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Central Bank Of Egypt Allows Banks To Invest Up To 25% Of Credit Facilities In Startup Funds

March 10, 2021

Startup funds in Egypt are the greatest beneficiary of Central Bank of Egypt’s latest policy which now allows Egyptian commercial banks to commit up to 25% of all credit facilities directed towards small and medium scale businesses in the country into funds targeting startups. According to the central bank, investments made by banks in the funds could reach as high as 70% of the total fund size of each fund in the first year of the investment; 50% in the second year of the investment; and 30% for the third of the investment.

In long-awaited move, Egypt central bank scraps currency transfer limit | Reuters — *Egypt’s central bank has been at the forefront of promoting investments in financial technology companies and funds targeting startups. Image Credits: Reuters*

However, the central bank says all banks investing in the startup’s fund must be allowed to exit from the fourth year. To that effect, it mandates that each of the fund’s bye-laws must include the possibility of the fund allowing the bank to exit starting from the fourth year of the start of the fund’s business. For non-profits, a period of three consecutive years is given for such exit.

For a bank to be able to participate in the scheme, it must obtain the necessary license from the General Authority for Financial Control, responsible for regulating securities and investments in the North African country. A participating bank must also make sure that the total value of its investments into the funds does not exceed 10% of the bank’s principal capital. It must also make sure that its shareholding in the fund does not exceed 50% of the fund or company’s capitalization, unless the fund is part of the bank’s group of companies.

Finally, the central bank has now allowed banks to increase their risk exposure level on the credit facilities given to the startup funds from the previous 0% to a new 20%.

Startup funding increases 31% in Egypt in 2020 | Enterprise — *Egypt’s startup ecosystem is not only a major leader in Africa, but also in the Middle East*. *Source: Magnitt’s MENA Venture Investment Report*

The Implications Of The New Policy

The policy is well-timed. The startup ecosystem in Egypt has been booming and has large presence of local funds — Egypt Ventures, Algebra Ventures, etc. — who will, most likely, be the greatest beneficiaries of the fund. The policy will even increase the spate of this funding.

The new policy will, also, now allow banks to float investment funds targeting startups as part of their subsidiaries.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Nigerian Banks And Loan Disbursement To Small And Medium Scale Businesses

August 2, 2019

This is a good time for Nigerian businesses to access loans. Nigeria’s Central Bank has recently mandated all money deposit banks in the country to give out 60% of all the money within their disposal as loans. Here is how some banks across Nigeria are starting to observing the directive.

Access Bank

Nigeria’s Access Bank, which has recently gone into a merger with Diamond Bank has recently announced plans to launch an innovative portal that will allow customers to process their loan application online. The bank granted up to N37 billion loans to its SMEs customers in 2018 alone.

The Bank has also organized a sensitization programme for players in the creative industry with a view to making access to the CBN Creative Sector Intervention Fund, CIFI, more seamless.

The Central Bank of Nigeria, CBN, recently rolled out the CIFI as part of its efforts to open up the creative sector and improve its contribution to the economy.

The CBN has already earmarked N20 billion for disbursement in the first phase of the exercise with three to 10 years payback plan and a maximum of nine percent interest rate per annum.

Fidelity Bank

Fidelity Bank has recently announced a partnership with PwC Nigeria, a tax and advisory services company, to fund SMEs with N12 million grant in its Fidelity Small and Medium Enterprises (SMEs) Funding Connect Series.
The bank also said that, at the final series of the event, three finalists will be rewarded a grand sum of N2 million (1st position) and N1 million each for the 2nd and 3rd positions respectively. The Executive Director Shared Services and Products, Mrs. Chijioke Ugochukwu, disclosed this at the Fidelity SME Forum on Inspiration FM, Lagos.
The event which will kick off in Lagos on August 7, 2019, is focused on funding.

“The event is focused on funding because in the course of our work, we have realised that aside capacity issues, funding is a major issue. So we try to create a platform where the supply and demand sides of the equation would meet. Supply meaning the fund providers while the demand side means the founders/entrepreneurs,’’ she said.

