The Central Bank of Egypt wants to incentivize banks’ investments in equity for SMEs
Bank investments in SME-focused equity funds now count toward minimum small business loan requirement: The Central Bank of Egypt (CBE) agreed yesterday to allow banks to count their own equity investments in SME-focused funds as part of the mandatory minimum portion of their loan portfolios they are required to allocate to SMEs, according to a circular published yesterday (pdf). The measure is meant to give commercial banks incentives to back angel investors, venture capitalists, and private equity growth funding for SMEs.
Background: Under the CBE’s EGP 200 bn SME finance initiative, commercial banks are required to allocate 20% of their loan portfolios to SMEs at 5% interest. Yesterday’s decision will also set the relative risk of banks’ investments in these equity funds at 0%, provided the investments meet certain requirements.