SMEs drive growth in Egypt
ALEXBANK’s digital-first small business offering will help the country’s transformation
As a private sector bank, ALEXBANK is unusual in that it is present in all 27 Egyptian governorates bar one, through its 179 branches.
The bank’s strength is in retail, microfinance and SMEs, with a particular focus on the agriculture sector. It’s here, says Dante Campioni, ALEXBANK’s Chief Executive Officer and Managing Director, that the bank is seen as an exemplar, one that’s crucial for Egypt’s ambitions.
The reason for this is partly Campioni’s background which includes small business: he made his career in retail, wholesale and investment banking in Asia and Europe, including London and Italy.
He initially brought the bank’s attention to this segment of the market. “Italy and Egypt are quite similar in that they’re both dominated by SMEs rather than the big corporates,” he says. “This gave us an edge.”
However, banking penetration in Egypt is still very low and, according to Campioni, only about a third of the Egyptian population has a bank account.
"We are in a situation whereby both the population and companies are underbanked. So we have some great opportunities to get close to customers and offer what they really expect from a bank."
Dante Campioni, CEO, Alexbank
The pace of transformation is rapid, says Campioni, and it’s driven by the Central Bank of Egypt, which has played an active role in targeting the underserved segments of the economy.
ALEXBANK itself is the result of the successful privatisation of a public bank in 2006. Intesa Sanpaolo acquired 80%, with the rest remaining in the hands of the Ministry of Finance (there are two board members from the ministry).
A few years ago, the Central Bank of Egypt ordered that a minimum of 20% of overall bank lending should be directed to SMEs by 2019. ALEXBANK is one of the few banks to have reached this target. The minimum has been increased to 25% by the end of 2022 – and Campioni says ALEXBANK is “almost there already”.
Another reason for ALEXBANK’s success in this area is that it has created a solid network of relationship managers. “We’ve also done a lot to simplify the required documentation and automate the lending processes,” says Campioni. In this, digitisation and automation are key to the bank’s transformation. In a few weeks, the bank will release the first of a series of fully automated end-to-end workflows which, says Campioni, “will dramatically cut the time to cash for our customers”.
When SMEs go to a bank, he says, “they need a quick answer. In Egypt until recently this could be measured in months.” The new workflow means that response time will decrease from about four weeks to 48 hours.
This credit is essential for economic growth, says Campioni. “One of my former customers in Italy – a producer of food machinery – told me he had a company willing to buy his products, but they told him they couldn’t buy for another eight months until they had saved the money.”
“This is a clear example of how SMEs are sometimes far away from banks, and how good credit can speed up economic growth. As soon as the company completes its investments, starts hiring workers and producing food, it will increase its contribution to GDP.”
The bank is also part of a general trend towards visibility. “Being invisible and dealing only in cash is a great way to hide profits,” says Campioni. “The authorities have created a lot of tax incentives and tax holidays to encourage SMEs to become visible. We are part of this overall plan to make these companies emerge from the grey economy.”
Egypt has also been passing new legislation to simplify red tape and encourage digitisation. “There are still some milestones to be achieved,” says Campioni, “but the will is there, and the authorities are very supportive.”
Egypt has heavily invested in infrastructure. For example, says Campioni: “When I arrived, one big problem was electricity. Now the country is signing agreements with Greece to export electricity and trying to export also to Saudi Arabia or to Sudan.”
There are transport initiatives for urban areas, and new smart cities – including a new smart capital – are being built.
The average age of Egypt’s population is low – approximately 60% are younger than 30, and 80% are under 45 – so smartphone penetration is high. This makes the country favourable to the development of digital services.
“Not everything is perfect and of course there are obstacles,” says Campioni of the Egyptian marketplace, “but big improvements have been achieved and are planned. This market can be interesting and attractive for many foreign corporations.”