The IFC has strengthened its presence in Egypt by expanding partnerships with two banks.
Ahli United and Alex Bank have both been added to the global trade finance programme (GTFP), which Nada Shousha, the IFC’s country head for Egypt, Libya and Yemen tells GTR will “ensure any supply gap is eliminated, since availability of essential commodities through import is critical for the country”.
Since 2011, the IFC has made around US$1bn available to Egypt’s private sector and Shousha views now as the right time to continue to support the banking sector, since their trade finance business has been expanding in recent years.
With ascension to the GTFP, the banks can expect the IFC to issue guarantees for payment risks for trade-related business. Members can leverage the IFC’s relationship with other programme members, as well as its relationships with large multinationals. The result is that banks can trade cross-border in situations that would have made it difficult without a guarantee.
The Egyptian economy has been badly hit by the ongoing social and political turmoil enveloping the country. While growth has remained marginally positive (with one quarterly shrinkage of 4.4% in 2011), the economy has been propped up by international aid, mainly from Gulf nations.
To date, GCC countries have granted the Egyptian economy US$12bn, with another US$6bn in Saudi capital expected to enter the market shortly. The finance has been mainly used for purchasing energy products.
But despite the unrest, Shousha says that there is still plenty of appetite among Egypt’s export sector to seek out new opportunities: “More Egyptian clients are trying to expand their business abroad into Europe, Asia, America, and especially Africa. Because the GTFP has a global orientation with more than 400 partner banks all across the world, we can support trade transactions in many challenging markets, including Africa, and this helps banks build relationships with new institutions on a low-risk basis.”
It’s hoped that the IFC’s presence is a stopgap rather than a permanent arrangement. International commercial lenders have largely vacated the market and Shousha says the IFC has been requested to step in “given Egypt’s huge import bill and the recent downgrades in Egypt’s rating”.