Interview: Dante Campioni
How can banks continue to encourage more companies to join the formal sector?
DANTE CAMPIONI: Increasing financial inclusion and attracting enterprises to join the formal sector is not something that banks can do alone. Success in this field will be the result of full collaboration between the financial sector and relevant governmental institutions. The solution to convincing companies to operate formally through banks is to offer products and solutions that are attractive to the unbanked, making these elements accessible through proper education and advisory support services. Working to improve financial literacy will also decrease the language barrier between banks and customers, thereby increasing the level of trust.
Banks can build on this trust by offering valuable services that support their customers’ needs. Efficient and effective banking processes need to match an environment that offers micro-, small and medium-sized enterprises (MSMEs) clear incentives. From a regulatory perspective, the Central Bank of Egypt (CBE) has undertaken a number of initiatives dedicated to the MSMEs sector, each of which are helping to create more favourable borrowing conditions.
What are some issues that MSMEs in rural areas face when accessing finance?
CAMPIONI: The level of financial inclusion in rural areas is lower than that of urban areas for many reasons. In part, it is due to lower levels of financial literacy as well as lower density of bank branches. In today’s era of digital services, however, it is possible to overcome this deficit quite quickly. Proximity is the first angle to consider. The smaller the customer is, the more imperative it is for the bank to be near to them. While management of relationships with larger SMEs can be concentrated in specialised enterprise centres that are capable of offering more sophisticated approaches, smaller enterprises must look for responses to their needs across the entirety of the bank network.
Another element differentiating relationship management between micro-enterprises and larger SMEs is the credit process. For micro-enterprises, it must be simpler, quicker and independent of balance sheet analysis. Training also has an important place in helping the banking sector be more inclusive of MSMEs. It requires changes in perspective and culture, looking for ways to mitigate risk while working to increase access to credit. Attention and support must be increased to sectors that are important to rural economies, such as agriculture and handicrafts. When the proper tools are available in these areas, economic growth follows suit.
What role can digital services play in increasing access to financial services?
CAMPIONI: The role of digital services is significant and will become more important as digital technologies continue to play larger roles in reaching customers and lowering the costs of services. The proliferation of mobile banking technologies, cards, electronic wallets, point-of-sale and new generations of ATMs means that traditional branches will command less of a central role in how services are offered.
Technological innovation allows for the introduction of solutions based on new concepts and processes that efficiently meet customers’ needs, however, an adaptable regulatory environment is necessary in order to effectively implement these solutions. The interoperability regulations issued by the CBE for electronic wallets, and the creation of the Egyptian National Payment System, are good examples of regulatory adaptability that allows financial services providers to improve efficiency and transaction costs. The result is increased attractiveness and accelerated diffusion of banking services. Continuing to work towards an adaptable regulatory framework – one that is sensitive to technological development – will be an essential asset to Egypt’s economic growth in the years to come.
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