Kuwait Finance House (KFH) said in a report that Egyptian banks have faced a challenging operating environment since the 2011 Revolution, with slower economic activities dragging down the demand for bank financing especially on the private (business) sector front.
Amidst high liquidity in the banking system and subdued private-sector demand, further encouraged by attractive short-term T-Bill rates, banks have shifted their lending portfolio to the public sector. Reflecting this trend, loans and discounts outstanding to the public sector increased to 15.3% of the overall loans and discounts outstanding in the banking sector as at end-2011, up from 14.4% as at end-2008. In contrast, loans and discounts outstanding to the private (business) sector declined to 60.1% as at end-2011 from 64.3% as at end-2008 and the peak of 70.2% as at end-2003,” the report issuer added.
According to KFH, lending activities are expected to improve in 2013, in line with a more stable political and economic environment which should pave way for recovery in economic/ business activities, tourism and foreign direct investments.
Earlier this year, the Egyptian Financial Supervisory Authority announced that the country will issue its first Islamic debt guidelines in 2012 to fuel Sukuk sales. An amendment in the executive regulation under the capital markets law is needed before allowing the issuance of sukuk.
“Apart from allowing local corporates to raise funds via the Islamic capital market, this much-awaited move is expected to boost secondary market liquidity (where the Sukuk papers will be listed) and vital for attracting Gulf investors,” KFH indicated.
Mubasher
