MICROCAPITAL.ORG STORY: Newly Launched Tanmeyah Provides Microfinance Loans in Egypt

As mentioned in a previous MicroCapital.org story, in May 2009, Citadel Capital’s Platform Company, Finance Unlimited, announced that it would team up with a microfinance management team and the Egyptian Gulf Bank to solidify plans to open Tanmeyah Micro Enterprise Services in Egypt. [1]

Citadel Capital is a private equity firm in the Middle East and North Africa region that emphasizes acquiring or creating companies, through acquisitions, turnarounds, and greenfields, and raises Opportunity-Specific Funds (OSF) to control these investments. Citadel Capital currently has 19 OSFs that control investments with companies that are worth USD 8.3 billion, and has returned USD 2.2 billion in cash to investors. [2]

Finance Unlimited is one of such companies that holds investments in the banking and financial services industry. [3] Tanmeyah is 51 percent owned by Finance Unlimited, 24.3 percent by management and 24.7 percent by the Egyptian Gulf Bank. [4], [5] The microcredit group, which announced its opening on September 8, 2009, opened 15 branches in July while issuing loans worth USD 1.5 million to 1,669 clients, and plans to expand its outstanding loans to USD 12.7 million to 19,000 clients by the end of 2009. [4], [5], [6]

Citadel Capital believes that Tanmeyah functions differently from most MFIs, and seeks to tap into a new market in Egypt that has a large demand for microfinance services. The company aims to position Tanmeyah as more of a commercial bank for the poor than a traditional MFI. [4], [5] “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,” said Citadel Capital Managing Director Ahmed El Houssieny. “We see a clear opportunity for Tanmeyah to come in and fill the void.” [5]

Tanmeyah and Citadel Capital directors believe that Tanmeyah has a unique business model that incorporates employing and training members of local communities to find and fund small businesses, and implement a strict credit analysis process and loan requirement system, which mandates that borrowers must have run their microenterprises for at least one year to qualify for a loan. The group provides short-term loans with a replacement cycle of four months to one year, of sizes between USD 181 to 5,435. [4], [5], [6]

Though it is debatable as to whether or not Tanmeyah’s business model is actually much different from a standard MFI, Hoissieny and the rest of Citadel Capital believe that 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.” [5]

By Radhika Chandrasekhar, Research Assistant

Bibliography

[1] MicroCapital.org. “MICROCAPITAL.ORG STORY: Tanmeyah Microfinance Company Launched in Egypt.” https://www.microcapital.org/microcapital-story-tanmeyah-microfinance-company-launched-in-egypt/

[2] Citadel Capital: Strategy. http://www.citadelcapital.com/strategy/our-strategy/

[3] Citadel Capital: Finance Unlimited. http://www.citadelcapital.com/current-investments/finance-unlimited-banking-and-financial-services/

[4] Zawya. “Tanmeyah Begins Operating Branches of Microfinance Network in Egypt.” http://www.zawya.com/printstory.cfm?storyid=ZAWYA20090908091547&l=091500090908

[5] Citadel Capital: “Tanmeyah Begins Operating Branches of Microfinance Network in Egypt.” http://www.citadelcapital.com/press-releases/tanmeyah-begins-operating-branches-of-microfinance-network-in-egypt/

[6] Bloomberg: Calculators. http://www.bloomberg.com/invest//calculators/currency.html

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