The financing gap for SMEs in Egypt is estimated at around USD 46 bn, but these businesses contribute more than 43% of the country’s GDP, according to the latest report from global payments giant Visa on key financial trends for SMEs.

A massive market: The more than 12mn SMEs make up 98% of all businesses operating in Egypt by number and employ over 47 mn citizens, marking them an important avenue for banks, non-banking financial institutions, and fintech companies, Visa Egypt's Vice President and General Manager Malak El Baba, said at a press conference to release the report.

One key trend is a move towards seeking formal financial services: SMEs in Egypt — 33% of which are financially constrained — are still “largely underserved and underbanked,” according to the report. Although 85% of SMEs don’t have access to banking services on the back of very few banking products catering to SMEs and other costs and complications, SMEs are increasingly looking towards formal financial services because they are seen as reliable and secure.

SMEs are also looking towards BNPL and POS financing as a way to boost sales: Visa notes that 49% of SMEs want to increase revenue by letting customers have a buy now, pay later (BNPL) payment option, with some c. 180k merchants already accepting the payment method. BNPL along with point-of-sale (POS) financing options are “gaining traction as a merchant tool to incentivize consumer conversion and increased spend,” according to the report.

Social media is increasingly becoming a key driver of sales: Of the over 51 mn social media users in the country, many are increasingly using social media platforms to find and even buy products from local SMEs. Customers that SMEs acquire online now make up 30% of their customer base.

E-wallets are becoming increasingly popular: With USD 30 bn changing hands via e-wallets in 2023, Visa sees demand increasing for their online and offline acceptance. Visa notes that the rising acceptance and use of e-wallets has changed the way many SMEs run, enabling them to take their operations online.

SMEs are eager to build a bigger and better online presence: Visa found that 32% of SMEs are looking to develop a presence online to find news customers from the 41 mn Egyptians that shop online.

B2B marketplaces are more and more attracting SMEs: Business-to-business (B2B) marketplaces are now used by more than 350k local SMEs because they are “increasingly recognizing [their] cost-effectiveness, efficiency, and accessibility.”

Digital business tools are on the up: “SMEs have ambitions to continue growing and improving their businesses through digital tools and are optimistic about digitization,” the report notes. While 42% of SMEs in the country use at least one digital tool, 88% of them are interested in a digital inventory solution, and a further 91% say they feel comfortable using digital tools in their businesses.

Addressing financial challenges: While 33% of SMEs face financial challenges, only about 15% have access to banking services, with the current loan portfolio for this segment estimated at around USD 11 bn in Egypt, according to the report. Visa has managed to increase its customers’ access to finance in Egypt tenfold over the past four years, while the number of point-of-sale terminals has expanded 7-8 times during the same period, said Karim Sayegh, Visa's head of corporate services for North Africa, the Levant, and Pakistan, during the presser.

What do these businesses need to grow in Egypt? Simply put, they need easily accessible financial products, continued business growth, and the ability to expand by managing spending on digital advertising and consumer outreach, while accepting multiple payment methods, the report stated. Additionally, leveraging digital channels to increase sales through e-commerce, bulk buying, supply chain management, and effective cash flow management will enhance their efficiency.

AND- Visa is working with the Central Bank of Egypt on operational trials for payment card tokenization on mobile applications, allowing contactless payments via these apps, with plans to officially launch the service through one of the largest state-owned banks soon, El Baba revealed.

ALSO- Visa is also collaborating with the CBE to draft new regulations to develop digital payments in foreign trade transactions, which could be announced by the Central Bank of Egypt soon, El Baba disclosed.

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