The entire series will be in Lagos, Port-Harcourt, later this year and in Kano early next year and we anticipate that across the three series we will have at least 3,000 participants, 10,000 SMEs, that will come in contact with 60 founders, 60 entrepreneurs and in total we are looking at N12 million in grants and across the entire series of the six breakout session in networking cocktails.
The three capacity building sessions will be with fund providers, founders, on one hand, model entrepreneurs, founders and subject matter experts.
“The five finalists get a chance to pitch the entire forum on August 7. So the five finalists will be live at the event and they will speak to the house about their ideas and three winners will emerge. The first prize will be N2 million and two consolation prizes of N1 million each.”
“To attend the event, you are to register by visiting the dedicated website for the bank which is smeconnect.fidelitybank.ng and of course also via the event app which you can download from Google Play stores for android phone users and the RS app store for Apple users.”

Nigerian banks’ lending pattern pointing to financial exclusion of SMEs

First Bank Of Nigeria

If you own micro, small or medium agricultural enterprise, this loan facility is a special intervention fund provided by the CBN to support your business. You get this loan at a low-interest cost and enjoy long-tenured repayment structure; to assist your business in enhancing capacity for employment generation, growth, and economic development.

Trusted customers of FirstBank seeking to expand their agri-businesses using low priced credit facilities as made possible under the scheme can benefit from this loan.

GTB

Fashion Industry Credit

Tailored to your Fashion business, designed for growth. In line with the CBN creative industry loan, the bank has created a single-digit interest rate loan at 9% to provide entrepreneurs in the fashion industry with all the financing they need to grow their business.

The loan can be:

Up to N5 Million for your fashion business.
Single-digit (9% per annum) interest rate at 0.75% per month
No fees
Flexible repayment plan spread over 360 days
Customers can access up to 50% of the average annual turnover

Food Industry

The bank also grants loan to the food industry. Now you can get all the financing you need with the GTBank Food Industry Credit, which offers you a single-digit interest rate loan of just 9% per annum.

The loan can be:

Up to N2 Million
9% per annum interest rate (0.75% monthly)
Flexible repayment plan spread over 180 days
Zero Fees

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Foreign Nationals In Ethiopia Can Now Set Up Banks And Insurance Business

July 29, 2019

Ethiopia is on course to liberalize its economy. Apart from opening bids for its first-ever privately owned telecom license, foreigners who are not citizens of Ethiopia may soon get a law that would allow them to set up and run insurance services as well as set up microfinance banks.

Here Is The Deal

Two draft bills that aim to restructure the country’s existing business law governing insurance companies and microfinance institutions have been passed by Ethiopian Council of Ministers.
The bills would definitely scale through and be passed into law since they were developed by the National Bank of Ethiopia and endorsed by the Ethiopian Council of Ministers.
What is just remaining is for the Ethiopian House of People’s Representatives, the Ethiopian parliament’s lower house, to which it had been forwarded to, to put its final ratification on it.
Under the new law, all that is needed, among other things, for a foreigner to set an insurance or microfinance business is for the foreigner to be a foreign national of Ethiopia.
This is part of restructuring Ethiopia’s current laws on insurance and microfinance sectors, according to the Ethiopian PM’s office.

The decisions to amend the East African country’s existing business laws governing insurance companies and microfinance institutions were made in line with recent and ongoing “large-scale” reform measures in the sectors, the Ethiopian Prime Minister’s Office revealed in a statement.

Here Is The Change These New Laws Are Bringing To The Table

Article 656 of the Ethiopian Commercial Code provides that the law shall determine the conditions under which physical persons or business organizations may carry on insurance business.
Recourse is however made to other parts of the commercial code and other laws to find out as to who may undertake insurance business and the conditions under which it may be undertaken in Ethiopia.
Accordingly, Article 513 of the commercial code provides that banks and insurance companies cannot be established as private limited companies, i.e., a private limited company cannot engage in banking, insurance or any other business of similar nature.
Similarly, Article 6(1) of the Licensing and Supervision of Insurance Business Pro No 86/1994 provides that no person may engage in the insurance business of any type unless it applies to and acquires a license from the National Bank of Ethiopia for the particular class or classes of insurance.
Furthermore, Article 4(1) and Art 2(3) of the same proclamation provide that such person has to be a share company as defined under Article 304 of the commercial code.
These requirements/conditions in effect prevent foreigners from engaging in the insurance business and foreign banks from opening branches and operating in Ethiopia.
The most probable reason for this position is the need to protect infant domestic insurance companies which do not have the desired financial strength, know-how, and human resources to be able to compete with foreign banks which have the superior capacity in these areas.
The new laws, therefore, are preparing to change all these.
Under the new law, all that is needed, among other things, for a foreigner to set an insurance or microfinance business is for the foreigner to be a foreign national of Ethiopia.

