Initiative to Support Priority Industrial Sectors with a Reduced Interest Rate of 15%

To the kind professor/Chairman of the Board, Bank Greetings, Cairo, February 23, 2025

With reference to the decision of the Prime Minister No. 4151 of 2022, that the Ministry of Finance shall manage and follow up on new (future) initiatives or any modifications to existing initiatives in accordance with the regulations and provisions contained in the decision, after the approval of the Council of Ministers, I would like to inform you that the Council of Ministers approved in its session No. (28) held on January 16, 2025, the issuance of an initiative to support priority industrial sectors with a reduced interest rate of 15%, in accordance with the restrictions and conditions received from the Ministry of Finance as follows:

1- The maximum value of the initiative is 30 billion Egyptian pounds to finance the purchase of machinery, equipment, and production lines.

2- The maximum duration of the initiative is five years from the date of its commencement, which is the period during which the reduced interest rate is utilized.

3- The amount allocated within the framework of the initiative shall be directed to the priority industrial sectors as defined in accordance with the decisions issued by the sixth meeting of the Ministerial Group for Industrial Development, chaired by Dr. Prime Minister on 9/12/2024 (attached is a list of priority industries) in local currency for clients from the formal private sector, provided that a letter is obtained from the General Authority for Industrial Development stating that, and the Authority shall provide the participating banks with a letter, notified to the Ministry of Finance, stating that the client's activity falls within the priority industrial sectors and that the Ministry of Industry (General Authority for Industrial Development) shall provide the concerned bank with a letter stating that the client meets the technical requirements to obtain the initiative mentioned in clause (11).

4- Priority shall be given to benefiting from the initiative for establishments located in the areas most in need of development and with the highest employment rates, namely: South of Giza Governorate - Governorates affiliated with the Suez Canal Region (Port Said - Ismailia - Suez East of the Canal) Border Governorates, including the Red Sea Governorate from South Safaga - Upper Egypt Governorates.

5- The interest rate taken as a basis for calculating compensation is the Central Bank's credit and discount rate + 1%, and the companies benefiting from the initiative shall bear a reduced interest rate of 15%, provided that the Ministry of Finance bears the difference in the interest rate (difference in the Central Bank's credit and discount rate + 1 - 15%), and the compensation is disbursed to the banks participating in the initiative on a quarterly basis.

6- The companies benefiting from the initiative shall bear the difference in the credit and discount rate if it increases above the current rate at the time of launching the initiative (i.e. the maximum that the Ministry of Finance will bear is 13.75%), in addition to what is determined as an additional incentive for the increase in the local value added rate according to clause (13).

7- The maximum financing for one client within the framework of the initiative is 75 million Egyptian pounds, and for financing one client and its related parties is 100 million Egyptian pounds, and the amount of credit available within the framework of the initiative is determined for each client in light of the volume of its business and the organized banking rules.

8- The transaction of one client, as well as one client and its related parties, is limited to one bank only, and the client's data is recorded on the electronic system of the initiative at the Central Bank to tighten control over the limits prescribed for the initiative.

9- Clients are prohibited from using the credit facilities granted to them within the framework of this initiative to pay off any other debts owed by them in the banking sector.

10- The client is excluded from the initiative and the interest rate is adjusted according to what each bank deems appropriate in the event of rescheduling or settling the credit facilities granted within the initiative or classifying the client as non-performing.

11- The conditions for benefiting from the initiative are as follows: A. The company obtains proof that it operates in an industrial activity in one of the priority sectors for the first phase of the Ministry of Industry (General Authority for Industrial Development). B. The company obtains proof of completion of the necessary constructions (including obtaining a building permit) from the Ministry of Industry (General Authority for Industrial Development). C. A tax invoice is available for the local purchase of machinery, equipment, or production lines, provided that it is submitted to the lending bank by the beneficiary and/or opening a documentary credit/collection documents for the external purchase of machinery and/or equipment and/or production lines through the lending bank.

All concerned parties (Ministry of Finance, Ministry of Industry, General Authority for Industrial Development) / the lending bank shall be notified of all correspondence.

12- The Ministers of Finance and Industry and the concerned authorities shall adopt performance measurement indicators for the initiative to assess it on the ground and the extent of the benefit achieved for the national economy and the companies benefiting from it, provided that the initiative is re-evaluated on an annual basis in accordance with the following: A. Increase in the company's assets. B. Increase in revenues. C. Increase in production capacity. D. Increase in the quantities of actual production and varieties. E. Filling a local gap. F. Increase in local value added. G. Linking the product to global value added chains. H. Increase in the number of employment. I. Localization of new industries.

Some of these indicators are based on the audited financial statements of the companies that are submitted to the lending banks and after obtaining the approval of the benefiting companies to make them available, and as for the operational indicators, a certificate is issued by the Ministry of Industry (General Authority for Industrial Development), and the beneficiary client submits all data to the Ministry of Industry (General Authority for Industrial Development) by means of a letter and a copy notified to the Ministry of Finance.

13- In the event of an increase in the percentage of local value added from one year to another during the years of the initiative, an additional incentive is given in the form of a reduction in the interest rate borne by the client as follows: • In the event of an increase in the local value added from the previous year by 7% to 10%, the interest rate is reduced by (1%) (so that the compensation borne by the Ministry of Finance is the Central Bank's credit and discount rate + 1% - 14% with a maximum of 14.75%). • In the event of an increase in the local value added from the previous year by more than 10%, the interest rate is reduced by (1.5%) (so that the compensation borne by the Ministry of Finance is the Central Bank's credit and discount rate + 1% - 13.5% with a maximum of 15.25%).

With regard to the newly developed industrial activities that have not been previously produced locally and the volume of their imports is large, the interest rate is reduced by (2%) (so that the compensation borne by the Ministry of Finance is the Central Bank's credit and discount rate + 1% - 13% with a maximum of 15.75%).

In the event of a decrease in the local value added from one year to another, the incentive represented in reducing the interest rate is stopped according to the initiative, and in all cases the percentage of local value added (increase - decrease) is measured by the Ministry of Industry (General Authority for Industrial Development).

14- The bank that does not have its accounts audited by the Central Auditing Organization is obligated to issue a certificate approved by the head of the internal audit sector and the CEO of the bank on a quarterly basis with the value of compensation for the difference in the interest rate for the credit facilities granted by it to the clients benefiting from the initiative, provided that the certificate referred to is issued through the Central Auditing Organization with regard to the banks that the Organization audits their accounts.

15- The prior approval of the client benefiting from the initiative must be obtained to disclose to the Ministry of Finance (Financing Sector) and the Ministry of Industry (General Authority for Industrial Development) data on the credit facilities granted to him in the initiative, and all technical and financial data required to follow up on the evaluation indicators of the initiative, including the indicators mentioned in clause (12) above, and the Ministry of Finance is provided by the Industrial Development Authority with a quarterly report and an annual report with the initiative data with an update of the performance measurement indicators.

16- The Ministry of Finance does not bear the late fees calculated on the clients' facilities within the framework of the initiative, nor any commissions or other expenses.

17- The Ministry of Finance provides a discount statement to the Central Bank to pay the burdens, deducting from the relevant appropriations after reviewing the reports and data submitted by the Central Bank, within two working days from the date of completing all data.

In light of the foregoing, the banks are obligated to provide the Banking Operations Sector at the Central Bank with the value of the compensation required for the difference in the interest rate during the first week of the month following the end of the quarterly period for which the compensation is due.

Please note that the necessary measures must be taken to implement the aforementioned initiative as of its date.

With best regards,

Hassan Abdallah