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The Finance Ministry has begun approving applications from manufacturers to access subsidized loans under the industrial finance initiative at a 15% interest rate, a government source at the ministry told EnterpriseAM. This comes following complaints from the Federation of Egyptian Industries that the program hasn't been activated and that securing financing under it was proving difficult.
REMEMBER- The Industry Ministry launched the first phase of the EGP 30 bn financing initiative back in April, offering reduced 15% interest rates to seven priority industrial sectors, including pharma, food, engineering, chemicals, textiles, mining, and building materials. The initiative, which was announced in December, aims to help private players finance the purchase of new machinery, equipment, and production lines at the discounted rate for five years. Some projects will get an even more favorable rate, with an additional 2% cut for projects that boost local added value or introduce new industrial activities that could replace imports.
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Some EGP 6 bn has already been disbursed by the Industry Ministry for qualified applications, the source said. The initiative is restricted to funding capital goods, machinery, and equipment. The Industrial Development Authority verifies applications and forwards approved lists to the Finance Ministry, which handles disbursement. The ministry does not interfere with the nature of the financing, the source said.
Despite the CBE cutting deposit and lending rates by 200 bps last month, interest rates have remained high for the industrial sector, head of the Chamber of Engineering Industries Mohamed El Mohandes told EnterpriseAM. Only one project out of several is getting approved, he said, calling for an acceleration in approvals to allow the initiative to have a tangible impact on the sector, especially for expansions and production line upgrades.
The program offers rates you’d be hard pressed to find anywhere else: Although four percentage points higher than the last batch of cut-rate finance for industry and agriculture, the 15% interest rate charged in the initiative is eight percentage points below the central bank's current 23.00% lending rate.
The industrial sector remains a priority for disbursing dues, the source said, adding that the new budget includes allocations to cover the interest rate differential. Two programs have been allocated EGP 8 bn under the industrial and agricultural loans support initiative and EGP 5 bn for the machinery and equipment support initiative to boost production capacity.
Talks are underway for a new financing initiative with easier terms to support small projects, given their role in driving economic growth, the source said.