Freeing Up The Economy

Ethiopia has also recently announced that government would no longer be monopolizing its telecom sector. At the moment, there is no MTN, Airtel, Safaricom, Vodafone or any other mobile telecom operator in the East African country of Ethiopia, but that will no longer be the case before this year ends. The country is set to award its first set of telco licenses to multinational mobile companies by the end of 2019.

Before this happens, Ethiopia’s government has continually monopolized the country’s telecom industry. Hence, this is expected to end a state-wide monopoly and open up one of the world’s last major closed telecoms markets.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Banks No Longer Need Separate License for Wallet Service – CBN

July 17, 2019

The Central Bank of Nigeria (CBN) has disclosed that Deposit Money Banks (DMBs) will no longer require a separate license to operate a mobile wallet or mobile banking.

This was disclosed in Lagos by the director, Banking and Payment System, CBN, Sam Okojire, who was represented by the deputy director, Banking and Payment System, Mr. Musa Itopa Jimoh, at the First Bank cross border seminar for Banking and Telecom Regulators from sub-Saharan Africa.

Jimoh said: “You do not need authorization from the CBN to go into Wallet services or mobile money schemes. All you need is to notify the CBN your current license suffix.”

Speaking of the apex bank’s position on the adoption of digital currencies, he said: “We have not made up our mind on what steps to take but I am not sure or believe that the CBN will ever go crypto.

“We know what they are doing in Sweden and China. We are not running on the same parameter and so based on financial inclusion, adopting digital currency will mean a number of our population will be excluded.”

In his opening remarks, the Managing Director/CEO of First Bank of Nigeria Limited Adesola Adedutan, said as the global market continues to grapple with digital technology, the bank will be at the forefront.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Facebook: https://web.facebook.com/Afrikanheroes/

Going Forward, Bank Directors Would Pay For Cyber Crimes In Kenyan Banks

The Kenyan Central Bank is taking the bull by the horns now. Cybercrimes by banks involving a breach of customer information and eventual stealing of funds will no longer only be thrown open to the court to decide who is liable or not, bank directors will have to pay for any breach of customer information going forward.

The Central Bank of Kenya (CBK) has issued new rules to payment service providers including commercial banks and technology companies warning the boards of directors that they face “ultimate” liability in case of criminal breaches.

A Look At The Guidelines

In the guidelines aimed at stemming cybercrime, the CBK says boards will take responsibility for breaches of customer information.

“Payment Service Providers (PSPs) should carry out regular independent assessment and audit functions that shall be undertaken by the internal and external audit and risk functions … The board of directors is ultimately responsible for the cybersecurity of the PSP,” said CBK.

PSPs including firms like Mastercard, Visa, Safaricom, Airtel, and Telkom have 90 days to comply with the requirements published this month.

Most common vulnerabilities on the internal network (percentage of banks)

Firms working with PSPs are also expected to treat customer information confidentially.

“Outsourcing agreements should be governed by a clearly written contract, the nature and detail of which should be appropriate to the materiality of the outsourced activity in relation to the ongoing business of the PSP,”

“Some of the key provisions of the contract include controls to ensure customer data confidentiality and service providers’ liability in case of breach …”

Some financial institutions are required to collect detailed customer information for anti-money laundering, tax, and accounting reasons.

Privacy experts around the world have recently expressed concerns about how personal data is collected and used by companies.

In April, the government approved a tough policy on data protection, paving the way for it to be tabled in Parliament.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Nigerian Banks Fret Over New Directives on Loans

July 15, 2019

A new directive by the Central Bank of Nigeria (CBN) ordering banks to have a minimum loan to deposit ratio of 60% by the end of September 2019. The directive according to the Apex bank is intended to get the commercial banks to lend more to the real economy and buy fewer government securities.

Observers, however, differ on the impact of this directive with some expressing worries over the timing which they say could have a negative impact on asset quality.

