Banking sector a possible bright spot for Egypt

Depending on whom you talk to, Egyptian bankers deserve either garlands for the prudential way they avoided financial catastrophe or thorns for throttling their country’s small businesses with miserly, short-sighted credit policies.

Since the revolution that ousted President Hosni Mubarak in February 2011, Egyptian banks have faced a currency crisis, a surge in delinquencies and a flight of foreign capital that left them choking on their own government’s debt. They have survived intact, however, thanks to changes over the past decade that revived the country’s sedentary financial sector.

“The country is still functioning, and it’s largely because of the banking sector,” said Hisham Ezz Al-Arab, chairman of the Commercial International Bank headquartered in Cairo. “So let’s give credit to the market regulators and the players.”

Having purged much of their balance sheets of nonperforming loans, the legacies of Egypt’s command economics of a half-century ago, Egyptian lenders have much about which to boast. The industry’s 39 institutions — dwindled from 62 over the past decade — enjoyed double-digit annual profit growth from 2004 until the advent of the global financial crisis four years later.

In the past 10 years, banks have trained their loan officers to lend against future earnings rather than fixed assets. Theoretically at least, that cultural shift means that an entrepreneur with a smart business plan or a popularly branded product might qualify for credit without having to put up an asset — like his home, for example — as collateral.