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The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has signed an agreement for a 20% equity stake in Egypt Factors, thereby helping establish a factoring company in Egypt.

The IFC’s investment of US$3mn will promote factoring as an alternative trade finance product which will benefit small and medium enterprises (SMEs) in the country’s dynamic export sector. Export factoring, a new financial service in Egypt, enables exporters to mitigate the financial risks associated with trading on an open account basis. The operations of the new company will enhance international trade opportunities by providing SMEs more competitive financing for their exports.

Sami Haddad, IFC director’s for Middle East and North Africa, notes that “enhancement and diversification of exports is key to Egypt’s future economic performance and factoring is an effective product aimed at helping export-oriented SMEs increase their business volume”.

Total capitalisation of Egypt Factors amounts to US$15mn, with Commercial International Bank Egypt (CIB) and First International Merchant Bank (FIMBank) holding a 40% equity stake each.

CIB, with its strong brand name and market position, is expected to bring its local market expertise and client base into the new venture by leveraging on its existing market presence.

FIMBank will play the key role as technical partner capitalising on its international expertise in factoring. “We are absolutely delighted to be in this project with such formidable partners and bringing this important product to the Egyptian exporters jointly. We are quite convinced that this will benefit the Egyptian ecomony as a whole, albeit of course in a small way,” claims the bank.

Drawing on the technical expertise among other strengths of its stakeholders, Egypt Factors will introduce industry best practices in Egypt and thereby provide a model for others to emulate.