We should really look at it as a whole story. In 2003 or 2004, with the beginning of the reform of the entire banking sector, and a lot of measures have taken place since then, beginning with the consolidation of the banking system. Banks were, at the time, maybe 60 plus banks; it went down to 38 banks. A lot of governance measures were put in place: a requirement for capitalisation; the way the banks behave in terms of extending credit; and so many different factors that have been put and developed over the past few years and actually contributed to the strength that we see in the banking system today.
When the flotation happened in November 2016, banks were ready. The objective of flotation basically is to create more balanced, competitive and fair market dynamics, and therefore, from banks' perspective, they actually managed to behave and perform in a better environment, and therefore helped them to achieve better performance.
Talking Africa region, these are all neighboring markets for the Egyptian banks, and definitely there is a lot of potential for them to look at and to consider being in these markets.
Technology and fintech help you to expand, and the potentiality to grow beyond – or cross-border growth – is definitely there and definitely on the radar of many other banks who are supported by their financial strength and the availability of skillsets. I think Kenya is one example that I can think of because they introduced mobile payments. They have grown very big in that area, and it's not only by paying your mobile bill, it has included a lot of other daily activities and business activities. Egypt looked at this example, and the regulator is putting the right framework and infrastructure in place to help achieve the proper controls and with the active promotion of this direction to all banks and the different market players. While it is useful to look at them, of course, they provide a kind of competition, and you need to move fast.
It's not a matter whether we think or debate, “Is it good to use this technology?”
“Is it good to use online activities or not?”
It's a matter of how fast you get your system adapted to go into this direction and provide the needs of your customers.
SMEs have always been a big contributor to the Egyptian economy. Is it potential for growth? Absolutely. So, why hasn't it been growing? It again has to do with appetite and readiness and awareness of the SME business operating in the market and the requirements to access financing. Banks operate in a big market, so we have a lot of opportunities, and therefore, banks over time always focused on these easy, straightforward opportunities dealing with large corporates. They have their future planned, and therefore for financial institutions it is much easier, and of course the ticket size makes it cost-efficient to deal in that sector.
Until now, banks were not incentivised based on their appetite to go to, let's say, a different segment of the market, be this SMEs. But with the whole reform process, the central bank has started to perform with a futuristic approach, rather than reacting to what's happening in the market. The central bank started to make this initiative and push the banks towards focusing on the SME business.
Public sector banks have been very successful in the SME business, and we're seeing now this happening with private sector banks. Large private sector banks and even medium-sized private sector banks are getting into the SME business in a very active way. There are key elements that help to shape the real potential of this market. The Egyptian market is not only a big market, but it's a very well diversified market. It has many key drivers that contribute to its growth.
It's not dependent on one product or one activity. You have tourism, which could be a bit volatile, but you have exports, you have Suez Canal revenues, you have an industrial base that produces different products, and you have a solid financial system that supports all these activities.