Egyptian Arab Land Bank has established itself as one of the largest banking entities in Egypt, specializing in real estate investments and trade finance. The Worldfolio speaks with Amr Fouad Kamal about investment in Egypt and how he is reshaping one of the oldest banks in the world.
The new investment law has been very good in attracting FDI and there is optimism towards Egypt. We can see that because when you go to the market, people are buying debt and bonds. People are getting involved in Egypt, but we don't see the same optimism towards FDI in terms of opening a shop or a manufacturing plant here. What is missing there? Is it this part of the process? One thing comes first the other one comes second, why we are not for seeing equivalent levels of FDI?
There is one factor that, in my own opinion, is restricting our strength of inflow in direct investment. You are in a troubled area, there is turbulence around you. Imagine you are living in Malaysia and you want to invest in Egypt: I would investigate the demography and geographic area and see what is going on in Syria, Iran… And that affects us very negatively in the quick movement of FDI. Because it is something you cannot forget, they would look at your transportation/airports/logistics…around the board, the insurance that you must pay for the transportation is very expensive in the mind of international investors. This is a fact we must take in consideration when it comes to assets coming into the country.
Despite that I agree the trust must be built and we need to focus more specifically on the private investors, from Europe and America – okay. But I also see the Chinese are coming with a very strong appetite; the Chinese investors are different. They are controlled by the government, so they come with a backup of financial resources. They are not easy-going investors, they are difficult investors. I am receiving communications from Chinese investors interested in investing in real state. The Gulf Arabs are feeling the pain because of the Iran threat they are receiving, but most of the Gulf Arab investors are looking very positively to Egypt. But they have different criteria than the Europeans; they are not after factories, they are more inclined to the real state and tourism establishments.
Moving into the banking sector: there are two main topics that are very important to discuss: one is financial inclusion (not only in the country but also among the Arab population) and the other is SME empowerment. What is your view on these issues?
For me banks, as institutions, are like big elephants. The move and the penetration is very slow (for example when we talked about SMEs and micro finance). Egypt is a very wide country. You have upper Egypt, villages everywhere, etc…You need very effective penetration to go to these areas and offer banking services.
This is a very hard job for the banks. It is not the role of the Central Bank or the role of the banks only, it's the total environment and legislation to induce or motivate the informal economy to align with the formal one. And you need incentives. Me, as a bank, I've taken decisions. There are hubs that specialize in funding young youth, empowering women, etc… and those hubs are being established everywhere in Egypt. But in this case, the NGOs are much more flexible in penetration and we have decided that we are going to lend money to them. I can see a lot that can be done by banks. We are taking those steps and the national banks are also taking steps – it is coming. But then again, there is another negative factor: mistrust.
I know many of the people that have money such as wealthy businessmen from trading; they do not deal with banks. They now prefer to invest in land to keep their money safe. You must also motivate the young generation to establish their own businesses; this is again a very important fact that refers to financial inclusion. Opening a shop, trading, franchise…etc, but all of them are very afraid because of the taxes they are going to pay, the pension or the fees. And we are not giving them that motivation. Small and medium-sized companies need "tax holidays", but this is not only the role of the banks, it is also down to the legal environment.
But do you take fintech as a solution to educate people? Is it something that you take into consideration?
I personally think that banks will disappear in a physical sense; the role of a big branch will demise over the next 10 years. You need to build up a very effective technology platform or what we call fintech. Again, this is something that has been considered by the Central Bank and the government itself. They are sponsoring that move but there is a legislation environment that must support that. The young Egyptian generation is becoming more educated – IT educated. They all use social media and mobile banking and it is not something that is difficult for them.
We have to adapt to them, because if we don’t, we will lose the momentum of serving consumers. To me, we are spending a lot of money in the automation of this bank, automation is right, but it only serves traditional banking services. As a bank, we have this plan that is going to be completed, to my satisfaction, in a year and a half more or less. But it needs time. What we can do here, as a land bank, is to cooperate with co-ops to lease these stores we own to help the young generation. So, we study what we can do for them and what they need to start their own job (electronic equipment). And we interview them and give them a very soft loan to establish the store. That’s what we have planned and what we are going to do next year.
Moving into the bank itself: you are the oldest bank in Egypt, the mantra of the bank is to support the development of not only the people in Egypt, but the Arab people around the region as well.
Yes, we have 14 branches in Jordan, seven in Palestine and one branch in Jerusalem. This is what I call the Arab Land bank. And this name is a very attractive name for investors. But I’ve changed that concept: we still have the name ‘Egyptian Arab Land Bank’ but we are becoming more about commercial and investment banking. Coming to Egypt, what is the best investment that a multinational can do? First, real estate development, not only in the residential side, but also the commercial.
The best successful model for me is the mall in City Stars, a Saudi investment; also, the investment in medical, education, healthcare, etc. We are the best bank to provide for that. Also, we are the second bank, after CIB, who have the capability to fund the shipping sector.
Your DNS comes from the spirit of empowering people, and you have done this over the past 139 years. What is the main strategy that you're leading now in terms of development of the business of the bank?
You can’t build any plan without the quality of manpower. I have chosen my board members with the approval of the Central Bank. We are a very strong board with very rich, accumulated experience in many areas: legal, banking, audit, real state, business, corporate, capital markets. And we go hand-in-hand so we know the strategy. Then, we have developed a very strong upper management level from different schools. Many of them, have worked in advanced banking institutions. There has been an aggressive change in our management since October 2017.
We are also developing very effective training programs for young people, the staff, old management. We are taking care of them. We are carefully selecting the right people to join the old management. In terms of the branches, I have hired 27, that is considered very little for banking. But again, I think that we must restructure the branch and focus on retail products. We are developing new credit cards, upgrading the IT system. So the whole bank is being restructured to give, not only real estate but for the commercial and investment needs. We are investing in touristic projects, we own many hotels in Hurghada, Sharm-El Sheikh; we have a very big and nice investment portfolio in touristic areas. I am also very interested in investing in education and healthcare, and that's a plan that I am adopting. I need the expertise for that, in terms of real estate assistance. And we are recruiting those people.
My strategy? I need to reshape this bank, the oldest bank in the Middle East, maybe one of the oldest banks in the world. Restore its image back as a major commercial and investment bank, and part of this is investment within real estate development at a regional level. In addition, I would like to establish a branch in North Africa; Morocco and in the Gulf (Dubai, Bahrain…). I would like to become not only a domestic but also a regional bank.