““Scaling up Poverty Reduction”Scaling up Poverty Reduction”Commercial Microfinance in EgyptCommercial Microfinance in Egypt

““Scaling up Poverty Reduction”Scaling up Poverty Reduction”Commercial Microfinance in EgyptCommercial Microfinance in Egypt

The case study of theThe case study of the National Bank for DevelopmentNational Bank for Development

By: Mrs. Mona MubarakBy: Mrs. Mona Mubarak

1616thth Dec. 2003 Dec. 2003

Introduction...Introduction...Introduction...Introduction...

Realizing the Role of Small & Micro Enterprises Realizing the Role of Small & Micro Enterprises SME’s in Poverty Alleviation & Employment SME’s in Poverty Alleviation & Employment CreationCreation

NBD designed a Micro Credit Concept with the NBD designed a Micro Credit Concept with the following main objectives :following main objectives :

•To create an entrepreneurial climate •To respond to short credit needs of entrepreneurs with no commercial record or license.

Objectives of the ProgramObjectives of the Program Objectives of the ProgramObjectives of the Program

Provide loans to small borrowers, Improving the quality of life Enhancing self employment opportunities Providing new employment opportunities Preserving various types of handicrafts from obsoletion Help small borrowers develop their banking habits Increasing the clients, control over their income Learn how to apply simple forms of book-keeping

Target Groups & Target Groups &

AreasAreas

- - Small borrowers in Rural & Urban areas through out Egypt

Loan Size, Purpose and Period

- At the beginning 1987, loans ranged from LE 500 -10000 - After the year 2000 max loan was LE 3000- According to clients activity, production trade service…- From 3-12, months period

Methodology Methodology

Depends on-foot publicity not in mass communication Depends on-foot publicity not in mass communication

Study of income and production cycle to determine loan Study of income and production cycle to determine loan and payment methodsand payment methods

Disbursed in cash within 5 days to 2 weeks Disbursed in cash within 5 days to 2 weeks

Client must deposit 10% of the amount in a saving book Client must deposit 10% of the amount in a saving book

NBD helps small borrowers develop their banking habitNBD helps small borrowers develop their banking habit

Increase saving awareness among its clients Increase saving awareness among its clients

Weekly visits by credit officers to:Weekly visits by credit officers to:

- follow-up the loan utilization - follow-up the loan utilization

- assure development of client’s activities - assure development of client’s activities

- assist in solving any obstacles - assist in solving any obstacles

- promoting the project to increase the program - promoting the project to increase the program

outreachoutreach

It is worthy to note that: It is worthy to note that:

- NBD has 67 branches - NBD has 67 branches

- NBD is the only bank with a specialized department for its - NBD is the only bank with a specialized department for its

Microcredit ProgramMicrocredit Program

Methodology …(Cont’d…)…(Cont’d…)

Special features of NBD-Micro Special features of NBD-Micro Credit Program Credit Program

- NBD has matched credit funds by full utility of credit funds provided by International donors

- NBD provided employment opportunities to 450 idividuals

- SME’s lending program is reapplicable to all geographical areas of Egypt

- Interests rates & fees are set to cover all program expenses

- All projects are continuing on self sustaining basis

Impact of NBD MicrocreditImpact of NBD Microcredit Economically : - A source of liquidity to finance working capital Socially: - Eradicating extreme poverty and hunger - Increase temporary permanent job opportunities to unemployed

SME Training Center

- NBD is establishing an International Training Center - Training Programs are tailored to provide training not only to Egyptians but to Asians and Africans as well.

Composite results of NBD in Composite results of NBD in Microcredit ProgramMicrocredit Program

Results of all SME credit programs by NBD till 30/11/2003

1. Total Number of disbursed loans 343522

2. Total Amount of disbursed loans LE 895,796,3233. Total Number of outstanding borrowers 22,6064. Total Amount outstanding loans LE 51,635,2755. Total Number of disbursed women loans 76148 6. Total Amount of disbursed women loans LE 136,830,9807. Total Number of outstanding women borrowers 65348. Total Value of outstanding women loans LE 8,715,7869. Total Number of Beneficiaries 10462910.Repayment Rate 96%

Conclusion Conclusion Conclusion Conclusion

Most bankers believe that Microfinance is:Most bankers believe that Microfinance is: - Unprofitable - Unprofitable

- Too risky - Too risky

- High administrative cost - High administrative cost

- Socio-Economic & Cultural barriers- Socio-Economic & Cultural barriers

As well as the following constraints: - Upper management commitment to Micro enterprise - Financial methodologies should follow up low income clientele - Belief in recruiting, training & retaining large number of specialized staff - Reach sustainability and cost –effectiveness through non subsidized interest rates - Increase productivity and rapid expansion of microenterprize

Nevertheless…Nevertheless…Nevertheless…Nevertheless…

NBD has succeeded since 1987 to overcome constraints NBD has succeeded since 1987 to overcome constraints

thus developing a program which has been: thus developing a program which has been: – Sustainable since 1987Sustainable since 1987– Covering its costs Covering its costs – Realizing profit Realizing profit – Expanding its outreach all over Egypt.Expanding its outreach all over Egypt.

Thank You