An Analysis of Access to Finance by MSMEs in Egypt (By J.A. Pedrosa Garcia, S. Agbollah and D. Kharbotlı)

Micro, Small and Medium Enterprises (MSMEs) represent more than 99% of all non-agricultural private enterprises in Egypt, and access to finance is a requisite for their survival and their ability to invest in the future. Finance can take the form of debt (e.g. from banks or microfinance institutions) or equity (e.g. venture capital, angel investors). This paper does a comprehensive review of the several types of finance that MSMEs can access (including new channels such as crowdfunding), as well as of the demand (MSMEs) and the country’s institutional and regulatory framework.
The results are very interesting. For instance, the line between banks and microfinance institutions (MFIs) has become blurry, which has happened because first, the weight of banks’ credit has decreased relative to the economy (private commercial banks have had relatively high liquidity levels and been conservative when working with MSMEs); and second, because MFIs have grown in importance, e.g. Egypt is now one of the largest microfinance markets in the Arab region.
The study highlights policy measures that could improve access to credit by SMEs. To stimulate the supply, for instance, banks could adopt lending systems better suited to the nature and characteristics of MSMEs (e.g. assess growth prospects rather than past financial statements); the appropriate infrastructure to allow NGOs involved in microfinance (NGO-MFIs) to become commercially autonomous could be provided; the demand for credit could be stimulated with measures promoting entrepreneurship, such as streamlining the procedures to start a business. Furthermore, the institutional system is rather burdensome, resulting in lenders not fully empowered to lend. Hence, measures to increase its efficiency (e.g. via express courts dealing with business affairs only) could be established.