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Islamic financing to expand

Managing Director of Taamir Mortgage Company to Daily News Egypt: The company will be ready to offer Islamic financing in the second half of the current year

By Mohammad Darwish

Ashraf Ramzi, Taamir’s Managing Director

The Taamir Mortgage Company signed partnership contracts with the Fund to Support Real Estate Finance with a value of EGP 200m to finance housing units.

In his interview with Daily News Egypt, Ashraf Ramzi, the Managing Director of Taamir Mortgage Company said that the contracts that his company signed with the Fund will provide financing for approximately 2,000 housing units for those with limited incomes.

In addition, he said that his company will be prepared to offer Islamic financing instruments such as Ijarah, Murabaha, and installment selling in the second half of the current year.

Ramzi said that the company decided to offer Islamic Financing this year was made easier by the fact that it does not require the amendment of any mortgage laws, but only requires that companies obtain the agreement of the Egyptian Financial Supervisory Authority.

He mentioned that Real Estate Finance Law No. 148 was accompanied by a fatwa assuring its compatibility with Islamic law. However, the revolution and the rising influence of political Islam made it possible to offer Islamic financial instruments such as Ijarah, Islamic rent-to-own agreements, and installment selling. He said that all these instruments are Islamic despite the naming differences in order to reassure those wary of dealing with real estate finance.

He announced that the company’s credit portfolio reached EGP 1.2bn last December 13th and that the value of its loans made since the beginning of 2012 equals EGP 50m. The company made EGP 230m worth of loans in 2011 and EGP 270m worth of loans in 2010. Ramzi expected the company lend more in the second half of 2012.

Taamir’s profits reached EGP 23m last year, compared to EGP 26m of net profit in 2010. In 2012 the company made loans to 23,500 clients.

Ramzi added that those with limited income account for 60% of Taamir’s credit portfolio and that 95% of the company’s loans are for housing.

The interest rate for Taamir’s loans is 12% for housing loans and 16% for commercial properties. Both rates are in line with the rates of the Egyptian market.

He said that limited income clients formed the majority of the company’s clients even before the revolution because it is a subsidiary of the Ministry of Housing and because it has a social mission and is not primarily interested in making profits.

He added that Taamir has not obtained loans for a long period and that the company relies completely on its financial portfolio.
This year, Taamir seeks to obtain a loan of EGP 20m from the Egyptian Mortgage Refinance Company in order to refinance its clients.

He added that agreement to amend real estate finance law has taken place and that the amendments have been prepared to submit to the Egyptian Financial Supervisory Authority. The amendments seek to facilitate the provision of Islamic financial instruments, raise the discount rate, solve the problem of registering properties, and to enforce disclosure policies. Real estate finance companies have agreed on all the amendments.

Ramzi said that the main guarantee that the company is requesting is that the client pay back his loans from his income. He said that the guarantee is ideal for the real estate finance system because, in the case that the client is not able to pay back his loan, the company can resort to the judiciary in order to seize the property, sell it, and recover the value of the loan. He said that Taamir does not like to resort to this option often in order to protect its clients.

He added that the revolution impacted a number of sectors such as tourism and, as such, clients who worked in those sectors were not able to repay their loans. He said that the percentage of clients unable to meet some of their obligations in 2011 was 20% and that the proportion rose slightly in 2012. He said that in the case of clients unable to make their loan payments, the company first attempts to remind them of the importance of meeting their obligations before resorting to the courts in order to preserve the company’s funds and the interests of the shareholders.

Most of the company’s activities are concentrated in Cairo and the surrounding cities such as 6th of October City, 10th of Ramadan City, El-Obour, Badr City, and Sadat City. The company’s foray into Borg El Arab in Alexandria was not successful.
Taamir has not tried to expand in other governorates because it does not own branches that enable it to serve all regions of Egypt. The company has no objection to working in other regions of Egypt if properties that need financing are built and office branches are found.

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