Guide to Business Overdrafts in Egypt

A business line of credit, known locally as a Jari Madeen (Overdraft Facility), is a primary financial tool for managing short-term liquidity in Egypt. This revolving credit instrument is most beneficial for small and medium-sized enterprises (SMEs) that face predictable gaps between accounts payable and accounts receivable. For businesses in manufacturing, trade, or contracting, it provides the necessary buffer to cover payroll or purchase inventory while awaiting client payments. Key considerations for any applicant in the current market are the high variable interest rates, which are directly tied to the Central Bank of Egypt's (CBE) policy rates, and the requirement for a strong, well-documented sales history. Success hinges on understanding this is a tool for cash flow management, not for long-term capital investment.

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Understanding the Mechanics of Egyptian Business Overdrafts

In the Egyptian banking sector, what is globally termed a "line of credit" manifests in two main forms. The most common is the Overdraft (Jari Madeen), which is directly linked to a company's primary current account. The bank authorizes the account to maintain a negative balance up to a pre-approved ceiling, for instance, EGP 1,000,000. Daily sales deposits directly reduce this negative balance, thereby minimizing the interest charges calculated on the day-end debit amount. This structure offers maximum flexibility for businesses with daily cash inflows.

The second form is the Revolving Credit Facility. This operates as a separate loan account with a defined limit. A business can request specific draws, or "tranches," against this limit for a set period, such as drawing EGP 200,000 for 90 days to finance a specific purchase order. Once the tranche is repaid, the full amount becomes available to borrow again. This method provides more structured control over borrowing compared to an open overdraft. Both facility types are typically reviewed and renewed by the bank on an annual basis, contingent upon the company's sustained financial performance.

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Key Providers and Market Segmentation

The Egyptian market for SME credit is dominated by a few key players, segmented into distinct tiers. The first tier consists of state-owned banks like the National Bank of Egypt (NBE) and Banque Misr. NBE's "Al Ahly Business" product leverages its vast branch network to offer competitive, turnover-based financing. Banque Misr has focused on digital innovation with its "Express Loan," which can provide approvals for up to EGP 5 million for existing clients with minimal paperwork, significantly reducing processing times.

Tier two is composed of service-oriented private banks. CIB (Commercial International Bank) excels with its Business Banking Credit Facility, which includes a sophisticated digital dashboard for managing funds. CIB is a preferred partner for businesses engaged in international trade, as it seamlessly integrates overdrafts with Letters of Credit (LCs) and documentary collection. Similarly, QNB Alahli is aggressive in the SME space, packaging its "Trade Finance" lines with other services like corporate credit cards and FX solutions. Alex Bank, part of the Intesa Sanpaolo group, maintains a strong regional focus in Alexandria and the Delta through its "Business Passport" program.

For businesses seeking Sharia-compliant financing, Islamic banks form a third tier. Abu Dhabi Islamic Bank (ADIB) Egypt does not offer interest-based overdrafts. Instead, it provides a "Limit Murabaha" or "Revolving Murabaha" facility. Under this structure, the bank purchases goods on the client's behalf and sells them to the client at a pre-agreed markup, with the limit revolving as payments are made. Faisal Islamic Bank offers similar working capital solutions, often structured as Murabaha or Musharaka (partnership) agreements, providing an alternative to conventional debt financing.

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Navigating Eligibility and Documentation

Egyptian banks categorize businesses based on annual sales turnover, a classification that directly impacts eligibility criteria. The Small Enterprise segment typically includes companies with a turnover between EGP 1 million and EGP 50 million. The Medium Enterprise segment covers those with turnovers from EGP 50 million up to EGP 200 million. Requirements for these two segments vary, with medium enterprises facing stricter due diligence. For instance, a sole proprietorship needs to demonstrate a minimum of one to two years of active operation, while an S.A.E. or LLC is usually required to have a three-year track record.

