New Egypt bank rules to boost business lending and growth

Egypt's central bank said on Monday it had amended credit market rules to encourage banks to lend to a wider range of clients, as part of efforts to mitigate credit risk and boost growth.

In a circular published on its website, the central bank cut the maximum amount that banks are allowed to lend to a single client to 15 percent of their Tier One capital, down from 20 percent previously, to reduce the risks associated with lending to a small number of large clients.

In a separate circular, it said that banks were also relying too heavily on retail lending, including personal, car and housing loans, and placed new limits on consumer credit.

It also cut the total sum that banks can invest in money market funds to 2.5 percent of their total deposits in local currency from 5 percent previously, a move bankers say could reduce their holdings of Egypt's high-yielding government debt.

The changes follow an announcement by the central bank on Sunday that it would push ahead with implementing President Abdel Fattah al-Sisi's plan to increase bank lending to small and medium-sized companies (SMEs) as part of efforts to boost growth and create private sector jobs.

"This will be good for the economy because it will encourage lending to SMEs and start the ball rolling in the economy and result in creating more jobs rather than just buying government debts," one banker said.