Others are of the view that the move “may unintentionally result in a reduction of banks’ risk management criteria for loan extension and by extension a deterioration in asset quality. With a few calling for new policies designed to increase bank lending to follow.

Loan ratios at Nigerian banks shrank between 2016 and 2018 as slower economic growth and high yields on government securities prompted banks to load up on lower-risk assets.

The new move encourages lending to small and medium-sized businesses (SMEs), mortgages and consumer loans by overweighting these loans at 150%.

That aims to encourage banks to accept the risk of an increase in non-performing loans (NPLs). Consumer lending in Nigeria is hampered by lack of reliable household credit records and weak recovery enforcement, Moody’s says in a note on July 8.

Midsize banks with higher exposure to consumer and SME loans tend to have higher NPL ratios than large banks, according to Moody’s.

Banks that fail to meet the new threshold will have to pay half of the shortfall as an additional cash reserve requirement. Moody’s argues that banks will be forced to diversify their lending, so reducing concentration risk, and says that most have already complied.

On the banks most affected by this development, our findings show that Zenith Bank, United Bank for Africa (UBA), Guaranty Trust Bank (GTB) and Stanbic are most affected as they have loan ratios lower than the threshold.

Ignoring the central bank’s weighting concession for lending to preferred sectors, Abimbola calculates that Zenith and UBA will both have to increase their loan books by over 350bn naira (870m euros, $970m) by September 30.

GTB and Stanbic will have to add 165bn naira and 30bn naira of new loans respectively, he says. That implies absolute quarter-on-quarter loan growth of 20% for Zenith. From experience, it is unusual for banks to increase their loan books by more than 10% in the whole year.

This could see downside risk on NPLs in the short term, which may prompt markets to start to pricing in negative headlines from the banks. Charles Robertson, a global chief economist at Renaissance Capital, says that a market-friendly option would be for the government to close its budget deficit.

This would force banks to lend to someone other than the government, he says. In the longer term, lower inflation would cut interest rates and encourage lending and borrowing, he argues.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

Facebook: https://web.facebook.com/Afrikanheroes/

Mutual Funds Investment In Nigeria Shoots Through The Roof. Hits Over $2 billion

June 24, 2019

Mutual money managers in Nigeria are having the best of fun. Figures from Nigeria’s Securities and Exchange Commission show that it is one sector of the country’s Stock Exchange that is still making profit. The value of mutual funds investment hit N746.5bn at the end of May 2019 according to SEC.

Mutual funds are professionally-managed investment programs that pool money from many investors to purchase securities.
They are made up of ethical funds, equity-based funds, money market funds, bonds funds, fixed income funds, real estate investment funds, and mixed funds.

A Break Down of The Figures

The figures show that:

Money market fund, which invests only in highly liquid instruments such as cash, cash equivalent securities and high credit rating debt-based securities with a short-term maturity — less than 13 months-recorded the highest investment of N563.9bn, made up of funds pooled from 19 investment schemes.
Money market funds offer high liquidity with a very low level of risk.

The Schemes Under The Fund Are:

Top Money Managers

S/N	NAME OF COMPANY	VALUE OF MONEY MARKET FUND (NAIRA)
1	Stanbic IBTC Money Market Fund ()	262.66 billion
2	FBN Money Market Fund ()	163.27 billion
3	ARM Money Market Fund	57.88 billion
4	AXA Mansard Money Market Fund	25.73 billion
5	Abacus Money Market Fund	9.88 billion
6	Zenith Money Market Fund	7.52 billion
7	EDC Money Market Fund Class A)	6.16 billion
8	Cordros Money Market Fund	5.83 billion
9	Coronation Money Market Fund	5.82 billion
10	Legacy Money Market Fund	5.42 billion
11	United Capital Money Market Fund	4.58 billion
12	Greenwich Plus Money Market Fund	3.24 billion
13	Chapel Hill Denham Money Market Fund	1.62 billion
14	AIICO Money Market Fund	979 million
15	GDL Money Market Fund	953 million
16	Meristem Money Market Fund	782 million
17	PACAM Money Market Fund	601 million
18	Afrinvest Plutus Fund	596 million
19	EDC Money Market Fund Class B	368 million

The top three fund managers under the money market fund were:

Stanbic IBTC Asset Management Limited
FBN Capital Asset Management Limited
Asset & Resources Management Company Limited.

