New guidelines will encourage banks to lend to SMEs, said CIB chief Hisham Ezz Al Arab, wearing his hat as chairman of the Federation of Egyptian Banks (FEI). The new regulations will allow banks to provide loans to SMEs that lack complete financial documents, as most of them are part of the informal economy, said Ezz Al Arab at a FEI forum on transitioning into a non-cash economy on Thursday. The banks will rely on preliminary permits issued by the government to provide the loan, in addition to proof that the borrower is on the way to completing full licensing procedures, Al Mal reports.

The CBE confirmed it is monitoring banks to make sure they abide by its regulations on SME lending, Al Shorouk says. The CBE reportedly made the statement to deny rumours that funds for SMEs were being diverted to larger borrowers.

… In related news, there are a “host of problems” with the CBE’s plan to expand lending to SMEs, veteran finance writer Patrick Werr writes in The National. Why should banks that cater to corporate borrowers “be forced to add expensive infrastructure and apply models outside their expertise” to lend to SMEs, he asks. The required regulation adds a layer to obstacles to doing business. Another problem concerns protecting depositors’ assets, an issue that appears at odds with forcing banks to lend to borrowers that do not have complete financial data. More shrewdly, Werr asks what stops an SME from borrowing at the mandated 5% interest rate only to reinvest the funds in government treasuries that pay around 11%?