Citadel Capital, the leading private equity firm in the Middle East and North Africa controlling investments of more than US$ 8.3 billion, is pleased to announce its entry into the microfinance sector with the establishment of a new Portfolio Company, Tanmeyah.
The investment in Tanmeyah will be made through Finance Unlimited, the firm’s Platform Company for investments in the regional financial services sector. Tanmeyah will help thousands of small business owners and low-to-middle income entrepreneurs gain access to loans and financial services that would otherwise be unavailable to them through conventional banking offerings.
“There is a large unmet demand for microfinance services in Egypt. Traditionally, commercial banks have been reluctant to venture into the area of micro-lending because it was an operationally challenging endeavor that required specialized credit assessment skills that were not available in the local market. We see a clear opportunity for Tanmeyah to come in and fill the void,” said Citadel Capital Managing Director Ahmed El Houssieny. “We believe it will be a profitable venture that fills a market niche, and at the same time, it will catalyze Egypt’s economic development as it avails financing to individuals and sectors to which financing was previously non-existent.”
Finance Unlimited will own a 51% stake in Tanmeyah, with the balance of the shares divided between the company’s management (25%) and the Egyptian Gulf Bank (EGB, 24%). The management team is made up of industry veterans, Amro Abouesh, who spearheaded Banque du Caire’s micro financing initiative, Amr Abouelazm, who was previously with the German Development Bank (KfW) and Hazim Medani, the former Chief Operating Officer at Bank of Alexandria and Director of the bank’s restructuring programs.
“Launching this project with a management team that has a long track record in the field of microfinance and a reputable commercial bank like EGB will give us a good head start and ensure a smooth running operation,” said El Houssieny.
Tanmeyah is currently finalizing an agreement with EGB to avail up to EGP 480 million for the company’s on-lending program.
According to Amro Abouesh, Executive Chairman of Tanmeyah, “The model that Tanmeyah will be using will be a bit different from other microfinance schemes that are currently available in Egypt through NGOs and donor agencies. Loan Officers, who are generally going to be members of the urban and rural communities that we are targeting, will be trained to go out into the field and identify potential candidates with existing small businesses. The entrepreneurs are required to have completed at least one year in their business cycle before they can qualify for a loan, which means that we will not be financing start-ups.”
Loans will generally be issued to qualified business owners within five days of credit approval with a minimum loan size of EGP 4,000 and a maximum of EGP 35,000. The nature of the microcredit scheme requires that loans be short in duration with a typical repayment cycle of four months to one year.
“The success rate with the repayment of small loans in Egypt is quite high. Statistics indicate that it is as high as 99% and even higher with women,” said Abouesh. “We expect to finalize our first loan within the next two months,” he adds.
Hazim Medani, Chief Executive Officer and Managing Director of Tanmeyah has indicated that the company, which will be capitalized at EGP 35 million, is targeting 15 branches within its first three months of operation. “The plan is to grow the network to include 400 branches throughout Egypt with a strong presence in rural governorates where unemployment rates are high and access to finance is minimal,” he added.
In addition to providing small businessmen with working capital that will help them to grow and create employment opportunities, Tanmeyah will itself be an engine of job creation. The company expects to employ more than 6,500 field officers by 2014.
“In the future we see lots of opportunities for expansion that will include additional services beyond microfinance such as micro insurance, brokerage services, money transfers and ATM machines,” said Tanmeyah Deputy Chairman and Deputy CEO Amr Abouelazm.
“There is much that can be done to bring financial services to low and middle income brackets that are currently viewed as un-bankable. We are also looking at regional opportunities for these kinds of services,” says El Houssieny. “Even though this is a new sector for Citadel Capital it still fits into our strategy of building a local platform and expanding regionally,” he adds.
Finance Unlimited is Citadel Capital’s Platform Company holding a number of discrete investments in the regional financial services industry. The company currently has exposure to the banking and corporate finance sectors through the Sudanese Egyptian Bank and Sphinx Egypt, a leading private equity management firm. Finance Unlimited also holds Pharos Capital, a Cairo-based investment bank and a top-five Egyptian brokerage with active alternative investment and asset management practices.
Citadel Capital is the leading private equity firm in the Middle East and North Africa. The firm focuses on building regional platform investments throughout the region in selected industries through acquisitions, turnarounds, and greenfields executed via Opportunity Specific Funds. Citadel Capital’s 19 OSFs now control Platform Companies with investments worth more than US$ 8.3 billion in 14 industries, including mining, cement, transportation, food and energy. Since 2004, the firm has returned more than US$ 2.2 billion in cash to investors, more than any other private equity firm in the region.