x Abu Dhabi, UAEWednesday 17 January 2018

Funders key for Egypt's small firms

Six months after Hosni Mubarak was ousted as president of Egypt, the country is still grappling with economic hardship and heading toward a recession. 

Among the industries seeing a boom in startups looking for funding in Egypt is the media. EPA
Among the industries seeing a boom in startups looking for funding in Egypt is the media. EPA
CAIRO // Six months after Hosni Mubarak was forced to give up the presidency of Egypt, the country is still grappling with economic hardship and heading towards a recession.

But even as obstacles emerge for the new government, Egypt is experiencing a renaissance of private small and medium-sized businesses.

On this new playing field, microfinance entrepreneurs are stepping forward to fill a funding gap for those wishing to expand or simply survive.

The small and medium enterprises (SME) sector accounts for the majority of Egypt's employment, and after the revolution there has been a deliberate refocus by the government to support Egyptians and their businesses.

One clear indication of the private-sector desire to take advantage of the new landscape is the increasing popularity of microfinance companies as a source of funding for SMEs, bypassing banks that perceive smaller businesses to be poor credit risks.

There are about 500 microfinance networks in Egypt, and Ranya Abdel Baki, the executive director of Sanabel, a Cairo-based network serving the microfinance network in the Middle East, said the country represents the largest borrowers market in the Middle East, and she saw no signs of a slowdown.

"I have all sorts of people calling me every day now who want to start a business and need funding including college students and older more established entrepreneurs," said Ms Abdel Baki.

Despite growing demand for Egypt's products, the post-revolution hardships affecting the country are an issue for the microfinancers. Some companies have been forced to shut down select offices in the hardest hit areas, and reduce the amount of money they lend at a time when capital is scarce.

Ms Abdel Baki added that delinquency rates had been on the rise because some borrowers believed they could get away with not meeting payments during a time of governmental transition.

"I have heard of political figures in some areas encouraging people not to repay their loans to boost their own popularity," she said, adding the worst cases were in Cairo and Alexandria, the site of the most intense political clashes.

Another obstacleis the delay of a law that would make microfinance companies more eligible to operate in Egypt. Ahmed El Bardai, the chief executive of Reefy, said he does not think a new law will be in place until the parliament is replaced.

Though he agreed that this had somewhat hindered business, he said "we are contemplating joint ventures with others [and] thinking about mobile banking or microinsurance".

Among the industries seeing a boom in startups looking for funding is the media, which is breathing in the air of freedom and looking to compete with the established old guard. The stream of new newspapers, television and radio channels is evidence of the move towards a freer press.

"What's happening now, we have freedom of expression compared to the era before January 25," said Gamal Zayda, the managing editor of Al Ahram newspaper, one of the top government-led newspapers in Egypt, and one of the oldest in the Arab world.

He said an important outcome of the number of startups in the media industry was the ability to give Egyptians the right to choose information from all spectrums of the political landscape.

Though media in the country have generally been dominated by government-owned newspapers, with partisan or privately owned media often taking the runner-up position, the latest newspaper and broadcast media launches hint at a more balanced media landscape. That is not discounting the kinks that need to be ironed out, including the calls for tighter regulation and transparency in the media industry.

Hussein Amin, the chairman of the Egyptian Radio and Television Union's research and development committee, a government body charged with overseeing broadcast media in the country, said it is possible for the government to continue to play an important role in the media while managing new entrants into the media sphere.

"The British Broadcasting Corporation is a good model, for instance. I need to see a change in the media that reflects what happened post-revolution and this is not by greeting the chaos that we're seeing now with conflicting messages," he said.