Last month, EFG Hermes, one of the MENA region’s premier financial services corporations, made global business headlines after penning an agreement with the Sovereign Fund of Egypt (TSFE) to acquire 76 percent of the Arab Investment Bank (AIB).
The deal sees EFG Hermes become AIB’s largest shareholder, with 51 percent, while TSFE is the second-largest, on 25 percent, and former majority shareholder National Investment Bank holding the remaining 24 percent.
Arabian Business sits down with Karim Awad, Group CEO of EFG Hermes Holding, to discuss how the banking sector – and its digital transformation – can play a significant role in Egypt’s economic growth story, financial inclusion, the specific expertise EFG Hermes brings to the table on this deal, and the long-term legacy of the pandemic.
The Egyptian banking outlook
Despite banking being one of Egypt’s most important sectors, Awad says the penetration of financial services in the country remains somewhat limited, though he adds that this offers good potential for future growth.
“However, when you look at it in terms of the services that the banks provide today, not only for retail clients but also for corporates and government projects, they are playing a very critical role in the overall economy of Egypt.”
He believes TSFE and EFG Hermes are well aligned in a number of areas. “We feel there are several services that can still be provided through a good 360-degree banking platform.” He sees SMEs – the backbone of any economy – as an especially promising niche offering ample room for growth in Egypt.
“We believe that we as EFG Hermes can add certain value on that front in particular, given that we own one of Egypt’s largest private microfinance enterprises and that we do a lot of leasing activities for SMEs as well. We can transfer some of that experience and create synergies and cross-selling opportunities on that front for the bank.”
Awad’s organisation has undergone a transformation over the past five years, from a “pure-play” investment bank into a financial services provider operating across the frontier and emerging market space in 13 countries. “We already have one of the country’s first and strongest non-bank financial services platforms, offering microfinance, leasing and insurance support through our consumer finance and insurance affiliates.”
EFG Hermes also owns VALU, a buy-now-pay-later platform that has become increasingly popular among Egyptian consumers. “It’s one of Egypt’s best consumer finance apps today,” says Awad.
“There could be certain cross-selling opportunities between what we do as an investment bank not only on the NBFI platform but also on our brokerage business and our investment banking business. By cross-selling to the EFG Hermes client base and the AIB client base, we believe we can help AIB grow going forward.”
Financial inclusion: a generation gap?
One of the stated objectives of EFG Hermes’ AIB investment was an aim to increase financial inclusion in the country. Asked how the deal can help achieve this, Awad says, “One is through a proper digital transformation, having the right digital platform and giving them access to finance. The population in Egypt is quite young and becoming increasingly technologically savvy. This is going to be a major drive in future financial inclusion and I think the next generation is going to be quite different than the previous one when it comes to the use of banking services.
“I think the previous generation of Egyptians was much more aloof to the use of banking services. The offering of good retail products, including a good suite for SME landing – all of this will be key in in bringing more financial inclusion and I think AIB can play a very active role on all those fronts.”
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