Fixed income funds increased by 11.56 percent month-on-month to N78.27bn from N70.16bn in April.

Real estate funds, pooled from three sources:

Skye Shelter Fund
Union Homes REITs
UPDC Real Estate Investment Fund –

Real estate funds stood at N45.55bn, an increase of 0.73 percent from the N45.22bn recorded in April.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.

Facebook: https://web.facebook.com/Afrikanheroes/

Thirteen Leading Global Banks Plan To Launch Cryptos in 2020

June 10, 2019

Good news for users of cryptos. There are plans by thirteen of the world’s largest banks, including UBS, Barclays, and Santander, to launch crypto versions of major global currencies in 2020, according to the Financial Times. The banks would be led by UBS and they have been working on crypto, nicknamed Utility Settlement Coin (USC) since 2015 to determine if blockchain can help optimize processes in wholesale banking.

Here Is What This Means

To make this a reality, the 13 banks, in addition to Nasdaq, have also invested £50 million ($63 million) in a new venture, Fnality, to run the USC project.
The USC will make it possible for users to get digital cash instruments to settle their transactions.
The system will be denominated in major global currencies including the US dollar, yen, euro, and sterling.
Each unit of the crypto denominated in a specific currency will be backed by the corresponding unit of traditional currency, so as to keep the price of the coin stable.
At the outset, the project will focus on creating niche applications. That is, Fnality will initially focus on creating the necessary market infrastructure that will make the crypto to work.
These initial applications will include meeting margin requirements in derivatives trades. A derivative is referred to as the security or financial instrument that depends or derives its value from an underlying asset or group of assets.
They are simply contracts between two or more parties. The value of such a contract is determined by changes or fluctuations in the asset where it derives its value from.
Currently, that process takes at least a day to be satisfied, but it would become almost instantaneous with the USC, according to Fnality CEO Rhomaios Ram cited by the Financial Times.
Beyond that, the USC could soon make it possible to clear and settle trades immediately. This could prove to be transformational, according to Hyder Jaffrey, head of strategic investments at UBS’ investment bank.

This May Suggest That More Banks Are Finding Blockchain and Cryptos Acceptable

Although this is not assured, USC suggests that banks are gradually finding confidence in blockchain and cryptos. However, these 13 banks will most likely still have to scale some legal and regulatory challenges in their efforts to adopt the technology and will need to prove that the scalability issues that hamstrung early experiments in crypto have been resolved.

The journey may be a tougher one though. This is because to develop an ecosystem that will be enough to convince the majority of banks and financial institutions (FIs) across the world to throw away existing processes for transaction settling will take time.

Indeed, the USC is a major step towards sealing a major approval for the technology but the end of the road is still far. The weight of the banks backing the USC should help the project secure traction — but this won’t guarantee success.

The Implication of All These

It appears blockchain technology is gradually gaining momentum. Facebook is seriously ready to launch its own crypto solution. The social media network has been busy pushing out efforts to enter financial services via a crypto solution. The solution will aim to provide payment options for its 2 billion users. A 2020 launch date is expected any moment from now.

A group of banks in Japan is also considering a 2020 calendar date for the launch of the group’s own cryptos. For sure, 2020 is going to be a year of blockchain technology. When these happen, blockchain tech may be signaling that it has become accepted into the mainstream system as a legitimate way of transacting, a hope that has since been hanging unfulfilled.

Combine all of these with USC, you get to find that cryptos are beginning to gain traction both within retail and institutional settings.

However, blockchain’s potential would still need to convince more of its believers. The head of Germany’s central bank said, for instance, that its trial of using blockchain to transfer and settle securities didn’t prove to be faster or cheaper than existing processes. Bank of America’s (BofA’s) tech and operations chief, Cathy Bessant, also echoed that she has yet to see a genuine use case that can scale to meet enterprise needs — despite the bank holding or having applied for the most blockchain-related patents among US FIs.

Should the USC finally work as desired, it would be an end to all these speculations and fear. Repeated over and over again without much concern, blockchain would finally come to stay.

Image result for banks that use blockchain

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.