Smes Acquire Lion Share of Private Sector in Egypt

Small and medium-sized enterprises (SMEs) acquire 98 percent of the private sector landscape in Egypt, employing over 47 million of the country’s population who are eligible to work.

These figures were released during a roundtable organized by Visa to launch the "SME Megatrends" report and showcase its key results.

The SME Megatrends report said SMEs share in Egypt’s GDP has reached 43 percent in FY2023-2024.

However, the report also found that the financing gap faced by SMEs has reached $46 billion.

It said 33 percent of SMEs in Egypt struggle with lack of access to finances and only 15 percent of these enterprises have adequate access to finances.

The report found that SME’s outstanding loan portfolio stands at $11 billion.

The SME Megatrends report identified significant opportunities for growth and innovation for the SMEs in Egypt, particularly in the digital and financial domains, with clear insights that can be leveraged by issuing banks to unlock new revenue opportunities and gain a competitive edge.

The report noted that digital transformation is paving new avenues of growth and sales for SMEs in the Egyptian market, with an uptick in social media and e-commerce, buy now, pay later (BNPL) and point of sale (POS) financial and e-wallet penetration.

The rapid acceleration of digitization within the region’s SME sector presents a wealth of new revenue opportunities for issuing banks who, by facilitating access to essential financial products and services, can tap into this potential, leading to an expanded customer base, increased transaction volumes, and heightened revenue prospects.

By working in partnership with Visa, issuing banks can deliver bespoke financial products tailored to SMEs' unique needs to actively promote inclusive economic growth,” said the report.

Speaking to Ahram Online, Malak El Baba, Visa Vice President and Egypt Country Manager, stressed that SMEs represent a significant potential Egypt can rely on to meet its targets when it comes to achieving the real GDP growth and restoring it to the pre-pandemic levels.

“Amid the ongoing challenges the world and the region are facing, and with the significant share of the SMEs in the private sector in the country, SMEs can play an important role in the employment across the country and it can raise the competitiveness of the Egyptian products,” El Baba told AO.

She stressed that Visa is dedicated to empowering issuing banks to tap into the vast potential of SME financial services, focusing on bridging the critical gaps that impede SME growth - an approach that involves transforming challenges into tangible opportunities.

“Through strategic partnerships with these banks, we aim to offer the essential resources required to develop tailored financial solutions that meet the specific needs of SMEs,” said El Baba.

Visa has already digitally enabled nearly 67 million SMBs worldwide, leveraging its extensive expertise and partner network, exceeding its three-year goal of digitally enabling 50 million SMBs globally.

“As the SMEs play a pivotal role in driving economic growth and is committed to integrating them into the digital economy, Visa extends extensive network, innovative business solutions and value-added services, and it collaborates with issuing banks to facilitate SME access to digital tools and financial services, bolstering the digital transformation of SMEs," Karim Sayegh, Director of Visa Commercial Solutions for North Africa, Levant and Pakistan, told Ahram Online.

“The Visa SME Megatrends report is an indispensable tool for issuers to better understand SME needs while identifying actionable strategies to customize their offerings for this market segment.”

“Crucially, the report reaffirms Visa's unwavering commitment to expanding SMEs' access to the digital economy, fostering a resilient and mutually beneficial business environment for all stakeholders.”

The report highlighted seven key trends in the SMEs landscape in Egypt, which are as follows: 1. Greater Desire for Formalized Financial Services and Access to Credit: Egyptian SMEs remain largely underserved and underbanked, with current formal financing offerings being costly and inadequate for their specific needs.

2. BNPL & POS Financing Are Increasingly Being Adopted by SMEs: BNPL and POS financial solutions are making inroads as tools to boost sales and increase customer satisfaction.

3. Social Media Driven Commerce is a Key Sales Channel for Informal SMEs: Social media commerce is a vital tool for informal SMEs, empowering them to grow their sales and expand their customer base. 4. E-Wallets Moving from Issuing to Acceptance: The significant increase in e-wallet penetration in Egypt is transforming the way SMEs get paid and enabling more businesses to go online.

5. Support Required to Build a Proprietary Online Presence & Payment Acceptance: With the e-commerce market driving SMEs to build an online footprint, they require more robust and simplified tools to enable them to compete online efficiently.

6. Proliferation of Digital B2B Marketplaces: The wholesale industry is fragmented and highly informal, allowing digital B2B marketplaces to offer SMEs a convenient platform and secure payment methods to connect with a wide range of suppliers.

7. SMEs Are Increasing Their Use of Digital Business Tools: Digital platforms have an opportunity to enable SMEs to drive operational efficiency, maximize profitability, and create formalized financial management.