Tamweely acquired by consortium of EU, British, Egyptian investors
Egypt announced on Monday the sale of 100 percent of the shares of microfinance company Tamweely to a consortium of European and local investors in a deal exceeding LE2.5 billion (around US$52 million).
The deal reflects investor interest in Egypt’s growing microfinance sector, a financial analyst told Mada Masr.
It is the first successful privatization deal in a long time for the government, whose long-running plans to fully or partially privatize multiple state-owned enterprises have stumbled for years.
Tamweely, established in 2017, is a leading player in Egypt’s non-bank financial services sector that mainly focuses on financing small and medium enterprises. According to the Cabinet statement on the sale, the company has served over 500,000 clients and disbursed LE17 billion (around US$351 million) in funds since its inception. Its shareholders included a handful of state-owned investment entities, including NI-Capital, Ayady for Investment and Development, and Post for Investment, which is fully owned by the National Postal Authority.
According to the deal signed on Monday by the ministers of international cooperation and investment at a press conference, Tamweely will be acquired in full by a consortium of investors that consists of private equity fund SPE Capital, the Egypt-based Tanmiya Capital Ventures, the European Bank for Reconstruction and Development (EBRD), and British International Investment. The consortium is set to partner with current Tamweely CEO Ahmed Khorshid on scaling up the company’s infrastructure, organization, and operations, the statement added.
Financial analyst Hesham Hamdy explained to Mada Masr that investors’ interest in Tamweely stems from the significant growth in Egypt’s microfinance sector, which targets the large portion of the population that remains unbanked and without access to corporate financial services.
The EBRD expressed interest in Tamweely due to its role in directing funds at women-owned businesses and businesses outside big cities, according to what the bank’s regional director, Heike Harmgart, told journalists at a press conference announcing the acquisition.
The microfinancing sector received state-backed investment support from 2017 onward, when it was added to a low-interest loan program backed by the Central Bank of Egypt. The central bank provided microfinancing companies and associations with around LE14 billion (around US$289 million) in funding to allow them to provide loans to nearly four million borrowers.
But now, microfinance is joining other economic sectors in which the government seeks to withdraw its hands and empower private-sector involvement, as indicated in Planning and International Cooperation Minister Rania al-Mashat’s statements in the Monday presser.
Harmgart also noted that the EBRD is making the investment to confirm support for Egypt’s privatization program, adding that the bank is in the initial talking stage with the government regarding other potential investments.
Although the government has been indicating that privatization is among its priorities for years, Tamweely’s sale is the first successful privatization deal in a long time. Hamdy noted that Tamweely was not among the state companies previously earmarked for privatization.
Privatization became a priority when the government sought to increase its dollar revenues to remedy an entrenched financial crisis, and as financing from the International Monetary Fund came along with stipulations that the state reduce its footprint in multiple economic sectors.
A 2018 IPO program was designed to lure investors in, making limited successful offerings before being postponed, with ministers’ citing hostile market conditions. The government revamped the program in early 2023 with plans to fully or partially privatize 32 state-owned enterprises, coinciding with the launch of a US$3 billion IMF loan that reiterated the privatization recommendations.
Yet, privatization still advanced in a sluggish manner since, facing bad market conditions, disagreements with investors over valuation of assets, and internal pushback on the sale of certain long-standing enterprises.
Over 60 percent of microloan recipients in Egypt are women, according to official data. Mada Masr previously found that many of the companies partake in predatory lending practices, with agents granting high-interest, high-risk loans for personal rather than entrepreneurial expenses to earn commission without ensuring applicants’ ability to make monthly payments.