Monday
		Total Balances for the days of the period

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