The cornerstone of any application is the "credit package," a comprehensive set of legal and financial documents. Legally, the bank requires a recent Commercial Register (Sijil Tijari) no older than three months, a valid Tax Card (Bitaka Daribiya), and the company’s Articles of Incorporation. Financially, the last three years of audited financial statements are non-negotiable for any significant facility. Banks will also request a recent Tax Position Certificate (Mawkif Daribi) to confirm compliance, along with 6-12 months of bank statements from other institutions to analyze the company's complete cash flow picture. A clean I-Score report for both the company and its primary shareholders is a mandatory prerequisite for any review.

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Analyzing the True Cost: Rates and Fees in 2026

The cost of a business line of credit in Egypt is variable and directly linked to the policy rates set by the Central Bank of Egypt. The primary benchmark is the CBE's overnight lending rate, often referred to as the "Corridor Rate." As of late 2026, this base rate is estimated around 22.00%, though it has seen significant fluctuation. On top of this base rate, each bank adds its own margin, or "spread," which can range from 2.0% to 5.0%. This spread is determined by the bank's assessment of the company's risk profile, sector, and financial health. Consequently, the total effective interest rate for an SME typically falls between 24% and 29% per annum on the utilized balance.

Beyond the interest rate, businesses must account for several other fees that contribute to the total cost of borrowing. A significant upfront cost is the Administrative Fee, which is calculated as a percentage of the total approved limit, not the amount used. This fee ranges from 1.0% to 2.5% of the limit and is paid annually upon establishment or renewal. Some banks also levy a "Highest Debit Balance Commission," a small charge of 0.1% to 0.2% applied to the peak overdraft amount reached during a given month. Finally, delinquency fees are punitive; if a business exceeds its approved limit, a penalty rate of 2% to 3% above the agreed interest rate is applied to the excess amount.

The Application Process: From Audit to Approval

Securing a business overdraft facility is a structured process that demands careful preparation. The first step is to ensure your financial records are in order. This involves having your financial statements for the last two to three fiscal years audited by a certified public accountant. Once your documentation is ready, the next step is to engage with the bank. It is highly advisable to schedule a meeting with a Relationship Manager (RM) at an SME-focused branch or hub, rather than approaching a general customer service desk. An RM can guide you through the bank's specific requirements and advocate for your application internally.

After the initial meeting, you will submit the formal credit package. The bank's credit department then begins its due diligence. This stage almost always includes a site visit, where a risk officer from the bank visits your business premises. The officer's objective is to verify your operations, inspect inventory levels, and assess the general health of the business beyond the numbers. Following a positive site visit report, the RM presents your case to the bank's internal credit committee for a final decision. This entire process, from submission to approval, typically takes two to four weeks for traditional applications. Digital products like Banque Misr's "Express" can shorten this to as little as five business days for qualified existing customers. The final step is signing the facility agreement and associated promissory notes (Shikat Dumman).

Strategic Use Cases and Inherent Risks

The primary strategic advantage of a business line of credit is maintaining operational liquidity. It allows a company to manage its working capital cycle effectively, paying suppliers and meeting payroll on time even when customer payments are delayed. This flexibility prevents the forced liquidation of assets to cover short-term obligations. A significant cost benefit is that interest is only charged on the funds actively in use. This makes it a more cost-effective solution for fluctuating cash needs compared to a term loan, where interest accrues on the entire principal from day one.

Despite its benefits, this financial tool carries significant risks that management must monitor. The most prominent risk in Egypt's current economic environment is interest rate volatility. An increase in the CBE's policy rates translates directly and immediately to higher servicing costs. Another major risk is the bank's right to "call the line." The facility is typically granted on an annual basis and can be reduced or cancelled at renewal if the company's financial performance deteriorates or if the bank reassesses the risk of its industry sector. This could suddenly remove a critical source of liquidity.

A common strategic error is becoming overly dependent on the overdraft. Businesses that use the facility to finance long-term assets, like machinery or vehicles, or to cover structural operating losses, fall into a debt trap. The high interest rates are unsuitable for long-term funding. A clear indicator of this problem is a "hard-core" debit balance that never returns to zero. Banks monitor this "swing" closely. To ensure renewal and maintain a healthy financial position, companies must manage their cash flow to bring the overdraft balance to zero or a positive figure for at least a few days each month, proving the facility is being used for its intended short-term purpose.