Egyptian banks lend stability to macro challenges

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Established in 1964 as a joint venture between the Central Bank of Egypt and Kuwait Investment Authority, the Arab African International Bank (AAIB) is one of the most influential private finance institutions in Egypt. Hassan Abdalla, CEO of AAIB, shares his views on how the banking industry is supporting Egypt’s economic challenges.

How would you grade Egypt’s financial backdrop?
There are challenges in the macroeconomy that need to be addressed, foremost the need to shore up liquidity and subdue inflation, but there are positives coming from my sector that can support the country. Moody’s recently decided to maintain a stable outlook on Egyptian banks, and they expect we will benefit from a stable deposit base, high local currency liquidity and strong profitability this year. Furthermore, they predict that the country will expand by 4 per cent in 2017, up from 3.5 per cent in 2016. Finally, strong banking will be buttressed by a healthier labor market, which saw unemployment ease to 12.7 per cent earlier this year.

What sectors do you see as the most competitive for investment?
For the last two years, Egyptian authorities have been focusing on developing different pillars in order to attract foreign direct investment (FDI) and incite stability. Tourism infrastructure, in particular, is an important focus area; civil and transportation infrastructure is another. Though there have been hiccups, policies have been put in place to rally confidence in investors.

In that regard, what financial policies have been implemented?
Earlier in 2016, the government instituted a mandatory quota for 20 per cent of bank loans to be dedicated to small-medium enterprises. While there are some risks associated with having a higher proportion of these assets, the policy will work towards generating more economic opportunities for youth looking to start a business. AAIB is well positioned to support this policy’s cause: we’ll be launching a full-fledged microfinance service next year, which will be done with a foreign partner to add global expertise. This is important because Egypt’s domestic market is not as familiar with microfinance as we are with conventional banking.