Egyptian banks poised for African expansion 

Egypt’s banking sector is one of the strongest on the continent. In our sister magazine, African Business’ ranking of Top 100 banks, two of the top three are from Egypt (National Bank of Egypt and Banque Misr), and CIB comes in at number 9. Of our Top 100, the 25 Egyptian banks make up 29% of the Top 100 total assets and 24% of the Top 100 tier one capital, twice that of Nigerian or Moroccan banks. During a side event at the African Development Bank Annual Meetings in May, African Banker brought together leaders from Egypt to discuss the banking landscape and to see how to leverage the strength of Egyptian banks to contribute more to investment and finance on the continent.


Giving some background, Yehia Abou El-Fotouh, Deputy Chairman of the National Bank of Egypt, said that reforms that began in 2003 had strengthened and diversified the banking sector, allowing for participation by both local and foreign entities. 

There are today 36 banks operating in the country, all of which are well capitalised. This follows the increase in minimum operating capital required by the central bank, currently at E£5bn. The number of banks has reduced from over one hundred in the early 2000s. 

“There are about 120m people living here in Egypt, if you include non-Egyptian nationals, so we believe this is a good number of banks, especially as they are all very strong,” El-Fotouh stressed. Egyptian banks are also expanding into other countries and his own, the National Bank of Egypt, the biggest bank by all metrics in the country, is currently present in Sudan, Dubai, Ethiopia and South Africa.. 

Mohamed Abdel Khabir, Group CFO at EFG Hermes Holding, explained the company’s expansion into Kenya and Nigeria thus: “The way we view our expansion is that we have to be in the markets where our clients are, not only to provide a single service but rather a whole suite of services to them. The division opened in Kenya in 2017 and has grown to become the biggest brokerage firms in the country. The company also bought a small brokerage house in Nigeria that has now grown to be among the five biggest in the country. 

“The whole idea is to help our clients in Egypt or anywhere else in the world to gain access to these markets. Apart from [the company] applying the experience it has accrued in Egypt in those markets, it is also facilitating the inward expansion of foreign clients into Egypt as well as Kenya and Nigeria. 

EFG Hermes is the most successful African investment bank in terms of expanding its activities outside its home market, making it one of the most important investment banks in the Arab world, with a strong footprint in the GCC countries. It is this experience, Abdel Khabir says, that can add value when bringing capital to the African continent from new markets. According to Mohamed Khairat, Head of Corporate Banking and Syndicated Loans at Banque Misr, the country’s second-biggest bank is focused on boosting its regional presence, even if the Egyptian market in itself has great opportunities.

“We typically look at it from two angles – at the trade corridor between Egypt and the countries we want to be engaged in and how we can serve our clients between these different countries; and we look at the cross-border business of our clients on both sides and how we can meet the banking and financial requirements in both jurisdictions,’’ he explained. 

Banque Misr’s investment banking arm, CR Capital facilitates investment flows and transactions between the Gulf and Egypt. Banque Misr also participates in syndicated loans to finance big ticket projects and comes second only to the National Bank of Egypt in the ranking of institutions in this category. 

Khairat said the challenge in Africa has been the ability to facilitate trade from one end to another and ensuring that profits from projects are guaranteed. He observed that it is often a challenge to find banks with an acceptable risk profile, which makes Afreximbank an ideal partner in financing Banque Misr’s clients engaged in projects outside Egypt. 

“The fact that we have a presence in Africa, Saudi Arabia, Lebanon, United Arab Emirates, France and Germany definitely facilitates our ability to finance our clients and meet their banking requirements as they move into new markets,” he said. It also helps when clients from other regions come into Egypt, he added.

Massive African network

Ayman Elzoghby, Director, Intra-African Trade, Investment and Corporate Finance, Afreximbank said “our collaboration with Egyptian banks has been very fruitful and rewarding over the years.” Egypt is the largest shareholder in Afreximbank, as well as forming the largest portfolio with the bank, at 26% of the bank’s total. 

Afreximbank also works closely with the financial sector in Egypt, including providing liquidity for local banks and supporting them to drive trade between Egypt and the rest of the continent. 

“We work in 52 African countries and hence we have relationships and lines of trade with more than 500 banks around the continent and we use that network to facilitate trade,” he said. The National Bank of Egypt, for example, does not cover as many banks as its clients need so Afreximbank is able to step in and provide that assistance where there is the need.  

Afreximbank also works with some Egyptian construction banks to undertake projects in other African countries. One such initiative is a hydro-electric project in Tanzania, which, at $3bn, is one of the largest all-African investment projects in recent times. 

Afreximbank, Elzoghby emphasised, is also promoting trade hubs in countries with larger economies in the continent. “Egypt is one such country, with a financial services sector that is capable enough to grow its footprint across Africa,” he said. 

“The Covid crisis taught us an important lesson,” he added. “A lot of international banks withdrew from the continent, leaving a sizeable gap in trade and project finance, which can only be filled by indigenous banks.” 

Yehia Abou El-Fotouh, Deputy Chairman of the National Bank of Egypt, said the African market was the primary one for expansion, with great opportunities for mutual benefits. “We are ready, we have the finance and we are pushing our clients to go into Africa. We are also supporting them in collaboration with Afreximbank and other banks,” he said. 

For Banque Misr, the current economic challenges also have opportunities wrapped in them. “If you really look at what we are trying to do in terms of export promotion, import substitution, this crisis has really opened up a lot of opportunities for companies that were not even looking at exports and are now rethinking their strategies and focusing on them,” he said. 

Poor market information the obstacle

Elzoghby said Afreximbank sees the lack of market information, rather than infrastructure, as the biggest obstacle to African trade. “Companies in Egypt do not know what people need in Nigeria, Kenya or South Africa, for example. So what we are trying to do is bridge the information gap by bringing businesses closer together,” he explained. 

The bank’s intra-African trade champions programme as well as its recent overtures to the Caribbean, are all designed to help African companies find and grow the markets for their products and services. “Under our EPC strategy, we have helped facilitate over $12bn in contracts in African countries, half in favour of Egyptian companies,” he said. 

Reflecting on how Egyptian banks can expand their presence in Africa, Elzoghby said he’d encourage them to look at what other local banks, in particular Moroccan banks, have done in terms of regional expansion. “ Egyptian banks must be present in all regions in Africa and this must be done as part of a deliberate strategy,” he emphasised. 

Commenting on the exit of international banks from Africa, Ayman Elzoghby explained that periods of crisis exert pressure on some banks to exit those markets perceived to be the most risky, hence the decision by some banks to leave the continent, but this, he said, is an opportunity for local banks to take over the assets of the departing ones. 

The panel concluded that the reforms that Egyptian banks have undertaken to strengthen the sector were a lesson that other jurisdictions could take from the Egyptian market, while Egyptian banks could be encouraged to emulate the digitisation efforts made in the banking sectors of some other countries in the continent.

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