In a significant shift, HSBC Egypt is launching a 1.5 billion Egyptian pounds (approximately $31.5 million) fund aimed at investing in small and medium-sized enterprises (SMEs) in the fintech sector. This move follows HSBC’s history of closing numerous accounts of local startups, raising questions about the bank’s shifting priorities in Egypt
The new fund, set to be managed by the Egyptian Financial Group (EFG) Holding, is expected to be launched in the third quarter of this year. It aims to support SMEs, particularly those operating in the burgeoning fintech sector. According to banking officials, the Central Bank of Egypt has already approved the establishment of the fund, with contributions coming from various financial institutions, including the Suez Canal Bank.
Under current regulations, the Central Bank of Egypt allows local banks to count their investments in SMEs, including startups, towards the 25% requirement of their credit facilities portfolio dedicated to micro-enterprises. However, these investments must not exceed 10% of the bank’s core capital, and a bank’s share in any fund or company must not surpass 50% to prevent being classified within the banking group.
HSBC Egypt’s CEO, Todd Wilcox, has previously stated the bank’s intention to expand its direct investments in Egypt, highlighting opportunities in industrial, technological, and renewable energy sectors. This new fund aligns with that vision, aiming to attract international investors to Egypt’s diverse economic projects, including the Suez Canal Economic Zone.
This initiative marks a notable turnaround from HSBC’s recent actions that sparked frustration among Egyptian startups. In 2013, HSBC Egypt closed numerous SME accounts, citing regulatory obligations and a strategic review. Many startups reported receiving abrupt notifications, often with significantly less notice than the promised 60 days. This move left many businesses scrambling to find new banking partners and raised concerns about HSBC’s reliability and commitment to the SME sector in Egypt.
Karine Kamel, who runs BridgEgypt, a consultancy firm, described her experience with HSBC’s account closures then as a betrayal. “It wasn’t a nice way to break up. I’d expect a call, very apologetic. Not a letter,” she lamented, noting the impersonal and abrupt nature of the notification. Similar sentiments were echoed by Moe Salem Korayem, CEO of Social Fruits, and Mahamad El Tanahy, Managing Director of Bright Creations, both of whom faced disruptions due to the sudden account closures.
Despite past grievances, HSBC is attempting to rebuild its rapport with the entrepreneurial community through new initiatives. Besides the upcoming fund, HSBC Egypt announced a 1 billion EGP Technology Entrepreneurs Lending program in 2022, designed to support high-growth tech companies in sectors such as fintech, e-commerce, retail, mobility, health, education, and software. This program, part of HSBC’s broader strategy to support internationally-minded businesses, prioritizes companies with sustainable development goals.
Ali Taqi, Head of Commercial Banking at HSBC Egypt, emphasized the bank’s commitment: “HSBC is committed to supporting the growth of internationally-minded businesses in Egypt. This is the third SME-focused growth initiative we have launched in recent months, following our Female Entrepreneur Lending Fund and Foras Trade Fund, and demonstrates our commitment to supporting entrepreneurs on their global growth journeys.”